As filed with the Securities and Exchange Commission on December 24, 1997
Registration No. 333 - _____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
COLUMBIA SPORTSWEAR COMPANY
(Exact name of Registrant as specified in its charter)
Oregon 5130 93-0498284
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification Number)
6600 North Baltimore
Portland, Oregon 97203
(503) 286-3676
(Address, including zip code, and telephone
number, including area code, of
Registrant's principal executive offices)
Patrick D. Anderson
Chief Financial Officer
COLUMBIA SPORTSWEAR COMPANY
6600 North Baltimore
Portland, Oregon 97203
(503) 286-3676
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
Copies To:
Stephen E. Babson John L. Savva
Robert J. Moorman Sullivan & Cromwell
Stoel Rives LLP 444 South Flower Street, Suite 1200
900 SW Fifth Avenue, Suite 2300 Los Angeles, California 90071
Portland, Oregon 97204 (213) 955-8000
(503) 224-3380
-------------------------
Approximate date of commencement of proposed
sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered (1) Offering Price Aggregate Offering Registration Fee
Per Share (2) Price (2)
<S> <C> <C> <C> <C>
Common Stock.................... 7,666,667 $16.00 $122,666,672 $36,187
============================================================================================================
<FN>
(1) Includes 1,000,000 shares of Common Stock that the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the Registration Fee pursuant
to Rule 457(a) under the Securities Act of 1933. A portion of the proposed
maximum aggregate offering price represents shares that are to be offered
outside of the United States but that may be resold from time to time in
the United States. Such shares are not being registered for the purpose of
sales outside the United States.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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===============================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
6,666,667 Shares
[LOGO]
Columbia Sportswear Company
Common Stock
-------------------
Of the 6,666,667 shares of Common Stock offered, 5,333,334 shares are being
offered hereby in the United States and 1,333,333 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."
All of the 6,666,667 shares of Common Stock offered are being sold by the
Company.
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is estimated that the initial public offering price per
share will be between $______ and $______. For factors to be considered in
determining the initial public offering price, see "Underwriting."
--------------------
See "Risk Factors" beginning on page 8 for certain considerations relevant
to an investment in the Common Stock.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "COLM."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price Discount(1) Company(2)
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total (3)...................................... $ $ $
- -------------------
<FN>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting estimated expenses of $700,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 800,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 200,000 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Company will be $___________, $_________ and
$___________, respectively. See "Underwriting."
</FN>
</TABLE>
-------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
shares will be ready for delivery in New York, New York, on or about
________________, 1998 against payment therefor in immediately available funds.
Goldman, Sachs & Co.
NationsBanc Montgomery Securities, Inc.
PaineWebber Incorporated
-------------------
The date of this Prospectus is , 1998.
<PAGE>
[ARTWORK]
The Company intends to furnish to its shareholders annual reports
containing financial statements audited by an independent public accounting
firm.
-------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER- ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
"Columbia Sportswear Company," "Columbia," "Convert," "Bugaboo,"
"Bugabootoo," "Interchange," "Omni-Dry" and "Silent Rain" are trademarks of the
Company. All other trademarks or trade names referred to in this Prospectus are
the property of their respective owners.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements, including statements
concerning planned expansion and financial resources, in "Summary" under the
captions "The Company," "Business Strengths" and "Growth Strategy," in "Risk
Factors" under the captions "Uncertain Ability to Implement Growth Strategy" and
"Management of Growth; Expansion of Distribution Facility," in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the captions "Overview" and "Liquidity and Capital Resources" and in "Business"
under the captions "Introduction," "Business Strengths," "Growth Strategy,"
"Industry Overview," "Products," "Business Process" and "Management Information
System." These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties related to the Company's
operations, some of which are beyond the Company's control. Certain factors that
could cause results to differ materially from those projected in the
forward-looking statements are described in "Risk Factors," including, but not
limited to, competition, new product offerings by competitors and price
pressures; seasonality, fluctuations in operating results and economic
cyclicality; effects of weather; changes in consumer preferences; the Company's
ability to implement its growth strategy, including management of growth and
expansion of its distribution facility; dependence on key personnel, independent
manufacturers and key suppliers; advance purchases of products; risks related to
collectibility of receivables; product liability and warranty exposures;
international operations, including risks associated with foreign operations
such as currency exchange rate fluctuations; and dependence on proprietary
rights. Risks and uncertainties that could have a material adverse effect on the
Company are also described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations"
<PAGE>
under the captions "Quarterly Results of Operations and Seasonality" and
"Liquidity and Capital Resources," and in "Business" under the captions
"Intellectual Property," "Competition" and "Government Regulation." Any of these
risks or uncertainties may cause actual results or future circumstances to
differ materially from any future results or circumstances expressed or implied
by the forward-looking statements contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. Except as
otherwise noted, all information in this Prospectus (i) assumes no exercise of
the Underwriters' over-allotment options, (ii) gives retroactive effect to the
conversion of all outstanding shares of the Company's nonvoting Common Stock
into shares of voting Common Stock to be effected prior to the completion of the
Offerings and (iii) gives retroactive effect to a 0.736-for-one reverse split of
the Common Stock upon completion of the Offerings. See "Description of Capital
Stock - Common Stock."
The Company
Columbia Sportswear Company ("Columbia" or the "Company") is a global
leader in the design, manufacture, marketing and distribution of active outdoor
apparel. As one of the largest outerwear manufacturers in the world and the
leading seller of skiwear in the United States, the Company has developed an
international reputation across an expanding product line for quality,
performance, functionality and value. The Company believes its award-winning
advertising campaigns effectively position the Columbia brand as active,
outdoor, authentic and distinctly American.
Established in 1938, the family-owned Company has grown from a small,
regional hat distributor to a global leader in the active outdoor apparel
industry. The Company has its roots and developed its initial expertise in the
production of high quality, rugged outdoor fishing and hunting gear for the
serious sportsman. Known for durability and dependability at a reasonable price,
the Company leveraged its brand awareness in the 1990s by expanding into related
merchandise categories and developing its "head-to-toe" outfitting concept. The
Columbia brand appeals to a large, increasingly international consumer base.
Today, the Company distributes its products to over 10,000 retailers in 30
countries. The Company's sales and operating income have increased to $299.0
million and $34.2 million in 1996 from $18.8 million and $1.6 million in 1987,
representing 10-year compound annual growth rates of 32% and 36%, respectively.
The Company believes it will continue to grow by focusing on enhancing the
productivity of existing retailers, expanding distribution in international
markets and further developing merchandise categories.
The Company groups its broad range of competitively priced merchandise into
four categories--outerwear, sportswear, rugged footwear and related accessories.
The durability, functionality and affordability of Columbia's products make them
ideal for use in a wide range of outdoor activities, including skiing,
snowboarding, hunting, fishing, hiking and golf, as well as for casual wear.
Throughout the product development cycle, merchandising and design teams
collaborate with retailers, the Columbia sales force and consumers to ensure
that the final product assortment of coordinated "head-to-toe" merchandise meets
or exceeds customer expectations. Across all of its product lines, Columbia
brings a commitment to innovative, functional product design and a reputation
for durable, high quality materials and construction. Columbia believes it
offers consumers one of the best price-value equations in the outdoor apparel
industry.
Business Strengths
Established and Differentiated Outdoor Lifestyle Brand. The Company
believes the Columbia brand represents a differentiated, active, outdoor,
authentic and distinctly American image built on quality, functionality,
performance and value. The Company's award-winning international marketing
campaigns, which feature Chairman Gertrude Boyle in the role of "Mother Boyle,"
an overbearing taskmaster who enforces tough Columbia quality standards,
emphasize this distinctive brand image.
3
<PAGE>
Broad and Growing Appeal. Columbia's merchandise appeals to a broad range
of consumers of varying ages and income levels, from serious outdoorsmen to
weekend sports enthusiasts. The Company's price-value equation is attractive to
a large segment of the $10.4 billion U.S. retail outdoor apparel market.
Columbia is effectively positioned to compete against lower priced or unbranded
products based on brand image and product features, and against higher priced,
largely technical or fashion brands based on superior value and generally lower
price points. The Company has benefited in the past and expects to continue to
benefit from the trend toward casual dressing and from the growth in demand for
active lifestyle apparel.
Premium Quality at a Reasonable Price. Columbia maintains a strong focus on
providing a superior mix of quality and value, which are defining elements of
the brand. The Company believes it is able to offer merchandise similar in
quality to its competitors at attractive price points by using its long standing
supplier relationships to source high quality products from around the world
while controlling costs, relying on Company-supervised production of merchandise
by independent manufacturers, involving itself in the supply chain at an earlier
stage than is typical in the industry and avoiding the overdesign of its
products.
Proven and Experienced Management Team. Senior management of Columbia has
substantial experience in the apparel industry and a demonstrated track record
of sales and earnings growth: Chairman Gertrude Boyle has been involved in the
business since 1970; President and Chief Executive Officer Timothy P. Boyle
joined Columbia in 1971; and Executive Vice President and Chief Operating
Officer Don Richard Santorufo joined the Company in 1979. Under their leadership
over the past decade, the Company's sales and operating income have increased at
compound annual growth rates of 32% and 36%, respectively. Immediately following
the Offerings, senior management will own over 76.6% of the Company.
Functional and Performance-Oriented Design. All Columbia merchandise is
designed and developed in-house by experienced merchandising and design teams.
Working closely with internal sales and production teams as well as with
retailers and consumers, the Company's merchandising and design teams can reduce
the risks of fashion swings by developing superior products that are tailored
specifically to meet consumer requirements. Because its products are designed
for functionality and durability, the Company does not attempt to lead consumer
preferences or differentiate its products based primarily on fashion. In fact,
many new products are based on existing designs, such as the Bugaboo Parka, a
consistent best seller for more than a decade.
Effective "Head-to-Toe" Merchandising. Columbia's "head-to-toe"
merchandising strategy presents retailers and consumers with a wide selection of
apparel and rugged footwear that shares common color palettes and outdoor
themes. Retailers and consumers both benefit from the ability to use Columbia as
a single source for an attractive array of merchandise. The Company's flagship
store, recently opened in Portland, Oregon, and the Company's successful store
within a store concept ("concept shops") provide showcases for Columbia's
coordinated merchandise.
Sourcing as a Competitive Advantage. Columbia's merchandise is produced
worldwide by independent manufacturers selected, monitored and coordinated by
local Columbia employees to assure conformity to strict quality and cost
standards. The Company believes the use of independent manufacturers, in
conjunction with the use of Columbia sourcing personnel rather than agents,
increases its production flexibility and capacity and allows it to maintain
control over critical aspects of the sourcing process, while at the same time
substantially reducing capital expenditures and avoiding the costs of managing a
large production work force.
Superior Inventory Management. From the time of purchasing through
production, distribution and delivery, the Company manages its inventory to
reduce risk. The sequencing of the product design, sourcing, production and
selling cycle mitigates inventory risk, in part by offering special discounts to
customers that
4
<PAGE>
purchase merchandise early. Because the Company's products are not based
primarily on fashion, and because Columbia undertakes extensive analysis to
ensure that its products are what consumers require, the Company believes its
inventory risk is not as great as that of some of its competitors require. A new
state-of-the-art inventory management information system, expected to be fully
operational in late 1998, is expected to further enhance the Company's ability
to manage its inventory.
Growth Strategy
Enhance Channel Productivity of Existing Retailers. The Company plans to
improve the productivity of its existing customers by expanding its concept
shops and installing brand enhancement systems. Concept shops, which promote a
consistent brand image, are located within the Company's retailers and are
dedicated exclusively to selling Columbia merchandise. As of September 30, 1997,
the Company had 164 concept shops worldwide and plans to double this number by
the end of 1998. The Company believes its concept shops increase sales by
displaying a complete selection of merchandise and promoting cross-merchandising
opportunities on a year around basis. Smaller-scale brand enhancement systems,
which include signage and fixtures that prominently display consolidated
groupings of Columbia merchandise offer benefits similar to concept shops. By
the end of 1998, the Company also expects to have installed 1,000 in-store brand
enhancement systems.
Leverage the Columbia Brand Name in International Markets. The Company
intends to capitalize on its size, strong U.S. brand position and its worldwide
brand recognition by targeting certain high opportunity markets for development
or expansion. The Company has identified Europe and Asia as regions where
outdoor activities are consistently popular and where the Company can exploit
its active, outdoor, authentic and distinctly American brand image and
reputation for value. The Company is seeking to enhance its distribution in a
number of countries, including the United Kingdom, Italy, France, Spain, The
Netherlands, Sweden and Germany. The Company will assume control of the
distribution of its products in Japan in late 1998 and recently opened 15 retail
store/department store counters in South Korea. Although the Company has made
significant progress in its international expansion efforts over the last
several years, substantial opportunity for growth exists. Net sales outside
North America have increased from $9.0 million in 1993 to $26.3 million in 1996,
but still represented only 8.8% of the Company's total net sales in 1996.
Develop Existing Merchandise Categories. The Company intends to realize
growth by further developing existing product categories, such as sportswear and
rugged footwear, where there remains ample room for growth in market share. The
Company's success in designing and marketing products has allowed Columbia to
significantly broaden its assortment in existing categories. From 1993 through
1996, outerwear and sportswear sales increased 27.8% and 166.6%, respectively,
in part as a result of new product introductions. Since it was introduced in
1993, net sales of the Company's rugged footwear have increased from $1.2
million to $12.5 million in 1996. The Company believes opportunities exist for
continued rapid growth in sales of rugged footwear as distribution is expanded
to sporting goods and specialty outdoor stores that carry the Company's
outerwear and sportswear categories.
Selectively Broaden Retail Distribution. The Company believes that over the
longer term significant opportunities exist to increase sales of its products to
department stores and footwear specialty shops. Although sales to department
stores accounted for less than 14% of the Company's U.S. net sales in 1996, the
Company believes this percentage will rise because department store retailers
often prefer to purchase products from vendors that can offer complete
head-to-toe product lines.
5
<PAGE>
The Company was established in 1938 and was incorporated under Oregon law
in 1961. The Company's executive offices are located at 6600 North Baltimore,
Portland, Oregon 97203, and its telephone number is (503) 286-3676.
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers of the Common Stock.
6
<PAGE>
The Offerings(1)
Shares of Common Stock offered:
U.S. Offering................................. 5,333,334 shares
International Offering........................ 1,333,333 shares
Total Common Stock Offered................. 6,666,667 shares
Total Common Stock to be outstanding
after the Offerings............................ 28,585,348 shares(2)
Use of proceeds.................................. Payment of S corporation
dividends to existing
shareholders. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol........... COLM
- -----------
(1) The offering of 5,333,334 shares of Common Stock initially offered in the
United States (the "U.S. Offering") and the concurrent offering of
1,333,333 shares of Common Stock initially offered outside the United
States (the "International Offering") are collectively referred to as the
"Offerings." The underwriters for the U.S. Offering (the "U.S.
Underwriters") and the underwriters for the International Offering (the
"International Underwriters") are collectively referred to as the
"Underwriters." The completion of the U.S. Offering is conditioned on the
completion of the International Offering, and vice versa.
(2) Excludes 2,000,000 shares reserved for issuance under the Company's 1997
Stock Incentive Plan (the "Stock Incentive Plan"), of which 859,379 shares
were subject to outstanding options at November 30, 1997 at a weighted
average exercise price of $8.92 per share. See "Management - Stock
Incentive Plan."
<TABLE>
<CAPTION>
Summary Consolidated Financial Information
(in thousands, except per share data)
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
-------- --------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales..................................... $127,668 $ 192,055 $256,426 $303,797 $ 298,988 $226,239 $258,355
Gross profit.................................. 52,047 79,511 107,486 120,826 122,129 90,613 113,784
Selling, general and administrative expense... 34,970 46,351 64,049 82,083 87,954 63,593 77,757
Earnings from operations...................... 17,077 33,160 43,437 38,743 34,175 27,020 36,027
Net income (1)................................ 15,015 30,748 38,324 28,726 21,010 22,309 31,800
Pro forma net income (2)...................... $ 8,995 $ 18,883 $ 24,130 $ 18,286 $ 13,487 $ 14,263 $ 20,118
Pro forma net income per share (2)............ $ 0.47 $ 0.70
Pro forma weighted income average shares
outstanding (3) 28,934 28,934
</TABLE>
<TABLE>
<CAPTION>
September 30, 1997
-----------------------
Pro Forma As
Actual Adjusted (4)
-------- ------------
<S> <C> <C>
Balance Sheet Data:
Working capital......................................................................................... $ 73,474 $ 64,645
Inventories............................................................................................. 69,249 69,249
Total assets............................................................................................ 259,069 264,940
Long-term debt.......................................................................................... 2,862 2,862
Shareholders' equity.................................................................................... 112,256 100,287
</TABLE>
- -----------
(1) For 1992 reflects a charge of $1.0 million related to the payment of a fine
in connection with the violation of certain import regulations; for 1995
reflects a $2.5 million payment in settlement of certain litigation; for
1996 reflects a $7.5 million charge related to the termination of a
compensation arrangement in exchange for the issuance of Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management - Certain Transactions" and Notes 13 and 15 of
Notes to Consolidated Financial Statements.
(2) The Company was an S corporation and accordingly was not subject to federal
and, generally, state income taxes during the periods indicated. Pro forma
net income reflects federal and state income taxes as if the Company had
been a C corporation, based upon a pro forma effective tax rate of 40%. See
"Dividend Policy and S Corporation Status" and Note 1 of Notes to
Consolidated Financial Statements.
(3) For 1996 and the nine months ended September 30, 1997, includes the number
of shares to be sold in the Offerings to generate proceeds to be used for
the payment of dividends in the estimated aggregate amount of $107 million
to existing shareholders, which the Company expects to declare prior to the
completion of the Offerings. See "Dividend Policy and S Corporation
Status," "Certain Transactions" and Note 1 of Notes to Consolidated
Financial Statements.
(4) Pro forma to reflect (i) the payment of dividends of $107 million to
existing shareholders, which the Company expects to declare prior to
completion of the Offerings, and (ii) the recording of $2.7 million of
deferred income tax benefit as if the Company had been a C corporation
since 1988. Adjusted to give effect to the sale of the 6,666,667 shares
offered by the Company in the Offerings at an assumed initial public
offering price of $15.00 per share and the application of the estimated net
proceeds therefrom. See "Use of Proceeds," "Dividend Policy and S
Corporation Status," "Certain Transactions" and Note 1 of Notes to
Consolidated Financial Statements.
7
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be carefully considered in evaluating the Company and its
business before purchasing the Common Stock offered by this Prospectus.
Competition
The markets for outerwear, sportswear and rugged footwear are highly
competitive. Within each of its geographic markets, the Company faces
significant competition from global and regional branded apparel and footwear
companies, as well as retailers that market apparel and footwear under their own
labels. These and other competitors pose significant challenges to the Company's
market share in its major U.S. and Canadian markets and make it more difficult
to make gains in newer markets in Europe and Asia. The Company also competes
with other apparel and footwear companies for the production capacity of
independent manufacturers that produce the Company's apparel and for import
quota capacity. See "--Dependence on Independent Manufacturers" and
"Business--Business Process--Sourcing and Manufacturing." Many of the Company's
competitors are significantly larger and have substantially greater financial,
distribution, marketing and other resources and have achieved greater
recognition for their brand names for product lines or certain products than the
Company. Increased competition by existing and future competitors could result
in reductions in display areas in retail locations, reductions in sales or
reductions in prices of the Company's products. There is no assurance that the
Company will be able to compete successfully against present or future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on the Company. See "Business--Competition."
Seasonality and Fluctuations in Operating Results; Economic Cyclicality
The Company's results of operations have fluctuated and may continue to
fluctuate significantly from period to period. The Company's products are
marketed on a seasonal basis, with a product mix now weighted substantially
toward the fall season. Consequently, the Company's results of operations for
the quarter ending September 30 have in the past been much stronger than the
results for the other quarters. This seasonality, along with other factors that
are beyond the Company's control, including general economic conditions, changes
in consumer behavior, weather conditions, availability of import quotas and
currency exchange rate fluctuations, could adversely affect the Company and
cause its results of operations to fluctuate. Results of operations in any
period should not be considered indicative of the results to be expected for any
future period. The sale of the Company's products, particularly skiwear, is
subject to substantial cyclical fluctuation. Sales tend to decline in periods of
recession or uncertainty regarding future economic prospects that affect
consumer spending, particularly on discretionary items. This cyclicality and any
related fluctuation in consumer demand could have a material adverse effect on
the Company's results of operations and financial condition. See
8
<PAGE>
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations and Seasonality."
Effects of Weather
Sales of the Company's outerwear are dependent in part on the weather, and
such sales may decline in years in which weather conditions do not favor the use
of the Company's outerwear. For example, the Company believes unseasonably warm
weather in the northern United States in late 1994 caused customers to delay,
and in some cases reduce or cancel, orders for the Company's outerwear,
including skiwear and snowboarding apparel, which had an adverse effect on the
Company's net sales and gross margins in 1994 and 1995. Sustained periods of
unseasonably warm weather could have a material adverse effect on the Company.
Consumer Preferences
The Company believes it has benefited from changing consumer preferences
and increasing consumer interest in outdoor activities and from lifestyle
changes that emphasize apparel designed for these activities, but these trends
may not continue. Any change in consumer preferences or consumer interest in
outdoor activities could have a material adverse effect on the Company. In
addition, although the Company believes its products have not been significantly
affected by past fashion trends, changes in fashion trends could have a greater
impact as the Company expands its product offerings to include more sportswear.
Furthermore, decisions about product designs often are made in advance of
consumer acceptance. Although the Company attempts to manage its inventory risk
through early commitments by retailers, production orders must generally be
placed with manufacturers before all of a season's orders are received by the
Company. Failure to anticipate and respond to changes in consumer preferences
and demands could lead to, among other things, lower sales, excess inventories
and lower margins, which could have a material adverse effect on the Company.
Uncertain Ability to Implement Growth Strategy
As part of its growth strategy, the Company seeks to develop existing
merchandise categories and increase international distribution, including in
countries where the Company has little distribution experience and where the
Company's brand name is not well-known. There is no assurance that these
strategies will be successful. The Company also intends to increase its sales of
products to department stores and expand the number of concept shops located
within retailers. Increasing sales to department stores, and the actual number
of concept shops to be opened and their success, will each depend on various
factors, including strength of the Company's brand name, competitive conditions,
the ability of the Company to manage the increased sales and concept shop
expansion, the availability of desirable locations and the negotiation of terms
with the department stores and the retailers in which the concept shops are
located. There is no assurance that future terms will be as favorable to the
Company as those under which the Company now operates or that these terms will
not adversely affect the Company's ability to manage inventory risk. There is no
assurance that the Company will
9
<PAGE>
be able to increase its sales to department stores or to open and operate new
concept shops on a profitable basis. There is no assurance that the
Company's growth strategies will be successful or that the Company's sales or
net income will increase as a result of the implementation of such strategies.
See "Business--Growth Strategy" and "--Business Process."
Management of Growth; Expansion of Distribution Facility
Successful implementation of the Company's business strategy will require
the Company to manage growth. To manage growth effectively, the Company will
need to continue to implement changes in certain aspects of its business, to
enhance its information systems and operations to respond to increased demand,
to attract and retain qualified personnel and to develop, train and manage an
increasing number of management-level and other employees. Growth could place an
increasing strain on Company management, financial, product design, marketing,
distribution and other resources, and the Company could experience operating
difficulties. The Company is replacing its management information system with an
enterprise system that integrates electronic data interchange ("EDI") and
inventory management capabilities. The system, some aspects of which are already
operational, is expected to be fully operational in late 1998. Delays or other
difficulties in implementing this system could disrupt the Company's ability to
manage its inventory effectively. In addition, the Company plans to increase the
size of its Portland, Oregon distribution facility substantially by early 1999
to meet expected future growth. In connection with this expansion, the Company
plans to implement a new warehouse management system. There is no assurance that
this expansion will be completed on time or will not interfere with existing
operations. Any failure to manage growth effectively could have a material
adverse effect on the Company's results of operations and financial condition.
Dependence on Key Personnel
The Company's future success will depend in part on the continued service
of certain key management and other personnel, including Gertrude Boyle, the
Company's Chairman, Timothy P. Boyle, the Company's President and Chief
Executive Officer, and Don Richard Santorufo, the Company's Executive Vice
President and Chief Operating Officer, and on the Company's ability to attract
and retain qualified managerial, design, sales and marketing personnel.
Competition for these employees is intense. There is no assurance that the
Company can retain its existing key personnel or that it can attract and retain
sufficient numbers of qualified employees in the future. The loss of key
employees or the inability to hire or retain qualified personnel in the future
could have a material adverse effect on the Company. See "Management."
Dependence on Independent Manufacturers
The Company's products are produced by approximately 115 independent
manufacturers worldwide. For 1997 product sales, approximately 94% (by dollar
volume) of the Company's products were produced by independent manufacturers,
and approximately 86% (by dollar volume) of the Company's products were produced
outside the United States, principally in the Far East. Other than its facility
for the production of fleece products and accessories in Chaffee,
10
<PAGE>
Missouri, the Company does not operate any production facilities. Six
manufacturers engaged by the Company accounted for approximately 38.5% (by
dollar volume) of the Company's total production for 1997 product sales. The
primary production facilities of these manufacturers are located in Asia. No
other manufacturer accounted for more than five percent of the Company's total
production for 1997 product sales.
The inability of a manufacturer to ship orders of the Company's products in
a timely manner or to meet the Company's quality standards could cause the
Company to miss the delivery requirements of its customers for those items,
which could result in cancellation of orders, refusal to accept deliveries or a
reduction in purchase prices, any of which could have a material adverse effect
on the Company. Although the Company enters into a number of purchase order
commitments each season specifying a time frame for delivery, method of payment,
design and quality specifications and other standard industry provisions, the
Company does not have long-term contracts with any manufacturer. In addition,
the Company competes with other companies for the production capacity of
independent manufacturers and import quota capacity. Certain of these competing
companies have substantially greater brand recognition and financial and other
resources than the Company and thus may have an advantage in the competition for
production and import quota capacities. None of the manufacturers used by the
Company produces the Company's products exclusively.
For production of a significant portion of the Company's products,
principally in China, Columbia directly purchases the raw material from
suppliers, obtains or arranges for any necessary import quotas and ships the
materials in a "kit" to the independent manufacturer that has been selected by
Columbia to produce the finished garment. This arrangement advances the timing
for inventory purchases and advances the point in the sourcing process at which
the Company is subject to the risk of loss or damage to the materials before a
finished garment is manufactured. In addition, independent manufacturers may
find traditional vendor relationships more profitable and may therefore perceive
an incentive to give priority to customers using those methods.
The Company requires its independent manufacturers to operate in compliance
with applicable laws and regulations. Although the Company's internal and vendor
operating guidelines promote ethical business practices and the Company's
sourcing personnel periodically visit and monitor the operations of its
independent manufacturers, the Company does not control these vendors or their
labor practices. The violation of labor or other laws by an independent
manufacturer of the Company, or the divergence of an independent manufacturer's
labor practices from those generally accepted as ethical in the United States,
could result in adverse publicity for the Company and could have a material
adverse effect on the Company.
Dependence on Key Suppliers
Certain of the specialty fabrics used by the Company and manufactured to
its custom specification may be available, in the short-term, from only one or a
very limited number of sources. While the Company believes it could identify and
qualify additional factories to
11
<PAGE>
produce these materials, the unavailability of certain existing manufacturers
for supply of these materials, for any reason, could have a material adverse
effect on the Company.
Advance Purchases of Products
To minimize purchasing costs, the time necessary to fill customer orders
and the risk of non-delivery, the Company places orders for its products with
its manufacturers prior to the time the Company has received all of its
customers' orders and maintains an inventory of certain products that it
anticipates will be in greater demand. There is no assurance, however, that the
Company will be able to sell the products it has ordered from manufacturers or
that it has in its inventory. Customer orders, moreover, are cancelable by the
customer up to 45 days prior to the date of the shipment of the products.
Inventory levels in excess of customer demand may result in inventory
write-downs and the sale of excess inventory at discounted prices, which could
have a material adverse effect on the Company. As of September 30, 1997, the
Company had $59.9 million of open purchase orders with its manufacturers and
$69.2 million of inventory at cost. See "Business--Business Process."
Risks Related to Collectibility of Receivables
The Company extends credit to its customers based on an assessment of a
customer's financial circumstances, generally without requiring collateral. To
assist in the scheduling of production and the shipping of seasonal products,
the Company offers customers extended payment terms for placing pre-season
orders and additional extensions for taking delivery before the peak shipping
season. These extended payment terms increase the Company's exposure to the risk
of uncollectible receivables. The Company's single largest customer accounted
for approximately four percent of the Company's net sales in 1996 and
approximately eight percent of the Company's net sales for the nine months ended
September 30, 1997. Significant customers of the Company have experienced
financial difficulties in the past, and future financial difficulties of
customers could have a material adverse effect on the Company.
Product Liability; Warranty Exposure
The Company's products are used in outdoor activities, sometimes in severe
weather conditions. Purchasers of these products depend on products to be well
designed and durable. Although the Company has not experienced any significant
expense as the result of product recalls or product liability claims, there is
no assurance that it will not incur expenses in connection with product recalls
or product liability claims that could have a material adverse effect on the
Company.
Substantially all of the Company's products are backed by a lifetime
limited warranty for defects in quality and workmanship. The Company maintains a
warranty reserve for future warranty claims, but the actual costs of servicing
future warranty claims may significantly exceed the reserve, which could have a
material adverse effect on the Company. See Note 2 of Notes to Consolidated
Financial Statements.
12
<PAGE>
International Operations
Approximately 86% of the Company's products are sourced outside the United
States through arrangements with over 85 manufacturers in 12 countries. In
addition, the Company is increasing its international sales efforts. As a
result, the Company's business is subject to the risks generally associated with
doing business abroad, such as foreign governmental regulations, foreign
consumer preferences, political unrest, disruptions or delays in shipments and
changes in economic conditions in countries in which the Company manufactures or
sells its products. These factors, among others, could influence the Company's
ability to sell its products in international markets, as well as its ability to
manufacture its products or procure certain materials. If any such factors were
to render the conduct of business in a particular country undesirable or
impractical, there could be a material adverse effect on the Company. Many of
the Company's imports are subject to existing or potential duties, tariffs or
quotas that may limit the quantity of certain types of goods that may be
imported into the United States, including constraints imposed by bilateral
textile agreements between the United States and a number of foreign countries.
These agreements impose quotas on the amounts and types of merchandise that may
be imported into the United States from these countries. These agreements also
allow the signatories to adjust the quantity of imports for categories of
merchandise that, under the terms of the agreements, are not currently subject
to specific limits. The Company's imported products are also subject to United
States customs duties, which comprise a material portion of the cost of the
merchandise. The United States and the countries in which the Company's products
are produced or sold may impose new quotas, duties, tariffs or other
restrictions, or may adversely adjust prevailing quota, duty or tariff levels,
any of which could have a material adverse effect on the Company. A significant
portion of the Company's products is produced in China. In June 1997, President
Clinton extended to June 1998 "most favored nation" ("MFN") non-discriminatory
trading status to China. Under U.S. law, MFN status for China is reviewed
annually. The United States has extended MFN status to China each year since
1980. China is a material source of production for the Company. A revocation of
MFN status would result in a substantial increase in tariff rates on goods
imported from China, and therefore could adversely affect the Company's
operations. In addition, in response to alleged transshipment of apparel by
China, the U.S. government may reduce quotas for certain garments imported from
China in 1998. A reduction in quotas for Chinese products could have a material
adverse effect on the Company. See "Business--Business Process--Sourcing and
Manufacturing" and "--Government Regulation."
Currency Exchange Rate Fluctuations
The Company generally purchases its products in U.S. dollars. The Company,
however, sources a significant amount of its products overseas and the cost of
these products may be affected by changes in the value of the relevant
currencies. Price increases caused by currency exchange rate fluctuations could
make the Company's products less competitive or have an adverse effect on the
Company's margins. The Company's international revenue generally is derived from
sales in foreign currencies, and this revenue could be materially affected by
currency fluctuations, including upon translation of amounts received in foreign
currencies into
13
<PAGE>
U.S. dollars following sale by the Company. Currency exchange rate fluctuations
could also disrupt the business of the independent manufacturers that produce
the Company's apparel by making their purchases of raw materials more expensive.
Beginning in late 1997, the Company implemented a program to hedge against its
exposure to currency exchange rate fluctuations. There is no assurance that the
hedging program will be successful or that foreign currency fluctuations will
not have a material adverse effect on the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."
Dependence on Proprietary Rights
The Company uses a number of trademarks, certain of which it has registered
with the United States Patent and Trademark Office and in selected foreign
countries. The Company believes its registered and common law trademarks have
significant value and that some of its trademarks are important to its ability
to create and sustain demand for its products. The Company also places
significant value on its trade dress, the overall appearance and the image of
its products. Although the Company has not been materially inhibited from
selling its products in connection with trademark or trade dress disputes, there
is no assurance that significant obstacles will not arise as it expands its
product line and geographic scope of its marketing. In markets outside the
United States, it may be more difficult for the Company to establish its
proprietary rights and to challenge successfully use of those rights by other
parties. There is no assurance, moreover, that the Company's trademarks or trade
dress do not or will not violate the proprietary rights of others, that they
would be upheld if challenged or that the Company would, in that event, not be
prevented from using its trademarks or trade dress, any of which could have a
material adverse effect on the Company. From time to time, the Company discovers
products that are counterfeit reproductions of the Company's products or that
otherwise infringe upon proprietary rights held by the Company. If the Company
is unsuccessful in challenging a party's products on the basis of trademark or
trade dress infringement, continued sales of these products by that or any other
party could adversely impact the Columbia brand, result in the shift of consumer
preference away from the Company and generally have a material adverse effect on
the Company. There is no assurance that actions taken by the Company to
establish and protect its trademarks and other proprietary rights will be
adequate to prevent imitation of its products by others or to prevent others
from seeking to block sales of the Company's products as violating of trademarks
and proprietary rights. In addition, the Company could incur substantial costs
in legal actions relating to the Company's use of intellectual property or the
use of the Company's intellectual property by others, which if successful, could
have a material adverse effect on the Company. In 1996 the Company paid $2.5
million to another party to settle a dispute over the use of certain marks,
including the word "Columbia." See "Business--Intellectual Property."
Absence of Prior Public Market; Possible Volatility of Stock Price
Prior to the Offerings, there has been no public market for the Company's
Common Stock. There is no assurance that an active trading market will develop
or be sustained after completion of the Offerings or that the market price of
the Common Stock will not decline below
14
<PAGE>
the initial public offering price. The initial public offering price of the
Common Stock will be determined through negotiations between the Company and the
representatives of the Underwriters. See "Underwriting." The Company believes
quarterly fluctuations in its financial results and factors not directly related
to the Company's operating performance, such as product or financial results
announcements by other apparel companies, could contribute to the volatility of
the price of its Common Stock, causing it to fluctuate significantly. These
factors, as well as general economic conditions, such as recessions or high
interest rates, may adversely affect the market price of the Common Stock.
Control by Principal Shareholders; Benefits to Existing Shareholders
Upon completion of the Offerings, Gertrude Boyle, Chairman of the Board,
Timothy P. Boyle, President, Chief Executive Officer and a director and Ms.
Boyle's son, Sarah Bany, Director of Retail Operations and a director and Ms.
Boyle's daughter, and Dan Santorufo, Executive Vice President and Chief
Operating Officer, will beneficially own approximately 77% of the outstanding
Common Stock. As a result, if acting together they will be able to control all
matters requiring approval by the shareholders of the Company, including the
election of directors and the amendment of the Company's articles of
incorporation, without the cooperation of other shareholders. Furthermore, the
Company will use the net proceeds of the Offerings and increased borrowings to
pay dividends of approximately $107 million to existing shareholders of the
Company. See "Use of Proceeds," "Dividend Policy and S Corporation Status,"
"Certain Transactions" and "Principal Shareholders."
Shares Eligible for Future Sale
Sales of a substantial number of shares of the Common Stock in the public
market following the Offerings, or the prospect of such sales, could adversely
affect the market price of the Common Stock and the Company's ability to raise
capital in the future in the equity markets. Upon completion of the Offerings,
there will be 28,585,348 shares of Common Stock outstanding. Of these shares,
the 6,666,667 shares to be sold in the Offerings will be eligible for immediate
resale without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), unless purchased by an "affiliate" of the Company, as that
term is defined in Rule 144 under the Securities Act. Upon expiration of lock-up
agreements with the representatives of the Underwriters, 180 days after the date
of this Prospectus (or earlier with the consent of the representatives of the
Underwriters), 21,072,927 shares will be eligible for immediate resale subject
to the limitations of Rule 144. As of November 30, 1997, options to purchase
859,379 shares of Common Stock had been granted under the Stock Incentive Plan.
The Company intends to file as soon as practicable following completion of the
Offerings a registration statement on Form S-8 under the Securities Act covering
shares of Common Stock reserved for issuance under the Stock Incentive Plan.
This registration statement is expected to become effective immediately upon
filing, whereupon, subject to the satisfaction of applicable exercisability
periods, Rule 144 volume limitations applicable to affiliates and, in certain
cases, the agreements with the representatives of the Underwriters referred to
above, shares of Common Stock issued upon exercise of outstanding options
granted pursuant to the Stock Incentive Plan will be available for immediate
resale in the open market.
15
<PAGE>
Potential Issuance of Preferred Stock; Anti-Takeover Effect of Oregon Law
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, and the Board of Directors may fix the preferences, limitations and
relative rights of those shares without any vote or action by the shareholders.
The potential issuance of Preferred Stock, certain provisions of Oregon law and
the concentrated ownership of the Company could make it more difficult for a
party to gain control of the Company. See "Description of Capital Stock."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 6,666,667 shares of
Common Stock by the Company in the Offerings (assuming an initial public
offering price of $15.00 per share and after deducting an assumed underwriting
discount and estimated offering expenses) are estimated to be $92.3 million
($106.3 million if the Underwriters' over-allotment options are exercised in
full). The Company intends to use the net proceeds to pay dividends to the
Company's existing shareholders.
DIVIDEND POLICY AND S CORPORATION STATUS
The Company expects to retain any earnings to finance the expansion and
development of its business and, except as described below, has no plans to pay
cash dividends after the Offerings for the foreseeable future. The payment of
dividends is within the discretion of the Company's Board of Directors and will
depend on the earnings, capital requirements and operating and financial
condition of the Company, among other factors. Certain of the Company's credit
agreements restrict the Company's ability to pay dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
Since 1988 the Company has been treated for federal income tax purposes as
an S corporation under Subchapter S of the Internal Revenue Code and has
generally been treated as an S corporation for state income tax purposes under
comparable state tax laws. As a result, the Company's earnings through the day
preceding the date of termination of the Company's S corporation status (the
"Termination Date") have been or will be for federal and, generally, state
income tax purposes taxed directly to the Company's shareholders, at their
individual federal and state income tax rates, rather than to the Company. The
Termination Date will occur on or prior to the date of the closing of the
Offerings. Subsequent to the Termination Date, the Company will no longer be
treated as an S corporation and, accordingly, will be subject to federal and
state income taxes on its earnings. See Notes 1 and 2 of Notes to Consolidated
Financial Statements.
In the nine months ended September 30, 1997 and in 1996 and 1995, the
Company declared cash dividends to its shareholders in the aggregate amounts of
$11,155,000, $8,543,000 and $20,389,000, respectively. The Company expects to
declare, prior to the completion of the Offerings, additional dividends to its
existing shareholders in the estimated aggregate amount of $107 million. See
"Use of Proceeds" and "Certain Transactions."
17
<PAGE>
DILUTION
As of September 30, 1997, the Company had a pro forma net tangible book
value (giving effect to dividends of $107 million expected to be declared prior
to completion of the Offerings and the recording of a deferred tax asset in the
amount of $2.7 million as described under "Capitalization") of approximately $99
million or $4.52 per share. Net tangible book value per share is equal to total
tangible assets (total assets less intangible assets) less total liabilities of
the Company, divided by the number of shares of Common Stock then outstanding.
Without taking into account any adjustment in net tangible book value
attributable to operations after September 30, 1997, after giving effect to the
sale by the Company of 6,666,667 shares in the Offerings at an assumed initial
public offering price of $15.00, the pro forma net tangible book value of the
Company as of September 30, 1997 (after deduction of an assumed underwriting
discount and estimated offering expenses and the application of the net proceeds
as described under "Use of Proceeds") would have been approximately $99 million
or $3.46 per share. This represents an immediate decrease in pro forma net
tangible book value of $1.06 per share to existing shareholders and an immediate
dilution of $11.54 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<CAPTION>
<S> <C>
Assumed initial public offering price per share................................ $15.00
Pro forma net tangible book value per share as of September 30, 1997......... 4.52
Decrease per share attributable to new investors............................. 1.06
Pro forma net tangible book value per share after the Offerings................ 3.46
------
Dilution per share to new investors............................................ $11.54
======
</TABLE>
The following table summarizes on a pro forma basis as of September 30,
1997 the relative investments of all existing shareholders and new investors,
giving effect to the sale by the Company of shares in the Offerings at an
assumed initial public offering price of $15.00 per share and the payment of
dividends of $107 million to existing shareholders, which the Company expects to
declare prior to completion of the Offerings (without giving effect to
underwriting discount and offering expenses payable by the Company):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------------- --------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...................21,918,681 76.7% $ 5,256,000 5.0% $ 0.24
New investors........................... 6,666,667 23.3 100,000,000 95.0 15.00
---------- --------- ------------ --------
Total.............................28,585,348 100.0% $105,256,000 100.0%
========== ========= ============ ========
</TABLE>
18
<PAGE>
The above information assumes no exercise of any outstanding options after
September 30, 1997. As of November 30, 1997, there were outstanding options to
purchase an aggregate of 859,379 shares of Common Stock at exercise prices
ranging from $8.30 to $13.03 per share. Purchasers of shares of Common Stock
offered in the Offerings will incur additional dilution to the extent
outstanding stock options are exercised. See "Management--Stock Incentive Plan"
and Notes 10 and 17 of Notes to Consolidated Financial Statements.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization and short-term
obligations of the Company on an actual basis as of September 30, 1997 and on a
pro forma as adjusted basis to give effect to (i) the payment of dividends after
September 30, 1997 and (ii) the receipt and application of the estimated net
proceeds to the Company from the sale of the 6,666,667 shares of Common Stock
offered by the Company in the Offerings at an assumed initial public offering
price of $15.00 per share. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1997
----------------------------
Pro Forma
Actual as Adjusted(1)
------ --------------
(in thousands)
<S> <C> <C>
Notes payable (2)...........................................................$ 77,478 $ 92,178
Current portion of long-term obligations.................................... 160 160
----------- ----------
Total short-term obligations............................................. 77,638 92,338
Long-term obligations, net of current portion..................................$ 2,862 $ 2,862
----------- ----------
Shareholders' equity:
Preferred Stock, 10,000,000 shares authorized; no shares
issued and outstanding................................................... __ __
Common Stock, 50,000,000 shares authorized; 21,918,681 shares issued
and outstanding, actual; 28,585,348 shares issued and
outstanding, pro forma as adjusted (3)................................... 17,886 110,186
Retained earnings........................................................... 101,679 (2,590)
Foreign currency adjustments................................................ (1,717) (1,717)
Unearned portion of restricted stock issued for future
services (5,592) (5,592)
---------- ----------
Total shareholders' equity............................................ 112,256 100,287
---------- ----------
Total capitalization..................................................$ 192,756 $ 195,487
========== ==========
</TABLE>
- -----------
(1) Pro forma to reflect (i) the payment of dividends in the estimated
aggregate amount of $107 million for S corporation distributions to
existing shareholders, which the Company expects to declare prior to the
completion of the Offerings, and (ii) the recording of $2.7 million of
deferred income tax benefit as if the Company had been a C corporation.
Adjusted to give effect to the sale of the 6,666,667 shares offered by the
Company in the Offerings, receipt of the estimated net proceeds of $92.3
million therefrom and the application of such proceeds to payment of
dividends by the Company. See "Use of
20
<PAGE>
Proceeds," "Dividend Policy and S Corporation Status," "Certain
Transactions" and Notes 1 and 2 of Notes to Consolidated Financial
Statements.
(2) Represents (i) amounts due under certain of the Company's credit lines and
(ii) increased borrowings of $14.7 million to pay dividends to
shareholders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
Note 7 of Notes to Consolidated Financial Statements.
(3) Excludes 2,000,000 shares reserved for issuance under the Stock Incentive
Plan, of which 859,379 shares were subject to outstanding options at
November 30, 1997 at a weighted average exercise price of $8.92 per share.
See "Management--Stock Incentive Plan" and Notes 10 and 17 of Notes to
Consolidated Financial Statements.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below for, and as of the end of, each
of the years in the five-year period ended December 31, 1996 have been derived
from the audited financial statements of the Company. The selected financial
data for the nine months ended September 30, 1996 and 1997 and as of September
30, 1997 have been derived from the unaudited financial statements of the
Company and include, in the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary to a fair presentation of the
information for such periods. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. The financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net sales.............. $ 27,668 $192,055 $256,426 $303,797 $298,988 $226,239 $258,355
Cost of sales.......... 75,621 112,544 148,940 182,971 176,859 135,626 144,571
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 52,047 79,511 107,486 120,826 122,129 90,613 113,784
Selling, general and
administrative expense. 34,970 46,351 64,049 82,083 87,954 63,593 77,757
-------- -------- -------- -------- -------- -------- --------
Income from
operations............. 17,077 33,160 43,437 38,743 34,175 27,020 36,027
-------- -------- -------- -------- -------- -------- --------
Interest expense, net.. 1,075 1,688 3,220 5,767 4,220 3,248 2,497
Other expense (1)...... 1,011 -- -- 2,500 7,477 -- --
-------- -------- -------- -------- -------- -------- --------
Provision (benefit) for
income taxes........... (24) 724 1,893 1,750 1,468 1,463 1,730
Net income............ $ 15,015 $ 30,748 $ 38,324 $ 28,726 $ 21,010 $ 22,309 $ 31,800
======== ======== ======== ======== ======== ======== ========
Pro forma net
income(2)............. $ 8,995 18,883 24,130 $ 18,286 13,487 $ 14,263 $ 20,118
======== ======== ======== ======== ======== ======== ========
Pro forma net income
per share (2)......... $ .47 $ .70
======== ========
Pro forma weighted
average shares
outstanding (3)....... 28,934 28,934
======== ========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------- September 30,
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital.............................. $ 29,639 $ 35,002 $ 48,971 $ 47,726 $ 59,797 $ 73,474
Inventories.................................. 13,698 18,937 43,442 48,404 34,638 69,249
Total assets................................. 55,486 78,428 133,349 162,301 135,967 259,069
Long-term debt............................... 6,443 3,750 1,250 --- 2,963 2,862
Shareholders' equity......................... 28,837 43,394 61,992 70,458 91,936 112,256
- -----------
<FN>
(1) For 1992 reflects a charge of $1.0 million related to the payment of a fine
in connection with the violation of certain import regulations; for 1995
reflects a $2.5 million payment in settlement of certain litigation; for
1996 reflects a $7.5 million charge related to the termination of a
compensation arrangement in exchange for the issuance of Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management--Certain Transactions" and Notes 13 and 15 of
Notes to Consolidated Financial Statements.
(2) The Company was an S corporation and accordingly was not subject to federal
and, generally, state income taxes during the periods indicated. Pro forma
net income reflects federal and state income taxes as if the Company had
been a C corporation, based upon a pro forma effective tax rate of 40%. See
"Dividend Policy and S Corporation Status" and Note 1 of Notes to
Consolidated Financial Statements.
(3) For 1996 and the nine months ended September 30, 1997, includes the number
of shares to be sold in the Offerings to generate proceeds to be used for
the payment of dividends in the estimated aggregate amount of $107 million
to existing shareholders, which the Company expects to declare prior to the
completion of the Offerings. See "Dividend Policy and S Corporation
Status," "Certain Transactions" and Note 1 of Notes to Consolidated
Financial Statements.
</FN>
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Established in 1938, Columbia has grown from a small, regional hat
distributor to a global leader in outdoor apparel. The Company has its roots and
developed its initial expertise in the production of high quality, rugged
outdoor fishing and hunting apparel for the serious sportsman. The Company
broadened its product offerings in the 1980s to include related merchandise
categories. In 1985 the Company introduced the Interchange System into its
outerwear line and opened the first of its six international sourcing offices,
further enhancing the value component of the Company's merchandise. In the 1990s
the Company leveraged its brand awareness by expanding its sportswear offerings
and introducing a rugged footwear line to complement its successful outerwear
line. Based on this success, the Company expanded into the international markets
through the establishment of direct sales operations in Canada, Europe and South
Korea and a network of independent distributors in South America, Japan,
Australia, New Zealand and certain European countries. Today, the Company sells
its products in 30 countries and its sales have increased to $299 million in
1996 from $18.8 million in 1987.
From 1992 through 1995, sales increased at a compound annual growth rate of
34%. During this period of rapid sales growth, the Company recognized the need
to diversify its product offerings, which were dominated by the
fall/winter-oriented outerwear and accessory lines (84.6% in 1993), and to
expand its geographic distribution, which was dominated by domestic sales (88.5%
in 1993). To accomplish this, the Company established an internal merchandise
and design department for its sportswear line and purchased its Canadian
distributor in 1992. In 1993 the Company introduced its first footwear offering
to the market and expanded its wholesale distribution into Europe. In 1997 the
Company opened a flagship store in South Korea, and in the fall of 1998 the
Company will assume the wholesale operations in Japan now operated by its
Japanese distributor. These actions diversified the Company's product offerings
and geographic distribution. For 1996, sales of the Company's sportswear and
footwear accounted for 25.3% and 4.2% of net sales, respectively, and sales
outside the United States accounted for 17.9% of net sales.
Sales decreased slightly in 1996, primarily as a result of a poor retail
environment in 1995 that caused domestic customers to hold unseasonably high
inventories during the fall 1996 order season. This had the effect of depressing
fall 1996 orders. In addition, two of the Company's larger customers, which
together accounted for $10.2 million of the Company's net sales in 1995,
declared bankruptcy after the fall 1995 season. The decrease in the domestic
business was offset in part by a $10.3 million, or 65%, increase in foreign
sales for 1996. For the nine months ended September 30, 1997 sales increased
$32.1 million, or 14.2%, compared to the nine months ended September 30, 1996.
The Company's gross margins are affected by its ability to maintain or
increase the price of its products and control production costs. Sales prices
are influenced by the strength of the
24
<PAGE>
Company's brand, competitive conditions and the amount of inventory sold in
close-out sales, which depends in part on weather conditions and the retail
environment as well as the Company's ability to manage these factors through
effective control of inventory levels. Prior to 1995 the Company had experienced
several years of improved gross profit margins. This increase was the result of
improved efficiencies in the production of the foreign sourced goods as well as
the strength of the brand in the marketplace. In 1995 and 1996 the Company
experienced a decline in gross profit margins from the prior years. For both
years the decrease was attributable to close-out sales of excess fall inventory
from the prior season. The excesses were the result of lower than anticipated
reorders due to a late winter in 1994 and a poor retail environment in 1995. In
response to the adverse effect on margins in 1995 and 1996, the Company has
implemented an inventory management strategy to reduce the exposure to excess
inventory positions. This strategy includes obtaining customer orders closer to
the production cycle as well as reducing the reorder percentage assumed in the
production schedule. For 1996 the Company sold out of fall products with only
minimal off-priced sales. Excess inventories also were minimal for the nine
months ended September 30, 1997. The Company believes this inventory management
strategy, its increasing revenue derived from international operations, and the
greater significance of sportswear and footwear in the product offering have
substantially reduced its exposure to weather-related sales fluctuations.
The Company's gross margins are also influenced by changes in its product
and relative levels of domestic and international sales. Generally, the
Company's outerwear products have generated higher gross margins than its
sportswear and rugged footwear products. In addition, the Company's
international sales have typically generated higher gross margins than those
realized on its domestic sales. Accordingly, the Company believes its increasing
emphasis on sportswear and rugged footwear products may tend to reduce gross
margins, while its expansion of international sales activity may strengthen
gross margins.
In 1993 the Company experienced sales growth of 50.4%, followed by a 33.5%
increase in 1994. This near doubling of sales in a two-year period resulted in
sales volumes that strained the supporting infrastructure and resulted in
relatively low selling, general and administrative expense as a percentage of
sales. During this period of rapid sales growth, the Company focused on
investing in its infrastructure to enable continued expansion. Major areas of
investment consisted of expansion of the domestic distribution facilities, the
establishment of sportswear and footwear design and development departments,
creation of a product development facility in Hong Kong and establishment of a
European sales headquarters. Significant investment in infrastructure
contributed to an increase in selling, general and administrative expense as a
percentage of sales to 30.1% for the nine months ended September 30, 1997 from
24.1% in 1993. The Company anticipates that it will be able to leverage selling,
general and administrative expense as a percentage of sales as the international
sales operations become more established and the sportswear and footwear
segments of the business continue to expand.
Inventory purchases from independent manufacturers and suppliers in the Far
East are denominated primarily in U.S. dollars. Purchase prices for materials
and finished goods, however, may be affected by fluctuations in exchange rates
between the U.S. dollar and the local
25
<PAGE>
currency where the products are sourced. Any such fluctuations may increase the
Company's cost of goods sold in the future. In the last two years, exchange
rates have not materially affected the Company's inventory costs. The Company
sells its products in Canada and Europe in the local currency of the retailer. A
stronger U.S. dollar would negatively affect the Company's net sales and gross
margins in Canada and Europe. For the nine months ended September 30, 1997, the
Company's European net sales and gross margins were negatively affected by the
strengthening U.S. dollar. Beginning in late 1997, the Company implemented a
program to hedge against its exposure to currency exchange rate fluctuations.
The Company has operated as an S corporation since 1988 and, as a result,
has not been subject to federal or, generally, state income taxes. Accordingly,
the following discussion of the Company's historical results of operations does
not include a discussion of income tax expense. In connection with the
Offerings, the Company will become a C corporation subject to federal and state
income taxation and will record a net deferred tax asset of approximately $2.7
million and a corresponding nonrecurring benefit to income tax expense. See
"Dividend Policy and S Corporation Status" and Note 1 of Notes to Consolidated
Financial Statements.
Results of Operations
The following table sets forth certain financial data for the Company for
the periods indicated as a percentage of revenue.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales:
United States.............. 88.8% 88.5% 88.8% 86.2% 82.1% 82.3% 80.9%
Canada..................... 6.9 6.8 6.9 8.6 9.1 9.5 9.2
Other International........ 4.3 4.7 4.3 5.2 8.8 8.2 9.9
----- ----- ----- ----- ----- ----- -----
Total................ 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales................ 59.2 58.6 58.1 60.2 59.2 60.0 56.0
Gross profit................. 40.8 41.4 41.9 39.8 40.8 40.0 44.0
Selling, general and
administrative expense..... 27.4 24.1 25.0 27.0 29.4 28.1 30.1
Income from operations......
13.4 17.3 16.9 12.8 11.4 11.9 13.9
- -----------
</TABLE>
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1997
Net Sales. Net sales increased 14.2% to $258.4 million for the nine months
ended September 30, 1997 from $226.2 million for the comparable period in 1996.
Domestic sales increased 12.3% to $209.0 million for the nine months ended
September 30, 1997 from $186.1 million for the comparable period in 1996. The
increase is attributable to strong growth in the footwear, youth and certain
outerwear categories. International sales, excluding Canada, increased 37.6% to
$25.6 million for the nine months ended September 30, 1997 from $18.6
26
<PAGE>
million for the comparable period in 1996. The increase was due primarily to a
$3.7 million, or 68.7%, increase in European direct sales. Canadian sales grew
10.2% to $23.7 million for the nine months ended September 30, 1997 compared to
the same period in 1996.
Gross Profit. Gross profit as a percentage of net sales was 44.0% for the
nine months ended September 30, 1997 compared to 40.1% for the comparable period
in 1996. The increase in gross margin was due to improved inventory management
resulting in fewer mark downs and close-outs as well as efficiencies in the
manufacturing process and continued strength of the brand in the market.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 22.3% to $77.8 million for the nine months
ended September 30, 1997 from $63.6 million for the comparable period in 1996.
As a percentage of sales, selling, general and administrative expense increased
from 28.1% to 30.1%. This increase was primarily attributable to the Company's
investment in personnel and operational infrastructure to support the product
line expansion, additional advertising and promotional expenditures to support
the brand and international expansion into Europe, South Korea and Japan.
Because these markets are in the start-up phase, personnel expenses and
advertising and promotional expenditures are disproportionately high as the
Company establishes the Columbia brand. The Company believes it can leverage
selling, general and administrative expense as a percentage of sales as its
international operations become more established and its sportswear and footwear
sales expand.
Interest Expense. Interest expense decreased by 23.1% for the nine months
ended September 30, 1997 from the comparable period in 1996. The decrease was
attributable to lower borrowing requirements for working capital in 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales decreased 1.6% to $299.0 million in 1996 from $303.8
million in 1995. This decrease was due to a decline in domestic sales, which
decreased 6.2% to $245.6 million in 1996 from $261.9 million in 1995. The
domestic sales decrease primarily reflects the poor retail environment
experienced in the industry in fall 1995 selling season that resulted in
decreased preseason orders for 1996. In response to significant excess inventory
levels from the fall 1995 season and the high inventory levels held at the
retailers, the Company deliberately reduced the production of fall 1996
merchandise to limit the Company's exposure to reorder business. In addition,
two of the Company's larger customers, which together accounted for $10.2
million of the Company's sales in 1995, filed for bankruptcy after the fall 1995
season. This decrease was partially offset by the opening of two new outlet
stores in late 1995 and the Company's flagship store in late 1996. International
sales, excluding Canada, increased 65.4% to $26.3 million in 1996 from $15.9
million in 1995. The increase was due primarily to a $5.2 million, or 96.1%,
increase in European direct sales and a $5.1 million increase in sales to
international distributors. Canadian sales increased 4.6% to $27.2 million in
1996 from 1995.
27
<PAGE>
Gross Profit. Gross profit as a percentage of net sales was 40.9% in 1996
compared to 39.8% in 1995. The lower gross margin experienced in 1995 was
attributable to excess off- priced inventory sales. Due to a very mild fall 1994
in the United States, the Company experienced a low reorder rate, resulting in
excess inventory that was sold off-price in the first quarter of 1995. In fall
1995, many of the Company's retail customers experienced poor sales, resulting
in cancellations for fall 1995 merchandise. In anticipation of lower reorders,
the Company elected to sell a significant amount of excess inventory in late
1995 at discount prices. The effect of these sales was lower gross margins for
the first and fourth quarters of 1995. Gross margins for the first quarter of
1996 were negatively affected by off-priced inventory sales carried over from
fall 1995. In 1996 the Company deliberately reduced the reorder factor for fall
1996 production. The reduced inventory exposure, coupled with a healthier retail
environment, resulted in minimal markdown sales in the fall 1996 selling season
and, consequently, improved gross margins in 1996 over the prior year.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 7.2% to $88.0 million in 1996 from $82.1
million in 1995. As a percentage of net sales, selling, general and
administrative expense increased to 29.4% of sales in 1996 from 27.0% in 1995.
The increase was primarily due to the Company's investment in personnel and
systems infrastructure to support the growth of the Company's product offering
and the expansion of the European operation. In addition, the second phase of
the distribution center became operational in late 1995. The increase as a
percentage of sales was also affected by lower than anticipated preseason order
volume in 1996, influenced by the poor 1995 retail selling season. Based on the
lower order volume, the Company initiated a corporate cost containment strategy
for 1996 which included a reduced advertising budget, a delay in hiring of
additional personnel and reduced spending for discretionary projects.
Interest Expense. Interest expense decreased 26.8% in 1996 from 1995. The
decrease was attributable to lower borrowing requirements for working capital
needs.
Other Expense. Other expense represents compensation recognized upon
conversion of participation shares to Common Stock for Don Richard Santorufo,
the Company's Executive Vice President and Chief Operating Officer. Total
non-cash compensation recognized by the Company for 1996 related to the
conversion was $5.7 million. In addition to the non-cash compensation
recognized, the Company awarded Mr. Santorufo a cash bonus of $2.8 million to
cover the personal tax liability associated with the transaction. Of the total
expense of $8.5 million, the normal recurring amount of $1.0 million was
reported as selling, general and administrative expense and the balance of $7.5
million was reported as other expense. The Company will continue to recognize
additional compensation relating to the vesting of these shares through the year
2004.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased 18.5% to $303.8 million in 1995 from $256.4
million in 1994. Domestic sales increased 15.1% to $261.9 million in 1995 from
$227.6 million in 1994.
28
<PAGE>
This increase was primarily attributable to the expanded sportswear offering and
across-the-board increases in core outerwear products. In addition,
international sales, excluding Canada, increased 43.5% to $15.9 million as
European direct sales doubled. Canadian sales increased 46.3% to $26.0 million
in 1995 from 1994.
Gross Profit. Gross profit as a percentage of net sales was 39.8% in 1995
compared to 41.9% in 1994. The decrease in gross margin for 1995 was
attributable to the off-priced inventory sales discussed above.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 28.1% to $82.0 million in 1995 from $64.0
million in 1994. Selling, general and administrative expense as a percentage of
sales increased to 27.0% in 1995 from 24.9%in 1994. The increase in selling,
general and administrative expense in dollars and as a percentage of sales
reflects the Company's continued investment in infrastructure and added
personnel to support the growth in sales and product offerings. In 1994 the
Company opened a new distribution center and implemented new financial,
distribution management and sales order processing software, which were
amortized for the full year in 1995.
Interest Expense. Interest expense increased 79.1% in 1995 from 1994. The
increase was due primarily to higher average borrowing levels resulting from the
higher inventory and receivable balances carried by the Company in 1995.
Other Expense. Other expense in 1995 consisted of a payment of $2.5 million
in settlement of a dispute concerning use of the word "Columbia."
Quarterly Results of Operations and Seasonality
<TABLE>
<CAPTION>
For the Quarter Ended
---------------------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------------ ----------------------------------------- ---------------------------
Statements of
Earnings Data: Mar. 31 June 30 Sept. 30 Dec 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
------- ------- -------- ------ ------- ------- -------- ------- ------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $ 44,762 $ 62,933 $126,409 $ 69,693 $ 49,292 $55,350 $121,597 $ 72,749 $54,495 $49,695 $154,165
As a % of full year 14.7% 20.7% 41.6% 23.0% 16.5% 18.5% 40.7% 24.3%
Gross profit........ $ 14,851 $ 26,551 $ 54,604 $ 24,820 $ 16,035 $20,192 $ 54,386 $ 31,516 $20,752 $21,623 $ 71,409
As a % of full year 12.3% 22.0% 45.2% 20.5% 13.1% 16.5% 44.5% 25.9%
As a % of net sales. 33.2% 42.2% 43.2% 35.6% 32.5% 36.5% 44.7% 43.3% 38.1% 43.5% 46.3%
Income (loss) from
operations.......... $ (1,070) $ 7,989 $ 30,074 $ 1,750 $(2,890) $ 1,572 $ 28,338 $ 7,155 $(1,131) $ (852) $ 38,010
As a % of net sales. (2.4)% 12.7% 23.8% 2.5% (5.9)% 2.9% 23.3% 9.8% (2.1)% (1.7)% 24.7%
</TABLE>
The Company's business is based on two primary wholesale selling seasons,
spring (December to June), which represented 20% of the 1996 business, and fall
(June to December), which represented 80% of the 1996 business by wholesale
dollar volume. The spring product mix is weighted toward sportswear, footwear
and lighter outerwear. These products generally have a lower unit selling price
and lower gross margin than the fall products. The fall product mix is weighted
toward the higher unit priced, higher margin outerwear. These seasonal
29
<PAGE>
differences lead to significant fluctuations in operating results from quarter
to quarter. Historically the Company has recognized the majority of its profits
in the third quarter and has realized losses in the first quarter. Second and
fourth quarter results vary from year to year based on the shipping efficiencies
and reorder activity for fall product.
Liquidity and Capital Resources
The Company's main sources of liquidity have been cash flows from
operations and borrowings on short term credit facilities. Net cash provided by
(used in) operations for the nine months ended September 30, 1997 and the
years ended December 31, 1996 and 1995 was $(44.3) million, $66.8 million and
$11.8 million, respectively.
The Company's primary capital requirements have been for working capital,
investing activities associated with expansion of the distribution center,
systems development, build-out of the new flagship store and general corporate
needs. Net cash used in investing activities for the nine months ended September
30, 1997 and the years ended December 31, 1996 and 1995 was $8.5 million, $10.9
million and $13.0 million, respectively.
Financing activities consist primarily of distributions to shareholders for
tax payments and net changes in the short term borrowings. Net cash provided by
(used in) financing activities for the nine months ended September 30, 1997 and
the years ended December 31, 1996 and 1995 was $54.7 million, $(53.7) million
and $588,000, respectively.
Prior to the Offerings, the Company was an S corporation and net income was
included in the shareholders' income for federal and certain state income tax
filings. To accommodate the payment of taxes, the Company generally made
substantial cash distributions to the shareholders in the first, third and
fourth quarters of each year. After the Offerings, the Company's cash flows from
financing activities will no longer reflect the distribution to shareholders for
tax purposes. The Company will be responsible, however, for corporate tax
payments, which will be reflected in the cash flow from operating activities.
The Company has an unsecured revolving line of credit for $50 million with
Wells Fargo Bank, N.A., which expires June 30, 1998. Funds borrowed bear
interest, at the Company's option, at a rate of (i) the CD Rate (as defined
therein) plus up to .75%, (ii) the Base Rate (as defined therein) minus up to
2.1% or (iii) LIBOR plus up to .75%. The amount of interest varies depending on
the ratio of the Company's indebtedness to tangible net worth. If an event of
default occurs, the Company is prohibited, subject to certain exceptions, from
making
30
<PAGE>
dividend payments or other distributions. As of September 30, 1997, $44,201.419
was outstanding under this line of credit bearing interest at a rate of 6.1%.
The Company is party to a Buying Agency Agreement with Nissho Iwai American
Corporation ("Nissho") pursuant to which Nissho provides the Company unsecured
credit, the amount of which varies annually at Nissho's discretion and acts as a
buying agent on behalf of the Company. At September 30, 1997, the maximum amount
available under the Nissho Agreement was $120 million, which includes $70
million allowed under the credit line and amounts available for letters of
credit. Borrowings bear interest at a rate of 0.5% above the three month LIBOR
rate. In addition, the Company pays Nissho a commission of 1.5% of the FOB price
of the goods purchased by Nissho in its capacity as buying agent. The Company is
prohibited from making distributions of cash or other assets to its shareholders
in excess of (i) amounts required to be paid by shareholders to pay federal and
state income tax obligations of the Company, (ii) 50 percent of the Company's
income after provision for state and federal income taxes and (iii) 100 percent
of the proceeds of a primary common stock offering. The agreement expires
September 30, 1998. As of September 30, 1997, $29,013,036 was outstanding under
the Company's line of credit with Nissho.
The Company maintains a credit agreement with The Hong Kong and Shanghai
Banking Corporation Limited for an uncommitted and unsecured line of credit with
a combined limit of $60 million. Within this limit, up to $45 million may be
used as an import line of credit for issuing documentary letters of credit and
up to $25 million may be used as a revolving line of credit for working capital.
Funds borrowed under the agreement bear interest, at the Company's option, at
either a fixed rate for a specified number of days days at the bank's cost of
funds plus 0.35%, or a floating rate of the prime rate minus 2%. As of September
30, 1997, $25,000,000 was outstanding under the agreement.
The Company's Canadian and Japanese subsidiaries also maintain certain
separate credit arrangements. If a subsidiary's credit arrangement is unsecured,
the Company generally guarantees the subsidiary's obligations under the credit
arrangement.
To assist in the scheduling of production and the smooth shipping of
seasonal product, the Company offers customers extended payment terms for
placing pre-season orders and additional dating for taking delivery before the
peak shipping season. Accordingly, the Company may have significant exposure
regarding the collection of receivables from its customers. The Company has
credit policies and procedures in place to manage the credit risk. The Company
believes the additional costs associated with the dating program are more than
offset by the reduced exposure to inventory excesses and the increased
distribution efficiencies. The extended dating program results in peak short
term borrowing on the credit facilities in October before the first due date
under the dating program. See "Risk Factors -- Risks Related to Collectibility
of Receivables."
31
<PAGE>
The Company estimates that capital expenditures for 1998 will be
approximately $36 million. This amount will be primarily for the final
implementation of the new management information system, and the initial phase
of the expansion and reconfiguration (including a new warehouse management
system) of the existing distribution center. The new enterprise management
information system, which is expected to be fully operational by late 1998, will
address the impact of the year 2000 on all core Company business systems. The
Company has other ancillary systems that will be modified to address any of the
year 2000 issues. The total expenditure for the distribution center project,
scheduled for completion in February 1999, is estimated to be $33 million. The
Company anticipates entering into a long-term borrowing arrangement to finance
the construction and reconfiguration of the distribution center.
The Company believes cash flow from operations, funds available under its
credit facilities, funds available under the borrowing arrangement to be entered
into in connection with the construction and reconfiguration of the distribution
center, and the net proceeds, if any, from the Offerings that are not paid as
dividends to the Company's existing shareholders will be sufficient to satisfy
the Company's capital requirements for the next 12 months.
32
<PAGE>
BUSINESS
Introduction
Columbia is a global leader in the design, manufacture, marketing and
distribution of active outdoor apparel. As one of the largest outerwear
manufacturers in the world and the leading seller of skiwear in the United
States, the Company has developed an international reputation across an
expanding product line for quality, performance, functionality and value. The
Company believes its award-winning advertising campaigns effectively position
the Columbia brand as active, outdoor, authentic and distinctly American.
Established in 1938, the family-owned Company has grown from a small,
regional hat distributor to a global leader in the active outdoor apparel
industry. The Company has its roots and developed its initial expertise in the
production of high quality, rugged outdoor fishing and hunting gear for the
serious sportsman. Known for durability and dependability at a reasonable price,
the Company leveraged its brand awareness in the 1990s by expanding into related
merchandise categories and developing its "head-to-toe" outfitting concept. The
Columbia brand appeals to a large, increasingly international consumer base.
Today, the Company distributes its products to over 10,000 retailers in 30
countries. The Company's sales and operating income have increased to $299.0
million and $34.2 million in 1996 from $18.8 million and $1.6 million in 1987,
representing 10-year compound annual growth rates of 32% and 36%, respectively.
The Company believes it will continue to grow by focusing on enhancing the
productivity of existing retailers, expanding distribution in international
markets and further developing merchandise categories.
The Company groups its broad range of competitively priced merchandise into
four categories--outerwear, sportswear, rugged footwear and related accessories.
The durability, functionality and affordability of Columbia's products make them
ideal for use in a wide range of outdoor activities, including skiing,
snowboarding, hunting, fishing, hiking and golf, as well as for casual wear.
Throughout the product development cycle, merchandising and design teams
collaborate with retailers, the Columbia sales force and consumers to ensure
that the final product assortment of coordinated "head-to-toe" merchandise meets
or exceeds customer expectations. Across all of its product lines, Columbia
brings a commitment to innovative, functional product design and a reputation
for durable, high quality materials and construction. Columbia believes it
offers consumers one of the best price-value equations in the outdoor apparel
industry.
Business Strengths
Established and Differentiated Outdoor Lifestyle Brand. The Company
believes the Columbia brand represents a differentiated, active, outdoor,
authentic and distinctly American image built on quality, functionality,
performance and value. The Company's award-winning international marketing
campaigns, which feature Chairman Gertrude Boyle in the role of
33
<PAGE>
"Mother Boyle," an overbearing taskmaster who enforces tough Columbia quality
standards, emphasize this distinctive brand image.
Broad and Growing Appeal. Columbia's merchandise appeals to a broad range
of consumers of varying ages and income levels, from serious outdoorsmen to
weekend sports enthusiasts. The Company's price-value equation is attractive to
a large segment of the $10.4 billion U.S. retail outdoor apparel market.
Columbia is effectively positioned to compete against lower priced or unbranded
products based on brand image and product features, and against higher priced,
largely technical or fashion brands based on superior value and generally lower
price points. The Company has benefited in the past and expects to continue to
benefit from the trend toward casual dressing and from the growth in demand for
active lifestyle apparel.
Premium Quality at a Reasonable Price. Columbia maintains a strong focus on
providing a superior mix of quality and value, which are defining elements of
the brand. The Company believes it is able to offer merchandise similar in
quality to its competitors at attractive price points by using its long standing
supplier relationships to source high quality products from around the world
while controlling costs, relying on Company-supervised production of merchandise
by independent manufacturers, involving itself in the supply chain at an earlier
stage than is typical in the industry and avoiding the overdesign of its
products.
Proven and Experienced Management Team. Senior management of Columbia has
substantial experience in the apparel industry and a demonstrated track record
of sales and earnings growth: Chairman Gertrude Boyle has been involved in the
business since 1970; President and Chief Executive Officer Timothy P. Boyle
joined Columbia in 1971; and Executive Vice President and Chief Operating
Officer Don Richard Santorufo joined the Company in 1979. Under their leadership
over the past decade, the Company's sales and operating income have increased at
compound annual growth rates of 32% and 36%, respectively. Immediately following
the Offerings, senior management will own over 76.6% of the Company.
Functional and Performance-Oriented Design. All Columbia merchandise is
designed and developed in-house by experienced merchandising and design teams.
Working closely with internal sales and production teams as well as with
retailers and consumers, the Company's merchandising and design teams can reduce
the risks of fashion swings by developing superior products that are tailored
specifically to meet consumer requirements. Because its products are designed
for functionality and durability, the Company does not attempt to lead consumer
preferences or differentiate its products based primarily on fashion. In fact,
many new products are based on existing designs, such as the Bugaboo Parka, a
consistent best seller for more than a decade.
Effective "Head-to-Toe" Merchandising. Columbia's "head-to-toe"
merchandising strategy presents retailers and consumers with a wide selection of
apparel and rugged footwear that shares common color palettes and outdoor
themes. Retailers and consumers both benefit from the ability to use Columbia as
a single source for an attractive array of merchandise. The Company's flagship
34
<PAGE>
store, recently opened in Portland, Oregon, and the Company's successful store
within a store concept ("concept shops") provide showcases for Columbia's
coordinated merchandise offerings.
Sourcing as a Competitive Advantage. Columbia's merchandise is produced
worldwide by independent manufacturers selected, monitored and coordinated by
local Columbia employees to assure conformity to strict quality and cost
standards. The Company believes the use of independent manufacturers, in
conjunction with the use of Columbia sourcing personnel rather than agents,
increases its production flexibility and capacity and allows it to maintain
control over critical aspects of the sourcing process, while at the same time
substantially reducing capital expenditures and avoiding the costs of managing a
large production work force.
Superior Inventory Management. From the time of purchasing through
production, distribution and delivery, the Company manages its inventory to
reduce risk. The sequencing of the product design, sourcing, production and
selling cycle mitigates inventory risk, in part by offering special discounts to
customers that purchase merchandise early. Because the Company's products are
not based primarily on fashion, and because Columbia undertakes extensive
analysis to ensure that its products are what consumers require, the Company
believes its inventory risk is not as great as that of some of its competitors.
A new state-of-the-art inventory management information system, expected to be
fully operational in late 1998, is expected to further enhance the Company's
ability to manage its inventory.
Growth Strategy
Enhance Channel Productivity of Existing Retailers. The Company plans to
improve the productivity of its existing customers by expanding its concept
shops and installing brand enhancement systems. Concept shops, which promote a
consistent brand image, are located within the Company's retailers and are
dedicated exclusively to selling Columbia merchandise. As of September 30, 1997,
the Company had 164 concept shops worldwide and plans to double this number by
the end of 1998. The Company believes its concept shops increase sales by
displaying a complete selection of merchandise and promoting cross-merchandising
opportunities on a year around basis. Smaller-scale brand enhancement systems
which include signage and fixtures that prominently display consolidated
groupings of Columbia merchandise, offer benefits similar to concept shops. By
the end of 1998, the Company also expects to have installed 1,000 in-store brand
enhancement systems.
Leverage the Columbia Brand Name in International Markets. The Company
intends to capitalize on its size, strong U.S. brand position and its worldwide
brand recognition by targeting certain high opportunity markets for development
or expansion. The Company has identified Europe and Asia as regions where
outdoor activities are consistently popular and where the Company can exploit
its active, outdoor, authentic and distinctly American brand image and
reputation for value.
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The Company is seeking to enhance its distribution in a number of countries,
including the United Kingdom, Italy, France, Spain, The Netherlands, Sweden and
Germany. The Company will assume control of the distribution of its products in
Japan in late 1998 and recently opened 15 retail store/department store counters
in South Korea. Although the Company has made significant progress in its
international expansion efforts over the last several years, substantial
opportunity for growth exists. Net sales outside North America have increased
from $9.0 million in 1993 to $26.3 million in 1996, but still represented only
8.8% of the Company's total net sales in 1996.
Develop Existing Merchandise Categories. The Company intends to realize
growth by further developing existing product categories, such as sportswear and
rugged footwear, where there remains ample room for growth in market share. The
Company's success in designing and marketing products has allowed Columbia to
significantly broaden its assortment in existing categories. From 1993 through
1996, outerwear and sportswear sales increased 27.8% and 166.6%, respectively,
in part as a result of new product introductions. Since it was introduced in
1993, net sales of the Company's rugged footwear have increased from $1.2
million to $12.5 million in 1996. The Company believes opportunities exist for
continued rapid growth in sales of rugged footwear as distribution is expanded
to sporting goods and specialty outdoor stores that carry the Company's
outerwear and sportswear categories.
Selectively Broaden Retail Distribution. The Company believes that over the
longer term significant opportunities exist to increase sales of its products to
department stores and footwear specialty shops. Although sales to department
stores accounted for less than 14% of the Company's U.S. net sales in 1996, the
Company believes this percentage will rise because department store retailers
often prefer to purchase products from vendors that can offer complete
head-to-toe product lines.
Industry Overview
Between 1991 and 1996 the U.S. retail market for outdoor apparel grew 18.0%
to $10.4 billion from $8.8 billion. The increased sales of outdoor apparel has
resulted, in large part, from the growth in the popularity of outdoor
activities. For example, according to the National Sporting Goods Association,
between 1994 and 1996 the number of people who participated in snowboarding
increased 76%, climbing 39%, in-line skating 31%, mountain biking 27% and
backpacking 17%. The growth in the popularity of outdoor activities has also
spurred an increase in sales of active outdoor apparel to consumers who do not
participate in these activities. The global trend toward casual dressing both in
and out of the workplace has also contributed to the increase in sales of active
outdoor apparel.
Sales of sportswear and rugged footwear have also increased in recent
years. From 1995 to 1996 sales of sportswear and rugged footwear in the United
States increased 6.6% and 4.3%, respectively. The Company believes the growth in
the sportswear market is fueled by a number of factors, including increasing
popularity of casual dressing worldwide, global interest in sports and active
lifestyles, consumer interest in brands, as well as innovative product design,
increased
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marketing and promotion expenditures and larger and more attractive retail
formats. The Company expects the growth in the rugged footwear market to
continue as the number of products designed to suit a greater variety of outdoor
activities and conditions proliferates.
Products
The Company offers a broad range of durable and functional outdoor apparel
that represents exceptional value to the consumer. The Company's products are
grouped into four broad categories -- outerwear, sportswear, rugged footwear and
related accessories -- and are sold as casual wear as well as for use in a wide
range of outdoor activities, including skiing, snowboarding, hunting, fishing,
hiking and golf.
The Company believes its Columbia brand represents a differentiated active,
outdoor, authentic, value-oriented and distinctly American image and designs its
products to reinforce this image. In both the design and production phases, the
Company focuses its efforts on the development of popular, higher volume
products at moderate price points. The Company's merchandise is durable and
functional, incorporating useful technical details such as pockets that double
as vents, double storm flaps over zippers and "gutters" that facilitate water
run-off. The Company's attention to technical details derives from Columbia's
long experience producing specialized hunting and fishing apparel and
contributes to the authenticity and functionality of Columbia's entire selection
of merchandise. In the manufacture of its apparel, the Company uses special
technical materials that possess functionality similar to branded materials, but
are produced at a lower cost, thereby enhancing the price-value equation.
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The charts below set forth net sales information by product category.
Net Sales by Product Category
[PIE CHART: 1993
Outerwear 79.7%
Sportswear 14.8%
Accessories 4.9%
Rugged Footwear 0.6%
Total Sales = $192 Million]
[PIE CHART: 1996
Outerwear 65.5%
Sportswear 25.3%
Accessories 5.0%
Rugged Footwear 4.2%
Total Sales = $299 Million]
Outerwear
Outerwear is the Company's most established product category. Although
sales of outerwear drive the Company's business, outerwear sales as a percentage
of the Company's net sales are likely to continue to decrease as Columbia
develops the markets for its growing sportswear and rugged footwear categories.
The Company intends to use its leading U.S. market position and extensive
experience in outerwear as a foundation upon which to grow its international
business. The Company's growth strategy primarily involves expanding the
category in international markets, improving the productivity of its existing
customers and increasing outerwear sales to more department store retailers over
the longer term.
The Company's outerwear is designed to protect the wearer from inclement
weather in everyday use and in a variety of outdoor activities, including
skiing, snowboarding, hiking, hunting and fishing. Many of the Company's jackets
incorporate Columbia's revolutionary Interchange System, which was introduced in
1983 and features a 3- or 4-jackets-in-1 design. Jackets incorporating the
Interchange System typically combine a durable, nylon outershell with a
removable, zip-out liner. The outershell and the liner may be worn separately or
together. This layered ensemble provides the wearer with a jacket for all
seasons and weather conditions at a reasonable price.
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Skiwear. The Company's skiwear line is the best selling brand of skiwear in
the United States. The Company's skiwear products include parkas, vests, ski
pants, ski suits, pullovers and sweaters. Many of the Company's ski parkas
feature the Interchange System. The Bugaboo Parka, which was an early Columbia
skiwear product incorporating the Interchange System, has been the Company's
best selling ski parka for over a decade. Columbia's attention to detail and
commitment to technical and useful features contribute to products with a
distinctive and differentiated look and feel.
Snowboard Apparel. Columbia's Convert brand is the second best selling
brand of snowboard apparel in the United States. The Convert line includes
parkas, vests, snowboard pants, pullovers and shirts. Columbia was one of the
first major outdoor apparel companies to identify and react to the rapid
emergence of snowboarding as a popular sport. Demonstrating its ability to move
quickly to capture a significant share of a growth niche, Columbia achieved
rapid consumer acceptance as net sales of its snowboard apparel increased to
$7.9 million in 1996 from its introduction in 1994.
Hunting and Fishing Apparel. Hunting and fishing products constitute one of
the Company's oldest product lines and include apparel for the serious sportsman
engaged in a variety of outdoor activities, including waterfowl hunting, upland
hunting, big game hunting and fishing. Products include parkas, shells, vests,
liners, bib pants and rain suits. All of these products incorporate a variety of
specific-purpose, tailored features that enhance Columbia's reputation as a
producer of outerwear. Examples of Columbia's attention to detail include shell
loops and Ethefoam fly patches, terrain and seasonal camouflage patterns, recoil
cushioned shoulders and Silent Rain cloth for noise-proof movement.
Youth Outerwear. The Company's youth line of products includes ski parkas,
vests, snow pants, snow suits and pullovers. The youth product line benefits
from the Company's expertise in its adult lines and enables a Columbia customer
to outfit the entire family in dependable outerwear at a reasonable price.
Sportswear
The Company believes the global market for sportswear is significantly
larger than the global market for outerwear, and the continued development of
this market represents a substantial opportunity for the Company. Beginning in
the latter part of 1993, the Company targeted sportswear as a growth
opportunity. Building on a foundation of authentic fishing and hunting shirts,
the Company rapidly expanded its sportswear product offering, resulting in
sportswear sales increasing as a percentage of the Company's net sales from
14.8% for 1993 to 25.3% for 1996. The Company believes sportswear sales as a
percentage of the Company's net sales are likely to continue to increase.
The majority of the Company's sportswear sales are to sporting goods and
specialty outdoor stores. Department stores, which represent a substantially
larger portion of sportswear distribution, accounted for only 12% of the
Company's net sales for 1996. The Company's
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growth strategy for sportswear sales consists of increasing productivity of
existing customers, improving merchandising at the store level (including
opening additional concept shops and installing brand enhancement systems),
expanding distribution to department stores and enhancing the product offerings
to take advantage of apparel trends.
The Company's sportswear products consist of durable, functional,
value-priced, authentic, active outdoor apparel that appeals both to the serious
outdoorsman and the more casual wearer who wants to project an outdoor image.
Sportswear products are designed to be sold alongside the Company's outerwear
and rugged footwear products as part of a unified "head-to-toe" outfitting
concept. In particular, fleece and pile products are merchandised to provide a
bridge to the outerwear products.
Outdoor Sportswear. The Company's outdoor sportswear is designed to meet
the recreation needs of walkers, hikers, campers, mountain bikers, fishermen,
hunters and the general outdoor enthusiast. Authentic design and affordable
prices also make the Company's sportswear products attractive to active outdoor
apparel consumers who purchase these products for casual wear. The outdoor
sportswear product line consists primarily of jeans, chinos, hiking shorts,
water sport trunks, knit shirts, woven shirts, sweats, sweaters and fleece and
pile products.
Golf Apparel. Introduced in 1997, the Company's golf line includes shorts,
pants, polo shirts, fleece products, windshirts and rainwear designed
specifically for the needs of golfers. The Company's golf line is differentiated
from competitors by its focus on golf as an outdoor activity that requires
specific fabrics and features to enhance performance.
GRT. The Company's GRT line of active outdoor performance apparel consists
of pants, shirts, shorts, vests, polo shirts, tee shirts, tank shirts and
lightweight jackets designed specifically for training, trekking and adventure
travel. Many of the items in the line incorporate the Company's Omni-Dry system
of moisture management.
Rugged Footwear
The Company's newest product category, rugged footwear, was introduced in
1993. The success of the introduction demonstrates Columbia's ability to expand
its head-to-toe merchandising assortment and to leverage its reputation as a
provider of durable, comfortable outdoor apparel, enabling consumers to broaden
their purchases of Columbia branded apparel. Rugged footwear as a percentage of
the Company's net sales has increased from 0.6% in 1993 to 4.2% in 1996. The
Company believes the market for rugged footwear remains a substantial growth
opportunity. The Company expects sales of its rugged footwear will be driven
primarily by the design and development of new footwear and by expanding the
distribution of rugged footwear within existing U.S. and international
distribution channels, such as sporting goods stores, outdoor specialty and
footwear retailers and department stores.
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The Company's rugged footwear category consists primarily of active
all-weather and performance outdoor products. Many of the Company's footwear
styles feature innovative technical designs that incorporate
waterproof/breathable constructions, thermal insulation, advanced cushioning
systems and high abrasion, slip-resistant outsoles. Several styles are offered
within each of the following classifications: All-Weather, Active Outdoor,
Performance Outdoor and Classic Columbia Comfort.
Accessories
The Company also produces and sells hats, caps, scarves, gloves, mittens
and headbands to complement its outerwear and sportswear lines.
Advertising, Marketing and Promotion
The Company's creative and award-winning print and broadcast advertising
campaigns have built brand awareness and have helped to highlight the strengths
of Columbia's products among consumers. The humorous advertisements, which have
received 18 awards in the past seven years, feature Chairman Gertrude Boyle as
an overbearing taskmaster--"one tough mother"--who demands high quality
standards for Columbia products. The advertisements, which often include witty
dialogue between "Mother Boyle" and her son Tim, Columbia's President, remind
consumers of the Company's long history of providing authentic outdoor apparel
with exceptional value and help to create a distinctly American brand. The
Company's advertising appears in a wide variety of print and broadcast media,
ranging from GQ, Rolling Stone, Ski (Germany), Be-Pal (Japan) and Desnival
(Spain) to The David Letterman Show, ESPN and MTV. The Company has also
sponsored several high profile sporting events, including three America's Cups,
the Eco Challenge, the Albuquerque International Balloon Fiesta and the
Paris-Dakkar Rally.
Business Process
From the time of purchasing through production, distribution and delivery,
the Company manages its inventory to reduce risk. Because the Company's products
are not based primarily on fashion and because Columbia undertakes extensive
analysis to ensure that its products are what consumers desire, the Company
believes its inventory risk is not as great as that of some of its competitors.
A new state-of-the-art inventory management information system, expected to be
fully operational in late 1998, should further enhance the Company's ability to
manage its inventory.
The Company encourages early purchases by its customers to promote
inventory management. To achieve this goal, the Company offers a select
assortment of its products to its entire roster of customers approximately one
to two months before most competing lines are introduced. Discounts are
available for customers who place early orders. In addition, the Company
provides its customers with staggered delivery times through the spring and fall
seasons, which also permits the Company and its customers to manage inventory
effectively and thereby diminish the likelihood of closeout sales.
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The following charts depict the purchasing, order and delivery cycles for
the Company's spring 1997 and fall 1997 merchandise. (For example, as of May
1997 the Company had placed orders for its fall 1997 season with its independent
manufacturers for 98% of its product needs, had already received orders from its
customers for 98% of the planned production and had shipped 9% of its products.)
There is no assurance that future purchasing, order and delivery cycles will be
similar to those illustrated below.
[Graph showing purchasing, order and delivery cycles for spring 1997
merchandise, with percentage of (i) purchases increasing from 1% at March 15,
1996 to 100% at February 15, 1997, (ii) orders increasing from 1% at June 15,
1996 to 100% at May 15, 1997 and (iii) delivery and invoicing increasing from 1%
at November 15, 1996 to 99% at August 15, 1997. Specific monthly percentages are
as follows:
Date Purchasing Orders Delivery and Invoicing
Mar. 15, 1996 1%
Apr. 15, 1996 2%
May 15, 1996 4%
Jun. 15, 1996 7% 1%
Jul. 15, 1996 27% 26%
Aug. 15, 1996 55% 56%
Sep. 15, 1996 83% 78%
Oct. 15, 1996 95% 96%
Nov. 15, 1996 96% 100% 1%
Dec. 15, 1996 97% 100% 5%
Jan. 15, 1997 99% 101% 23%
Feb. 15, 1997 100% 102% 48%
Mar. 15, 1997 103% 75%
Apr. 15, 1997 104% 89%
May 15, 1997 100% 96%
Jun. 15, 1997 100% 97%
Jul. 15, 1997 98%
Aug. 15, 1997 99%
Sep. 15, 1997 99%]
[Graph showing purchasing, order and delivery cycles for fall 1997 merchandise,
with percentage of (i) purchases increasing from 1% at August 15, 1996 to 100%
at June 15, 1997, (ii) orders increasing from 0% at November 15, 1996 to 100% at
September 15, 1997 and (iii) delivery and invoicing increasing from 3% at April
15, 1997 to 99% at December 15, 1997. Specific monthly percentages are as
follows:
Date Purchasing Orders Delivery and Invoicing
Aug. 15, 1996 1%
Sep. 15, 1996 3%
Oct. 15, 1996 8%
Nov. 15, 1996 20% 0%
Dec. 15, 1996 35% 5%
Jan. 15, 1997 57% 64%
Feb. 15, 1997 76% 79%
Mar. 15, 1997 89% 87%
Apr. 15, 1997 96% 96% 3%
May 15, 1996 98% 98% 9%
Jun. 15, 1997 100% 99% 16%
Jul. 15, 1997 100% 99% 31%
Aug. 15, 1997 99% 49%
Sep. 15, 1997 100% 70%
Oct. 15, 1997 100% 83%
Nov. 15, 1997 96%
Dec. 15, 1997 99%]
The Company attempts to mitigate its inventory risk in part by matching
purchases of inventory to the receipt of customer orders, as illustrated by the
charts above. By avoiding significant inventory build-ups in anticipation of
orders not yet received, the Company believes it is able to reduce the risk of
overcommitting to inventory purchases. Because customer orders can be canceled
up to 45 days prior to shipment, however, this strategy does not eliminate
inventory risk in the event of significant cancellations of customer orders.
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Product Design
All Columbia merchandise is designed and developed in-house by experienced
merchandising and design teams. Working closely with internal sales and
production teams as well as with retailers and consumers, the Company's
merchandising and design teams can mitigate the risks of fashion swings by
developing superior products that are tailored specifically to meet consumer
requirements. Because its products are designed for functionality and
durability, the Company does not attempt to lead consumer preferences or
differentiate its products based primarily on fashion. In fact, many new
products are based on existing designs such as the Bugaboo Parka, a consistent
best seller for more than a decade. By pursuing this strategy, the Company
believes it can attract a wider, value-oriented consumer audience than its more
technical or fashion-oriented competitors.
The Company uses several special materials, such as Omni-Tech and
Bergundtal Cloth, in the design of its products, some of which were developed in
collaboration with textile mills. Omni-Tech fabrics have micro-porous
polyurethane coatings that provide a waterproof finish and breathability.
Bergundtal Cloth, constructed with taslanized filament nylon in the horizontal
direction and filament nylon in the vertical direction, has a water-repellent
finish on its face and is coated with polyurethane on its back to provide added
water resistance and wind protection. The Company's special materials
substantially enhance the value of the Company's products without adding
significant cost.
All designs are created by approximately 70 members of Columbia's product
development team. Prototypes of the designed products are created in the
Company's Hong Kong facility. Prototypes are reviewed by groups of retailers,
sales personnel and consumers for commercial acceptance. The design process
requires approximately six to seven months from conceptualization until the
product line is finalized. After the product line is finalized, costing and
scheduling of manufacture of the product line at factories commences. This
process requires approximately one and one-half months to complete. Pricing of
the product line is then completed over the following two months, after which
the Company's sales force receives samples. At approximately the same time,
placement of orders for the product line commences, and the Company will
purchase finished garments for the following four or five months. When the
finished garments arrive for shipment to retailers, approximately 18 months will
have passed since the initial conceptualization of the product line.
Sourcing and Manufacturing
Columbia's apparel is produced worldwide by independent manufacturers
selected, monitored and coordinated by regional Columbia employees to assure
conformity to strict quality standards. The Company believes the use of these
independent manufacturers, whether producing products from materials provided by
the Company or obtained directly by the manufacturer, increases the Company's
production capacity and flexibility and reduces its costs.
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Unlike many apparel companies, Columbia uses few independent agents in its
sourcing activities. Rather, the Company maintains 10 sourcing and quality
control offices in the Far East, in Hong Kong, Thailand, Taiwan, India, Sri
Lanka, South Korea, China (three) and Malaysia, in each case staffed by Columbia
employees and managed by personnel native to the region. At September 30, 1997,
the Company employed a total of approximately 240 persons in these offices,
including approximately 101 persons in its Hong Kong office. Personnel in these
offices include those engaged in direct sourcing activities, such as
specification and sample distribution, production capability certification,
order placement, contract management and price and quantity negotiations, as
well as communications with the U.S.-based design teams, sample preparation,
quality control, quota and other import restriction monitoring, warehouse and
shipment coordination and pattern making. Final pricing for all orders, however,
is approved by personnel from the Company's U.S. headquarters. The Company
believes the use of dedicated Columbia personnel rather than independent agents
reduces its sourcing costs. Columbia personnel who are focused narrowly on the
Company's interests are more responsive to the Company's needs than independent
agents would be, and are more likely to build long-term relationships with key
vendors. The relationships enhance the Company's access to raw materials and
factory capacity at more favorable prices.
The Company's merchandise is produced by approximately 115 independent
manufacturers worldwide. For 1997 product sales, approximately 94% (by dollar
volume) of the Company's products were produced by independent manufacturers,
and approximately 86% (by dollar volume) of the Company's products were produced
outside the United States, principally in the Far East. Other than its facility
for the production of fleece products and headware in Chaffee, Missouri, the
Company does not operate any production facilities. The Company attempts to
monitor its selection of independent factories to ensure that no one
manufacturer or country is responsible for a disproportionate amount of the
Company's merchandise. Six manufacturers engaged by the Company accounted for
approximately 38.5% (by dollar volume) of the Company's total production for
1997 product sales. The primary production facilities of these manufacturers are
located in Asia. No other manufacturer accounted for more than five percent of
the Company's total production for 1997 product sales.
The Company believes the use of independent manufacturers, in conjunction
with the use of Columbia sourcing personnel rather than agents, increases its
production flexibility and capacity and allows it to maintain control over
critical aspects of the sourcing process, while at the same time substantially
reducing capital expenditures and avoiding the costs of managing a large
production work force. There are no formal arrangements between the Company and
any of its contractors or suppliers; however, the Company believes its
relationships with its contractors and suppliers are excellent and that its
long-term, reliable and cooperative relationships with many of its vendors
provide it an advantage over many of its competitors.
The Company's quality control program is designed to ensure its products
meet the Company's high quality standards. The Company monitors the quality of
its fabrics and inspects prototypes of each product before production runs are
commenced. The Company also performs random in-line quality control checks
during and after production before the garments leave the
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factory. Columbia quality control personnel visit most of their independent
manufacturers' facilities at least weekly. Final inspections occur when the
garments are received in the Company's distribution centers. The Company employs
a total of approximately 75 full-time quality control personnel in its 10 Far
East sourcing and quality control offices, as well as additional inspectors at
its warehouses in Portland, Oregon and at its one U.S. manufacturing facility.
In addition, a staff of approximately 22 persons in the Company's headquarters
facility oversees and coordinates global quality control standards and efforts.
The Company believes its quality control program is an important and effective
means of maintaining the quality and reputation of its products.
Production of apparel by independent manufacturers is accomplished through
one of two principal arrangements. In the first, the supplier purchases the raw
materials needed to produce the garment from sources approved by Columbia
personnel, at prices and on terms negotiated by that independent supplier. Most
of the Company's merchandise is manufactured under this arrangement. In the
second, sometimes referred to as "cut, make, pack, and quota" and used
principally for production in China, Columbia directly purchases the raw
material, principally fabric, from suppliers, obtains or arranges for any
necessary U.S. import quotas, and ships the materials in a "kit," together with
patterns, samples, and most other necessary items, to the independent
manufacturer that has been selected by Columbia to produce the finished
garment. Prior to shipment, materials for the kits are stored and consolidated
at the Company's Hong Kong warehouse. While this second arrangement advances the
timing for inventory purchases and exposes the Company to certain additional
risks before a garment is manufactured, the Company believes this arrangement
further increases its manufacturing flexibility and frequently provides it with
a cost advantage over other production methods. See "Risk Factors--Dependence
Upon Independent Manufacturers."
While the Company has traditionally received a significant portion of its
customers' orders prior to placement of its initial manufacturing orders,
production orders must generally be placed with manufacturers before all of a
season's orders are received by the Company from customers. Columbia, therefore,
takes into account market trends and the early orders received from customers in
placing its orders with suppliers. Many of these customer orders may change with
respect to colors, sizes, allotments or assortments before delivery. The Company
uses these orders and its experience to estimate production requirements to
secure necessary fabrics and manufacturing capacity.
The Company's independent manufacturers sell finished products to the
Company on an FOB basis and are at risk for the quality and timely delivery of
the products. To date, substantially all of the Company's international
production requirements have been financed with letters of credit rather than
purchased under open credit terms. The suppliers are able to obtain payment
under the letter of credit upon delivery of the merchandise to the freight
consolidator chosen by the Company, together with a certificate from a Columbia
quality control inspector, purchase order identification and, if necessary for
the goods in question, a quota "visa." The Company believes payment to its
suppliers under this arrangement, while increasing the Company's need for
inventory financing, enhances its attractiveness to suppliers and improves
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its ability to negotiate more favorable terms in other areas. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company transacts business on an order-by-order basis and does not
maintain any long-term or exclusive commitments or arrangements to purchase from
any vendor. The Company competes with other companies for the production
capacity of independent manufacturers and import quota capacity. The Company
believes it has good relationships with its vendors and there will be adequate
sources to produce a sufficient supply of goods in a timely manner and on
satisfactory economic terms in the future. Manufacturers' delivery dates are
generally specified to ensure that products will be available in the Company's
warehouses in a timely manner assuming shipment by ocean freight. Manufacturers
are generally given a grace period after their scheduled delivery date to make
goods available for shipment; they are often obligated to pay any increased
costs resulting from the need to ship products by air as a result of delivery
after this period. The Company has from time to time experienced difficulty in
satisfying its raw material and finished goods requirements, and any such future
difficulties could adversely affect the Company. See "Risk Factors--Dependence
on Independent Manufacturers" and "--Dependence on Key Suppliers."
Sales and Distribution
The Company's products are sold to approximately 10,000 specialty and
department store retailers in the United States, Canada, Asia, Europe, South
America, Australia and New Zealand. The Company believes continued growth will
result from its focus on enhancing the productivity of existing retailers,
expanding distribution in international markets and developing merchandise
categories.
The Company plans to improve the productivity of its existing customers by
expanding its concept shops worldwide and installing brand enhancement systems.
Concept shops create an environment that is consistent with the Company's image
and enables the retailer to display and stock a greater volume of the Company's
products per square foot of retail space. Each concept shop requires an
investment by the Company in display fixtures and other materials of about
$15,000 and, typically, an increased inventory commitment by the retailer. These
concept shops also encourage longer term commitment by the retailer to the
Company's products and enhance consumer brand awareness. As of September 30,
1997, the Company had 164 concept shops worldwide and plans to double this
number by the end of 1998. Smaller-scale brand enhancement systems, which
include signage and fixtures that prominently display consolidated groupings of
Columbia merchandise, offer benefits similar to concept shops. By the end of
1998, the Company expects to have installed 1,000 in-store brand enhancement
systems.
The Company intends to continue to capitalize on its strong U.S. brand
position and its worldwide brand recognition by targeting certain high
opportunity markets for development or expansion. Having already achieved a
significant share of the North American outerwear market, Columbia's strategy
for its existing and new North American customer base is to
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develop further sales of its sportswear and rugged footwear. In new markets in
Europe and Asia, Columbia's strategy is to replicate its success in its core
North American market by establishing relationships with retailers through its
highly visible outerwear line. As Columbia's brand image and reputation
strengthens through acceptance of its outerwear, it introduces its sportswear
and rugged footwear lines into these new markets.
The Company believes that over the longer term significant opportunities
exist to increase sales of its products to department stores and footwear
specialty shops. The Company expects to expand its sales to these retailers, in
part by attracting new customers and in part by expanding sales in existing
retailers. In 1996, approximately 88% of the Company's net sales were to
specialty stores and 12% were to department store retailers.
Net Sales by Region
[PIE CHART: 1993 [PIE CHART: 1996
United States 88.5% United States 82.1%
Canada 6.8% Canada 9.1%
International 4.7%] International 8.8%]
North America
The Company sells its products to approximately 3,900 U.S. retailers and
1,100 Canadian retailers. Of these, J.C. Penney is the Company's largest
customer, representing just over four percent of the Company's net sales in
1996. Not all of the Company's product lines are sold to each of its North
American retailers.
The Company uses 25 independent sales agencies, which employ a total of
approximately 80 sales representatives, to distribute its products in North
America. Columbia operates nine outlet stores in North America: one each in
Portland, Lake Oswego and Lincoln City, Oregon; Gilroy, California; Birch Run,
Michigan; Medford, Minnesota; Kenosha, Wisconsin; Lancaster, Pennsylvania and
Windsor, Ontario. The Company's outlet stores sell excess inventory in a
47
<PAGE>
manner that does not adversely affect its retailers. Columbia also operates a
free-standing flagship store in Portland, Oregon. This retail store is designed
to create a distinctive "Columbia" environment and reinforces the active and
outdoor image of the Columbia brand. In addition, the retail store provides the
Company with the ability to test new marketing and merchandising techniques. The
Company has also established 83 concept shops in retail stores in North America
and plans to more than double this number in 1998.
The Company distributes most of its products to U.S. retailers from its
300,000 square foot Rivergate Distribution Center, which is located in Portland,
Oregon. At this distribution facility, the Company's products are inspected,
sorted, packed and shipped. The Company is planning to enlarge its Rivergate
Distribution Center by at least 240,000 square feet within the next two years.
The Company also distributes a small portion of its products in the United
States from a smaller facility adjacent to its Chaffee, Missouri manufacturing
facility. The Company distributes its products in Canada from a 66,000 square
foot warehouse in Strathroy, Ontario.
European Common Market
The Company sells its products to approximately 3,800 European retailers.
The Company maintains a European sales and marketing office in Strasbourg,
France and, with the exception of the United Kingdom, Switzerland and Greece,
distributes its products in Europe from an independent logistics company based
in The Netherlands. In the United Kingdom, Switzerland and Greece, the Company
sells through independent distributors. The Company has approximately 22 concept
shops in European retailers. Although the Company's marketing and sales efforts
to date have been most successful in France, Spain, The Netherlands and Sweden,
Columbia believes substantial opportunities exist in other countries such as
Germany. Net sales of the Company's products in Europe have increased at a
compound annual growth rate of 66.8% between 1993 and 1996.
Asia
The Company has distributed its products in Japan since the mid-1970s and
sells its merchandise to approximately 1,000 Japanese retailers. In the fall of
1998, the Company will begin distributing its products directly in Japan, which
the Company believes will create the opportunity for significant acceleration of
sales in Japan. Based on its experience in Japan, the Company also believes the
South Korean market represents another significant growth opportunity in Asia.
In 1997 the Company began selling its products in South Korea through 15 retail
locations. Sales and marketing efforts in Asia are directed from Tokyo and
Seoul. The Company's products will be warehoused and shipped in Japan by an
independent company based in Tokyo, and in South Korea from a warehouse near
Seoul.
48
<PAGE>
Other Countries
The Company sells its products to independent exclusive distributors,
representing approximately 350 retailers, in Argentina, Australia, Chile, Czech
Republic, Ecuador, Greece, Hungary, Ireland, Japan, New Zealand, Poland, Russia,
Sweden (hunting and fishing products only), Switzerland and the United Kingdom.
The Company expects to begin selling its products in 1998 to distributors
representing retailers in Mexico, Norway and Turkey.
The Company plans to improve the productivity of its existing international
distributors and, except for the anticipated expansion in 1998, does not intend
to expand sales to additional countries. Over the longer term, the Company
believes international sales to some of its existing countries could be made
directly.
Intellectual Property
The Company owns trademarks for many of its products, including "Columbia,"
"Columbia Sportswear Company," "Convert," "Bugaboo," "Bugabootoo," "Silent Rain"
and "Interchange." The Company's trademarks, many of which are registered or
subject to pending applications in the United States and other nations, are for
use on a variety of items of apparel. The Company believes that its reputation,
built through years of providing high quality apparel at a good value for
consumers and through its distinctive advertising, are linked in the minds of
consumers with the Company's trademarks. The Company believes its trademarks are
of great value and are instrumental to its ability to create and sustain demand
for its products. The Company also places significant value on the overall
appearance and image of its products. The Company's trade dress (the overall
appearance and image of its products), as much as its trademarks, distinguishes
Columbia's products in the marketplace. As the Company expands its markets it
attempts to establish and protect its proprietary rights. From time to time the
Company discovers products in the marketplace that are counterfeit
reproductions, and the Company attempts to prevent or terminate such infringing
activity. In the past the Company has successfully resolved conflicts over
proprietary rights through legal action and negotiated settlements. Although the
Company has not been materially inhibited from selling its products in
connection with trademark or trade dress disputes, there is no assurance that
significant obstacles will not arise as it expands its product line and
geographic scope. See "Risk Factors--Dependence on Proprietary Rights."
Management Information System
The Company is committed to maintaining technically advanced systems that
will help it achieve its overall growth strategy. The Company is replacing its
current management information system with an enterprise system that integrates
EDI and inventory management capabilities. This system, some aspects of which
are already operational, is expected to be fully operational by late 1998.
The new system updates current and historical net sales, inventory and
merchandise planning on a daily basis. It also provides a stronger and more
timely link between the Company and its customers, enhancing the Company's
ability to monitor
49
<PAGE>
its performance against historical and budgetary benchmarks, to manage inventory
and labor costs as well as to make more informed purchasing decisions. The
Company believes this system will also help to improve customer service and
operating efficiency. The system is expected to serve the Company for at least
the next five years.
Backlog
The Company generally receives the bulk of the orders for each of the fall
and spring seasons a minimum of three months prior to the date the products are
shipped to customers. The orders are cancelable by the customer up to 45 days
prior to the date of shipment. At September 30, 1997, the Company's backlog was
$170.5 million, compared to $116.6 million at September 30, 1996. To manage
inventory risk, the Company estimates its production requirements conservatively
and engages in certain other inventory management techniques. See "--Business
Process." For a variety of reasons, including the timing of shipments, product
mix of customer orders and the amount of in-season orders, backlog may not be a
reliable measure of future sales for any succeeding period.
Competition
The active outerwear, sportswear and rugged footwear segments of the
apparel industry are highly competitive. The Company encounters substantial
competition in the active outerwear and sportswear business from, among others,
The North Face, Inc., Marmot Mountain Ltd., Woolrich Woolen Mills, Inc., The
Timberland Company ("Timberland"), Patagonia Corporation ("Patagonia") and
Helly-Hansen A/S. In addition, the Company competes with major sport companies,
such as Nike, Inc. ("Nike"), Adidas AG and Reebok International Ltd., and with
fashion-oriented competitors, such as Polo Ralph Lauren Corporation, Nautica
Enterprises, Inc. and Tommy Hilfiger Corporation. The Company's rugged footwear
line competes with, among others, Timberland, Kaufman Footwear (a division of
William H. Kaufman, Inc.), Nike ACG, Salomon S.A. and The Rockport Company. Many
of these companies have global operations and compete with the Company in Europe
and Asia. In Europe the Company also faces competition from such brands as
Berghaus, Jack Wolfskin and Craft of Sweden, and in Asia the Company faces
competition from such brands as Mont-Bell and Patagonia. In addition to name
brand competitors, the Company also faces competition from its own retailer
customers that manufacture and market clothing and footwear under their own
labels. Some of the Company's competitors are substantially larger and have
substantially greater financial, distribution, marketing and other resources
than the Company. The Company believes the primary competitive factors in the
market for activewear are functionality, durability, style, price and brand
name, and that its product offerings are well positioned within the market. See
"Risk Factors--Competition."
Government Regulation
Many of the Company's imports are subject to existing or potential duties,
tariffs or quotas that may limit the quantity of certain types of goods which
may be imported into the United States and other countries, including
constraints imposed by bilateral textile agreements
50
<PAGE>
between the United States and a number of foreign countries. These agreements,
which have been negotiated bilaterally either under the framework established by
the Arrangement Regarding International Trade in Textiles, known as the
Multifiber Agreement, or other applicable statutes, impose quotas on the amounts
and types of merchandise that may be imported into the United States from these
countries. These agreements also allow the signatories to adjust the quantity of
imports for categories of merchandise that, under the terms of the agreements,
are not now subject to specific limits. The Company's imported products are also
subject to United States customs duties, which are a material portion of the
cost of the merchandise. The United States and the countries in which the
Company's products are produced or sold may impose new quotas, duties, tariffs
or other restrictions, or may adversely adjust prevailing quota, duty or tariff
levels, any of which could have a material adverse effect on the Company. See
"Risk Factors--International Operations."
Employees
At September 30, 1997 the Company had 1,182 full-time employees. Of these
employees, 811 were based in the United States, 62 in Canada, 23 in Europe and
286 in Asia. None of the Company's employees is represented by a labor union.
The Company believes it maintains good employee relations.
Properties
The principal executive and administrative offices of the Company are
located at 6600 North Baltimore, Portland, Oregon. The general location, use and
approximate size of the Company's principal owned and leased properties are set
forth below:
<TABLE>
<CAPTION>
Approximate
Location Owned/Leased Use Square Feet
- -------- ------------ --- -----------
<S> <C> <C> <C>
Portland, Oregon Owned Distribution Facility 300,000
Portland, Oregon Leased Headquarters Offices 172,000
Chaffee, Missouri Leased Manufacturing and Distribution Facility 75,000
</TABLE>
51
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth the executive officers, directors and
certain key employees of the Company.
Name Age Position
- ---- --- --------
Gertrude Boyle 73 Chairman of the Board
Timothy P. Boyle 48 President, [Chief Executive Officer,]
Treasurer,
Secretary and Director
Don Richard Santorufo 51 Executive Vice President and Chief Operating
Officer
Patrick D. Anderson 40 Chief Financial Officer
Carl K. Davis 49 Vice President and General Counsel
Terry J. Brown 55 Executive Planner and International
Distributor Planner
Robert G. Masin 49 National Sales Manager
Grant D. Prentice 43 General Manager - Outerwear Merchandising
Michael R. Egeck 39 General Manager - Sportswear Merchandising
Rodney R. Gumringer 36 General Manager - Footwear Merchandising
Douglas R. Hamilton 45 Director of Operations - Canada and Europe;
President and Chief Operating Officer -
Columbia Sportswear Canada Limited
Sarah Bany 39 Director of Retail Stores and Director
Murrey R. Albers(1)(2) 56 Director
Edward S. George(1)(2) 60 Director
John Stanton(1)(2) 42 Director
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Gertrude Boyle has served as Chairman of the Board of Directors since 1983. The
Company was founded by her parents in 1938 and managed by her husband, Neal
Boyle, from 1964 until his death in 1970. Ms. Boyle also served as the Company's
President from 1970 to 1988.
Timothy P. Boyle joined the Company in 1971 as General Manager and has served as
President and Chief Executive Officer since 1988. He has been a member of the
Board of Directors since 1978. Mr. Boyle is also a member of the board of
directors of Triad Machinery, a heavy equipment retailer. Mr. Boyle is Gertrude
Boyle's son.
52
<PAGE>
Don Richard Santorufo joined the Company in 1979 as Purchasing and Production
Manager, and in 1984 he was promoted to Vice President, Manufacturing and
oversaw the development of the Company's Asian manufacturing operations. He has
served as Executive Vice President and Chief Operating Officer of the Company
since January 1995. From 1975 to 1977 Mr. Santorufo was Production and
Purchasing Manager for Alpine Designs, a Colorado skiwear manufacturer, and from
1977 to 1979 he was Production Manager for Jen-Cel-Lite Corporation, a
Washington sleeping bag and insulation manufacturer.
Patrick D. Anderson joined the Company in June 1992 as Manager of Financial
Reporting, became Corporate Controller in August 1993 and was appointed Chief
Financial Officer of the Company in December 1996. From 1985 to 1992, Mr.
Anderson was an accountant with Deloitte & Touche LLP.
Carl K. Davis joined the Company in October 1997 as Vice President and General
Counsel. He was employed by Nike from 1981 to October 1997 where he served in a
variety of capacities, most recently as Director of International Trade.
Terry J. Brown joined the Company in January 1983 as Planner and served as
Executive Planner and International Distributor Manager since November 1995.
Prior to joining the Company, Mr. Brown was Vice President and Chief Financial
Officer of Agoil, Inc., an oil and gas exploration and development company, from
1978 to 1981, and as Planner for Jantzen Incorporated, an apparel company, from
1968 to 1978.
Robert G. Masin joined the Company in May 1989 as National Sales Manager. From
1976 to 1989 he worked for W.L. Gore and Associates, a polymer technology and
manufacturing and service company. From 1982 to 1989 he was National Sales
Manager of Gore's Fabric Division.
Grant D. Prentice joined the Company in May 1984 as General Manager of Outerwear
Merchandising. From 1977 to 1984, Mr. Prentice worked as a sales representative
for Gerry Outdoor Products, a skiwear company based in Colorado.
Michael R. Egeck has been General Manager - Sportswear Merchandising for the
Company since August 1992. From 1983 to 1992, Mr. Egeck was with Seattle Pacific
Industries, a sportswear apparel company where his most recent title was
Director of Merchandising, Design and Sales Operations.
Rodney R. Gumringer joined the Company in December 1993 as General Manager -
Footwear. From 1988 to 1993, Mr. Gumringer was Product Development Manager for
the casual shoe division of Nike.
Douglas R. Hamilton became President and Chief Operating Officer of the
Company's Canadian subsidiary in August 1992. In August 1995, he also became
Director of Operations - Canada and Europe. From 1987 to 1992, Mr. Hamilton was
a principal shareholder and
53
<PAGE>
President of Canada-Trans Limited, a clothing distributor and silk screening
company, which was acquired by the Company in 1992.
Sarah Bany joined the Company in 1979 and has held various positions since that
time, most recently (since December 1988) as Director of Retail Stores. She
became a director in December 1988. Ms. Bany is Gertrude Boyle's daughter.
Murrey R. Albers became a director of the Company in July 1993. Mr. Albers is
President and Chief Executive Officer of United States Bakery, a bakery with
operations in Oregon, Washington, Idaho, Montana and California. Mr. Albers, who
has been in his current position since June 1985, joined United States Bakery as
general manager of Franz Bakery in 1975.
Edward S. George became a director of the Company in April 1989. For 30 years,
until his retirement, Mr. George worked in the banking industry and, since
January 1991, has served as a financial consultant to Bell Enterprises.
John Stanton became a director of the Company in July 1997. Since 1994, Mr.
Stanton has served as Chairman and Chief Executive Officer of Western Wireless
Corporation, a publicly held company that operates cellular communications
systems in 23 western states. Mr. Stanton was Chairman and Chief Executive
Office of General Cellular Corporation, a predecessor and now subsidiary of
Western Wireless Corporation, in 1992. He previously co-founded McCaw Cellular
Communications, where he served as Chief Operating Officer from 1985 to 1988 and
as Vice Chairman from 1988 to 1991. Mr. Stanton also serves as a director of
other corporations, including Advanced Digital Information Corporation and
SmarTone.
Directors are elected at the annual shareholders meeting and hold office
until the next annual shareholders meeting and until their successors are
elected and qualified. Non-employee directors receive $3,000 for each meeting of
the Company's Board of Directors attended and reimbursement of travel expenses.
Officers are appointed by the Board of Directors and serve at its discretion.
The Company maintains an Audit Committee and a Compensation Committee. The
Audit Committee oversees actions taken by the Company's independent auditors.
The Compensation Committee reviews the compensation levels of the Company's
executive officers and makes recommendations to the Board of Directors regarding
compensation. The Compensation Committee also administers the Stock Incentive
Plan. See "--Stock Incentive Plan."
In May 1993, Mr. Santorufo pled guilty to one count of falsely understating
to the U.S. Customs Service the prices of certain merchandise imported by the
Company. Mr. Santorufo paid the imposed fine and successfully completed
probation.
54
<PAGE>
Compensation Committee Interlocks and Insider Participation
In the last fiscal year there was no compensation committee of the
Company's Board of Directors. Compensation decisions with respect to executive
officers of the Company were made by Gertrude Boyle, Chairman of the Board, and
Timothy P. Boyle, President and Chief Executive Officer.
Executive Compensation
Compensation Summary. The following table sets forth compensation information
for the Chief Executive Officer and the four most highly compensated executive
officers of the Company other than the Chief Executive Officer whose total
annual compensation exceeded $100,000 in 1997 (collectively, the "Named
Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Awards
-----------
Annual Compensation Securities
Other Annual Underlying
Salary Bonus(1) Compensation Options
-------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Gertrude Boyle, Chairman of
the Board.......................... $153,920 ---- $ 4,750 (3) ----
Timothy P. Boyle, President
and Chief Executive Officer........ 323,733 ---- 4,750 (3) ----
Don Richard Santorufo,
Executive Vice President and
Chief Operating Officer............ 286,946 ---- 4,750 (3) ----
Grant D. Prentice, General
Manager - Outerwear
Merchandising...................... 227,199 ---- 4,750 (3) 68,816
Robert G. Masin, National
Sales Manager...................... 213,370 ---- 4,750 (3) 34,408
</TABLE>
- --------------------
(1) Bonuses earned in 1997 will not be determined until early 1998.
(2) The Company expects that, after bonuses earned in 1997 are determined, Ms.
Boyle will be deemed a Named Executive Officer.
(3) Represents amounts paid as a matching contribution to the Company's 401(k)
Plan. Excludes a profit sharing contribution, which will be determined in
1998.
Options Granted in Last Fiscal Year. No stock options were granted to any Named
Executive Officer during the year ended December 31, 1996.
55
<PAGE>
The following table summarizes option grants to Named Executive Officers during
the year ended December 31, 1997.
<TABLE>
<CAPTION>
Option Grants in 1997
Potential
Realizable
Value at
Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------ -------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- --- -------------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gertrude Boyle --- --- --- --- --- ---
Timothy P. Boyle --- --- --- --- --- ---
Don Richard Santorufo --- --- --- --- --- ---
Grant D. Prentice 41,290 4.8% $ 8.30 3/12/07 $215,947 $545,028
27,527 3.2 13.03 11/14/07 225,997 570,359
Robert G. Masin 34,408 4.0 8.30 3/12/07 179,954 454,186
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. No Named Executive Officer exercised stock options during the years
ended December 31, 1997 or 1996. As of December 31, 1996 no stock options were
held by any Named Executive Officer. The following table summarizes information
with respect to option exercises and option values for the year ended December
31, 1997 for Named Executive Officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1997
and Year-End Option Values (1)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Shares at Year-End (#) at Year-End ($)
Acquired on Value ----------------------------- ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gertrude Boyle --- --- --- --- --- ---
Timothy P. Boyle --- --- --- --- --- ---
Don Richard Santorufo --- --- --- --- --- ---
Grant D. Prentice --- --- 0 68,817 $0 $330,871
Robert G. Masin --- --- 0 34,408 0 230,534
<FN>
(1) Options are "in-the-money" at the year-end if the fair market value of the
underlying securities on such date exceeds the exercise price of the the
options. The amounts set forth represent the difference between an assumed
price to the public in the Offerings of $15 and the exercise price of the
options, multiplied by the applicable number of option shares.
</FN>
</TABLE>
Limitation of Liability and Indemnification
The Company's Second Amended and Restated Articles of Incorporation (the
"Articles") eliminate, to the fullest extent permitted by Oregon law, liability
of a director to the Company or its shareholders for monetary damages for
conduct as a director. Although liability for monetary damages has been
eliminated, equitable remedies such as injunctive relief or rescission remain
available. In addition, a director is not relieved of his or her
responsibilities under any other law, including the federal securities laws.
The Company's Articles require the Company to indemnify its directors to
the fullest extent not prohibited by law. The Company has also entered into
indemnification agreements with each of the Company's directors. The Company
believes that the limitation of liability provisions in its Articles and
indemnification agreements may enhance the Company's ability to attract and
retain qualified individuals to serve as directors.
Stock Incentive Plan
1997 Stock Incentive Plan. On March 12, 1997, the Board of Directors
adopted, and the shareholders of the Company approved, the Stock Incentive Plan.
The Stock Incentive Plan provides for the award of incentive stock options to
employees and the award of nonqualified stock options, stock appreciation
rights, bonus rights and other incentive grants to directors, employees,
independent contractors, advisors and consultants. The Company has reserved
2,000,000 shares of Common Stock for issuance under the Stock Incentive Plan. At
November 30, 1997, options to purchase 859,379 shares at a weighted average
exercise price of $8.92 per share were outstanding under the Stock Incentive
Plan.
The Stock Incentive Plan is administered by the Board of Directors, which
has the authority, subject to the terms of the Stock Incentive Plan, to
determine the persons to whom options or rights may be granted, the exercise
price and number of shares subject to each option or right, the character of the
grant, the time or times at which all or a portion of each option or right may
be exercised and certain other provisions of each option or right.
The exercise price of incentive stock options must not be less than the
fair market value of the Common Stock at the date of the grant or, in the case
of incentive stock options issued to holders of more than 10% of the outstanding
Common Stock, 110% of the fair market value. The maximum term of incentive stock
options is 10 years, or five years in the case of 10% shareholders. The
aggregate fair market value, on the date of the grant, of the Common Stock for
which incentive stock options are exercisable for the first time by an employee
during any calendar year may not exceed $100,000. Options are exercisable over a
period of time in accordance with the terms of option agreements entered into at
the time of grant. Generally, options become exercisable over a five-year
period. Options granted under the Stock Incentive
56
<PAGE>
Plan are generally nontransferable by the optionee and, unless otherwise
determined by the Compensation Committee, must be exercised by the optionee
during the period of the optionee's employment or service with the Company or
within a specified period following termination thereof.
57
<PAGE>
CERTAIN TRANSACTIONS
In December 1997 the Company acquired all of the outstanding capital stock
of GTS, Inc. ("GTS") from Gertrude Boyle, Timothy P. Boyle and Sarah Bany. GTS
holds a 21 percent interest in each of the Company's Canadian, French and German
subsidiaries and a less than one percent interest in the Company's Korean
subsidiary. GTS was formed because the Company, as an S corporation, was
prohibited from owning 80 percent or more of the stock of another corporation.
As a result of the transaction, all of the Company's subsidiaries are now wholly
owned. The Company issued 65,480, 150,742 and 48,680 shares of Common Stock to
Ms. Boyle, Mr. Boyle and Ms. Bany, respectively, in connection with this
transaction.
The Company leases its corporate headquarters in Portland, Oregon from Ms.
Boyle and leases [a warehouse] from Ms. Boyle and Mr. Boyle. Pursuant to written
leases, the Company pays $76,800 annually to Ms. Boyle for use of the
headquarters building and $56,100 annually to Ms. Boyle and Mr. Boyle for use of
the warehouse. In 1996 and the nine months ended September 30, 1997, such lease
payments totaled $132,900 and $99,675, respectively.
In December 1996 the Company entered into a Deferred Compensation
Conversion Agreement with Don Richard Santorufo, Executive Vice President and
Chief Operating Officer of the Company, providing for the conversion of deferred
compensation units granted under a prior agreement into an aggregate of
2,099,979 shares of the Company's Common Stock. Of those shares, 1,254,226
shares vested immediately, 389,248 shares vest ratably over three years
commencing December 31, 1997, and 456,505 shares vest ratably over five years
commencing December 31, 2000. The agreement provides the Company with a right to
repurchase unvested shares if Mr. Santorufo's employment is terminated. In
connection with the transaction, the Company loaned Mr. Santorufo approximately
$5.7 million for payment of related income taxes, of which Mr. Santorufo is
obligated to repay $3,818,316 on December 31, 2001 and $1,906,466 on April 15,
2002. These amounts bear interest at the rates of 6.31% and 6.49%, respectively.
In addition, the Company agreed to make a loan for up to 50 percent of any
additional tax liability that may be imposed on Mr. Santorufo with respect to
the compensation received under the agreement as well as to pay a cash bonus to
cover 50 percent of any such tax liability. The amount of this cash bonus will
be increased to offset taxes owed by Mr. Santorufo as a result of such bonus.
The agreement also provided for a cash bonus of $2,750,000 in consideration of
past services and future bonuses in amounts equal to the accrued interest due
and owing on Mr. Santorufo's loan from the Company, increased to offset taxes
owed by Mr. Santorufo as the result of such bonuses. The bonuses are subject to
Mr. Santorufo's agreement to assign certain proceeds and distributions on his
shares to the Company as security for repayment of the loans. The agreement also
grants Mr. Santorufo the right to require the Company to register certain of his
shares of Common Stock for sale to the public in connection with the Offerings.
Mr. Santorufo does not intend to exercise this right in connection with the
Offerings.
In connection with the Offerings and the termination of the Company's S
corporation tax status, the Company entered into a tax indemnification agreement
with each of its shareholders
58
<PAGE>
including Gertrude Boyle, Timothy P. Boyle, Sarah Bany, Don Richard Santorufo
and certain trusts. The agreements provide that the Company will indemnify and
hold harmless each of these shareholders for federal, state, local or foreign
income tax liabilities, and costs relating thereto, resulting from any
adjustment to the Company's income that are the result of an increase or change
in character of the Company's income during the period it was treated as an S
corporation. The agreements also provide that if there is a determination that
the Company was not an S corporation prior to the Offerings, the shareholders
will pay to the Company certain refunds actually received by them as a result of
that determination.
In February 1996 the Company acquired its Rivergate facility from Mr. Boyle
and Mr. Santorufo, assuming an outstanding loan with a principal amount of
$3,230,069. Mr. Boyle and Mr. Santorufo had acquired the property from the
Company and assumed the associated loan in June 1994 and subsequently leased it
back to the Company.
Since January 1994 the Company's Canadian subsidiary has leased office and
warehouse space from B.A.R.K. Holdings, Inc., a company owned by Douglas
Hamilton, President and Chief Operating Officer of the Company's Canadian
subsidiary and Director of Operations - Canada and Europe, and his wife. The
Company pays basic rent (as defined in the lease) in the amount of C$83,400 per
year under the lease, which terminates in December 2003. Mr. Hamilton,
individually and as trustee for his wife, was a shareholder in the Canadian
company acquired by Columbia in 1992. In the acquisition the Hamiltons received
common stock in the new Columbia Canadian subsidiary, which was repurchased by
the subsidiary in April 1996 for an aggregate of C$724,516.
59
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership, as of December 23, 1997 and as adjusted to reflect the sale of the
Common Stock in the Offerings, of the Common Stock by (i) each person known by
the Company to own beneficially more than five percent of the Common Stock, (ii)
each director of the Company, (iii) each Named Executive Officer and (iv) all
directors and executive officers as a group. Except as otherwise noted, the
Company believes the persons listed below have sole investment and voting power
with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
Percentage of Common Stock
Shares Beneficially ---------------------------------
Name Owned (1) Before Offering After Offering
- ---- ------------------ --------------- --------------
<S> <C> <C> <C>
Gertrude Boyle.........................
6600 North Baltimore
Portland, Oregon 97203 4,704,380(2) 21.5% 16.5%
Timothy P. Boyle....................... 11,413,552(3) 52.1% 39.9%
6600 North Baltimore
Portland, Oregon 97203
Don Richard Santorufo.................. 2,099,979 9.5% 7.3%
6600 North Baltimore
Portland, Oregon 97203
Grant D. Prentice...................... 11,241(4) * *
Robert G. Masin........................ 7,456(5) * *
Sarah Bany
6600 North Baltimore
Portland, Oregon 97203 ............ 3,700,770(6)(7) 16.9% 12.9%
Murrey R. Albers....................... 1,119(8) * *
Edward S. George....................... 2,237(9) * *
John Stanton........................... 775(10) * *
All directors and executive
officers as a group (15
persons)............................... 21,977,544(11) 100% 76.9%
</TABLE>
- ----------------
* Less than 1.0%
(1) Shares that the person has the right to acquire within 60 days after
February 28, 1998 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
60
<PAGE>
(2) Includes 1,253,578 shares held in two grantor retained annuity trusts for
which Ms. Boyle is the income beneficiary and Ms. Bany is the beneficiary
of the remainder.
(3) Includes 144,514 shares held in trust, of which Mr. Boyle's wife is
trustee, for the benefit of Mr. Boyle's children.
(4) Includes options to purchase 11,241 shares of Common Stock exercisable
within 60 days after February 28, 1998. Excludes options to purchase 57,576
shares of Common Stock not exercisable within 60 days after February 28,
1998.
(5) Includes options to purchase 7,456 shares of Common Stock exercisable
within 60 days after February 28, 1998. Excludes options to purchase 26,952
shares of Common Stock not exercisable within 60 days after February 28,
1998.
(6) Includes 137,632 shares held in trust, of which Ms. Bany's husband is
trustee, for the benefit of Ms. Bany's children.
(7) Includes 767,187 shares held in two grantor retained annuity trusts for
which Ms. Bany is the income beneficiary and Ms. Bany's husband and
children are the beneficiaries of the remainder.
(8) Includes options to purchase 1,119 shares of Common Stock exercisable
within 60 days after February 28, 1998. Excludes options to purchase 4,043
shares of Common Stock not exercisable within 60 days after February 28,
1998.
(9) Includes options to purchase 2,237 shares of Common Stock exercisable
within 60 days after February 28, 1998. Excludes options to purchase 8,086
shares of Common Stock not exercisable within 60 days after February 28,
1998.
(10) Includes options to purchase 775 shares of Common Stock exercisable within
60 days after February 28, 1998. Excludes options to purchase 4,387 shares
of Common Stock not exercisable within 60 days after February 28, 1998.
(11) Includes options to purchase 58,863 shares of Common Stock exercisable
within 60 days after February 28, 1998. Excludes options to purchase
282,654 shares of Common Stock not exercisable within 60 days after
February 28, 1998.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock.
Common Stock
As of December 23, 1997, 21,918,681 shares of Common Stock were
outstanding, held of record by eight shareholders. After the Offerings,
28,585,348 shares will be outstanding. Concurrently with the completion of the
Offerings, (i) each share of the Company's nonvoting Common Stock held by
shareholders other than Gertrude Boyle will be exchanged for and converted into
approximately 0.935 shares of the Company's voting Common Stock, and each share
of the Company's nonvoting Common Stock held by Ms. Boyle will be exchanged for
and converted into approximately 1.150 shares of the Company's voting Common
Stock, and (ii) each converted share of the Company's voting Common Stock will
be subsequently converted into 0.736 shares of Common Stock pursuant to a
reverse stock split. The following description of rights assumes these
conversions and reverse split.
Holders of Common Stock are entitled to receive dividends as may from time
to time be declared by the Board of Directors of the Company out of funds
legally available therefor. See "Dividend Policy and S Corporation Status."
Holders of Common Stock are entitled to one vote per share on all matters on
which the holders of Common Stock are entitled to vote and do not have any
cumulative voting rights. Holders of Common Stock have no preemptive,
conversion, redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share equally and ratably in the assets of the Company, if any, remaining
after the payment of all liabilities of the Company and the liquidation
preference of any outstanding class or series of Preferred Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company in the Offerings when issued will be, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
are subject to any series of Preferred Stock that the Company may issue in the
future, as described below.
Preferred Stock
The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the number of shares constituting any such series and the
preferences, limitations and relative rights, including dividend rights,
dividend rate, voting rights, terms of redemption, redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
series, without any further vote or action by the shareholders of the Company.
The issuance of Preferred Stock by the Board of Directors could adversely affect
the rights of holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying
or preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of, and the voting and other rights of the
holders of, Common Stock. The Company has no plans to issue shares of Preferred
Stock.
62
<PAGE>
Oregon Control Share and Business Combination Statutes
Upon completion of the Offerings, the Company will become subject to the
Oregon Control Share Act (the "Control Share Act"). The Control Share Act
generally provides that a person (the "Acquiror") who acquires voting stock of
an Oregon corporation in a transaction (other than a transaction in which voting
shares are acquired from the issuing public corporation) that results in the
Acquiror holding more than 20%, 33 1/3% or 50% of the total voting power of the
corporation (a "Control Share Acquisition") cannot vote the shares it acquires
in the Control Share Acquisition ("control shares") unless voting rights are
accorded to the control shares by (i) a majority of each voting group entitled
to vote and (ii) the holders of a majority of the outstanding voting shares,
excluding the control shares held by the Acquiror and shares held by the
Company's officers and inside directors. The term "Acquiror" is broadly defined
to include persons acting as a group.
The Acquiror may, but is not required to, submit to the Company a statement
setting forth certain information about the Acquiror and its plans with respect
to the Company. The statement may also request that the Company call a special
meeting of shareholders to determine whether voting rights will be accorded to
the control shares. If the Acquiror does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual or special meeting of shareholders. If the Acquiror's control
shares are accorded voting rights and represent a majority or more of all voting
power, shareholders who do not vote in favor of voting rights for the control
shares will have the right to receive the appraised "fair value" of their
shares, which may not be less than the highest price paid per share by the
Acquiror for the control shares.
Upon completion of the Offerings, the Company will become subject to
certain provisions of the Oregon Business Corporation Act that govern business
combinations between corporations and interested shareholders (the "Business
Combination Act"). The Business Combination Act generally provides that if a
person or entity acquires 15% or more of the outstanding voting stock of an
Oregon corporation (an "Interested Shareholder"), the corporation and the
Interested Shareholder, or any affiliated entity of the Interested Shareholder,
may not engage in certain business combination transactions for three years
following the date the person became an Interested Shareholder. Business
combination transactions for this purpose include (a) a merger or plan of share
exchange, (b) any sale, lease, mortgage or other disposition of 10% or more of
the assets of the corporation and (c) certain transactions that result in the
issuance or transfer of capital stock of the corporation to the Interested
Shareholder. These restrictions do not apply if (i) the Interested Shareholder,
as a result of the transaction in which such person became an Interested
Shareholder, owns at least 85% of the outstanding voting stock of the
corporation (disregarding shares owned by directors who are also officers and
certain employee benefit plans), (ii) the board of directors approves the
business combination or the transaction that resulted in the shareholder
becoming an Interested Shareholder before the Interested Shareholder acquires
15% or more of the corporation's voting stock or (iii) the board of directors
and the holders of at least two-thirds of the outstanding voting stock of the
corporation (disregarding
63
<PAGE>
shares owned by the Interested Shareholder) approve the business combination
after the Interested Shareholder acquires 15% or more of the corporation's
voting stock.
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has not been any public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market,
or the prospect of such sales, could adversely affect prevailing market prices.
Upon completion of the Offerings, 28,585,348 shares of Common Stock will be
outstanding. Of these shares, the 6,666,667 shares sold in the Offerings will be
freely tradeable without restriction under the Securities Act, unless purchased
by an "affiliate" of the Company, as that term is defined in Rule 144. The
remaining 21,918,681 shares outstanding after completion of the Offerings are
"restricted securities" as defined in Rule 144 and may be sold in the public
market only if registered under the Securities Act or if they qualify for an
exemption from registration, including an exemption pursuant to Rule 144.
The Company, its directors and officers and the holders of all of the
Company's outstanding Common Stock as of the date hereof have agreed that,
during the period beginning from the date of this Prospectus (or earlier with
the consent of the representatives of the Underwriters), and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
(other than (i) pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus, (ii) bona fide gifts to transferees who agree to be
bound by a like restriction or (iii) private sales to persons who were
shareholders prior to the closing of the Offerings) or any securities of the
Company that are substantially similar to the shares of the Common Stock or
which are convertible into or exchangeable for securities that are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives of the Underwriters, except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings. Upon
expiration of these agreements, 21,072,927 of these shares will be eligible for
immediate resale in the public market subject to the limitations of Rule 144.
In general under Rule 144, a person, including an "affiliate" of the
Company, who has beneficially owned restricted shares for at least one year is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately 286,000 shares immediately following the Offerings) or the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about the Company. Rule 144(k) provides that a person who is not an
"affiliate" of the issuer at any time during the three months preceding a sale
and who has beneficially owned shares for at least two years is entitled to sell
those shares at any time without compliance with the public information, volume
limitation, manner of sale and notice provisions of Rule 144.
As of November 30, 1997, options to purchase 859,379 shares of Common Stock
were outstanding under the Stock Incentive Plan. The Company intends to file as
soon as practicable
65
<PAGE>
following completion of the Offerings a registration statement on Form S-8 under
the Securities Act covering shares of Common Stock reserved for issuance under
the Stock Incentive Plan. Based on the number of options expected to be
outstanding upon completion of the Offerings and shares reserved for issuance
under the Stock Incentive Plan, the registration statement would cover 2,000,000
shares. See "Management - Stock Incentive Plan." The registration statement will
become effective immediately upon filing, whereupon, subject to the satisfaction
of applicable exercisability periods, Rule 144 volume limitations applicable to
affiliates and, in certain cases, the agreements with the representatives of the
Underwriters referred to above, shares of Common Stock to be issued upon
exercise of outstanding options granted pursuant to the Stock Incentive Plan
will be available for immediate resale in the open market.
VALIDITY OF THE ISSUANCE OF THE COMMON STOCK
The validity of the issuance of the Common Stock offered in the Offerings
will be passed upon for the Company by Stoel Rives LLP, Portland, Oregon and for
the Underwriters by Sullivan & Cromwell, Los Angeles, California.
EXPERTS
The Consolidated Financial Statements included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered in the
Offerings. This Prospectus omits certain information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered in the
Offerings, reference is made to such Registration Statement, exhibits and
schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including the
exhibits and schedules filed therewith, may be inspected without charge at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and from the Commission's Internet
Web site at http://www.sec.gov.
66
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 and
September 30, 1997 (unaudited).......................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996 and for the nine months ended September 30, 1996
and 1997 (unaudited).................................................... F-5
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1997 (unaudited).......................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and for the nine months ended September 30,
1996 and 1997 (unaudited)............................................... F-7
Notes to Consolidated Financial Statements................................ F-9
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders of Columbia Sportswear Company.:
We have audited the accompanying consolidated balance sheets of Columbia
Sportswear Company as of December 31, 1995 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Columbia Sportswear Company and
subsidiaries as of December 31, 1995 and 1996, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
April 10, 1997 (December 15, 1997 as to Notes 1 and 17)
F-2
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
- -------------------------------------------------------------------------------
December 31,
----------------------
September 30,
1995 1996 1997
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,288 $ 3,283 $ 5,058
Short-term investments -- 848 --
Accounts receivable, net of allowance of $2,369,
$2,440, and $3,640, respectively 88,079 60,423 141,715
Inventories (Note 3) 48,404 34,638 69,249
Prepaid expenses and other 1,798 1,673 1,403
-------- -------- --------
Total current assets 139,569 100,865 217,425
PROPERTY, PLANT, AND EQUIPMENT (Note 4) 21,271 28,197 32,337
INTANGIBLES AND OTHER ASSETS (Note 5) 1,461 6,905 9,307
-------- -------- --------
TOTAL ASSETS $162,301 $135,967 $259,069
======== ======== ========
</TABLE>
(Continued)
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
- -------------------------------------------------------------------------------
December 31,
-------------------------
September 30,
1995 1996 1997
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank (Note 7) $ 51,412 $ 11,520 $ 77,478
Accounts payable 22,746 18,090 45,587
Accrued expenses (Note 6) 12,284 11,166 20,652
Current portion of long-term debt (Note 8) 1,250 160 160
Distribution payable to shareholders 4,151 132 74
--------- --------- ---------
Total current liabilities 91,843 41,068 143,951
LONG-TERM DEBT (Note 8) -- 2,963 2,862
COMMITMENTS AND CONTINGENCIES
(Notes 7, 14, and 15) -- -- --
SHAREHOLDERS' EQUITY:
Common shares; 50,000 shares authorized;
issued and outstanding 27,655, 30,687, and
30,687, respectively 2,163 17,886 17,886
Retained earnings 68,567 81,034 101,679
Foreign currency adjustments (272) (664) (1,717)
Unearned portion of restricted stock issued
for future services -- (6,320) (5,592)
--------- --------- ---------
Total shareholders' equity 70,458 91,936 112,256
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 162,301 $ 135,967 $ 259,069
========= ========= =========
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-4
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
- -------------------------------------------------------------------------------
For the Nine
For the Years Ended Months Ended
December 31, September 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $256,426 $303,797 $298,988 $226,239 $258,355
COST OF SALES 148,940 182,971 176,859 135,626 144,571
-------- -------- -------- -------- --------
Gross profit 107,486 120,826 122,129 90,613 113,784
SELLING, GENERAL, AND
ADMINISTRATIVE 64,049 82,083 87,954 63,593 77,757
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS 43,437 38,743 34,175 27,020 36,027
-------- -------- -------- -------- --------
OTHER EXPENSE:
Interest expense, net 3,220 5,767 4,220 3,248 2,497
Other (Notes 13 and 15) -- 2,500 7,477 -- --
-------- -------- -------- -------- --------
Total other expense 3,220 8,267 11,697 3,248 2,497
-------- -------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 40,217 30,476 22,478 23,772 33,530
PROVISION FOR INCOME TAXES 1,893 1,750 1,468 1,463 1,730
-------- -------- -------- -------- --------
NET INCOME $ 38,324 $ 28,726 $ 21,010 $ 22,309 $ 31,800
======== ======== ======== ======== ========
PRO FORMA NET INCOME DATA:
Income before provision for income
taxes, as reported $ 40,217 $ 30,476 $ 22,478 $ 23,772 $ 33,530
Pro forma provision for income
taxes (Note 1) 16,087 12,190 8,991 9,509 13,412
-------- -------- -------- -------- --------
PRO FORMA NET INCOME $ 24,130 $ 18,286 $ 13,487 $ 14,263 $ 20,118
======== ======== ======== ======== ========
PRO FORMA NET INCOME PER
SHARE (Note 1) $ .47 $ .70
======== ========
PRO FORMA WEIGHTED AVERAGE
NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 28,934 28,934
======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Thousands)
- -------------------------------------------------------------------------------
Unearned
Common Stock Foreign portion of
----------------------- Currency restricted stock
Shares Retained Translation issued for
Outstanding Amount Earnings Adjustment future services Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 27,623 $ 2,061 $ 41,529 $ (196) $ -- $ 43,394
Capital contribution -- 21 -- -- -- 21
Distribution to shareholders -- -- (19,623) -- -- (19,623)
Net income -- -- 38,324 -- -- 38,324
Foreign currency translation adjustment -- -- -- (124) -- (124)
--------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1994 27,623 2,082 60,230 (320) -- 61,992
Stock bonus 32 81 -- -- -- 81
Distribution to shareholders -- -- (20,389) -- -- (20,389)
Net income -- -- 28,726 -- -- 28,726
Foreign currency translation adjustment -- -- -- 48 -- 48
--------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 27,655 2,163 68,567 (272) -- 70,458
Capital contribution -- 30 -- -- -- 30
Issuance of common stock 3,032 15,693 -- -- (6,320) 9,373
Distribution to shareholders -- -- (8,543) -- -- (8,543)
Net income -- -- 21,010 -- -- 21,010
Foreign currency translation adjustment -- -- -- (392) -- (392)
--------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1996 30,687 17,886 81,034 (664) (6,320) 91,936
Distribution to shareholders (unaudited) -- -- (11,155) -- -- (11,155)
Net income (unaudited) -- -- 31,800 -- -- 31,800
Foreign currency translation adjustment (unaudited) -- -- -- (1,053) -- (1,053)
Amortization of unearned compensation (unaudited) -- -- -- -- 728 728
--------- --------- --------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1997 (Unaudited) 30,687 17,886 $ 101,679 $ (1,717) $ (5,592) $ 112,256
========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
- -------------------------------------------------------------------------------
For the Nine
For the Years Ended Months Ended
December 31, September 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,324 $ 28,726 $ 21,010 $ 22,309 $ 31,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,086 5,048 6,419 4,689 5,238
Noncash compensation -- 81 5,655 680 727
Loss on disposal of equipment 321 36 155 98 1
Changes in operating assets and liabilities:
Accounts receivable (25,118) (16,852) 26,340 (41,934) (84,165)
Inventories (24,576) (4,912) 13,749 (636) (34,709)
Prepaid expenses and other (356) (1,007) (709) (907) 248
Other assets 168 215 (5,585) (270) (2,702)
Accounts payable 16,071 (1,458) (3,605) 14,610 29,974
Accrued expenses 2,645 1,970 3,385 5,918 9,299
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities 10,565 11,847 66,814 4,557 (44,289)
-------- -------- -------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (10,058) (13,074) (10,103) (4,347) (9,369)
Proceeds from sale of property, plant, and equipment 4,282 87 33 8 49
Purchase of short-term certificates of deposit -- -- (855) -- --
Maturity of short-term investments -- -- -- -- 815
-------- -------- -------- -------- --------
Net cash used in investing activities (5,776) (12,987) (10,925) (4,339) (8,505)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on notes payable to bank 18,744 27,615 (39,876) 15,594 66,018
Repayments on long-term debt (2,250) (2,500) (1,250) (1,250) (100)
Repayment of note payable to shareholder (252) -- -- -- --
Distributions to shareholders (19,390) (24,527) (12,562) (10,901) (11,211)
Capital contribution from shareholders 21 -- 30 -- --
Payments on acquisition note (408) -- -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities (3,535) 588 (53,658) 3,443 54,707
-------- -------- -------- -------- --------
NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH 3 (40) (236) (196) (138)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,257 (592) 1,995 3,465 1,775
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 623 1,880 1,288 1,288 3,283
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,880 $ 1,288 $ 3,283 $ 4,753 $ 5,058
======== ======== ======== ======== ========
</TABLE>
(Continued)
F-7
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA SPORTSWEAR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
- -------------------------------------------------------------------------------
For the Nine
For the Years Ended Months Ended
December 31, September 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
(Unaudited)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest, net of
capitalized interest $ 3,088 $ 5,725 $ 4,419 $ 3,721 $ 2,404
State and foreign income taxes 1,538 1,887 2,765 1,628 1,203
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Property, plant, and equipment acquired through
assumption of debt $ -- $ -- $ 3,123 $ 3,123 $ --
Note receivable from sale of fixed assets -- -- -- -- 128
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-8
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND ORGANIZATION
Nature of the Business - Columbia Sportswear Company (the "Company") is a
global leader in the design, manufacture, marketing and distribution of
active outdoor apparel throughout North America, Europe, Japan, and Korea.
The Company owns a 79% subsidiary, Columbia Sportswear Canada Limited
("CSCL"), which distributes outerwear in Canada. GTS, Inc., a holding
company, held a 21% interest in CSCL. GTS was wholly-owned by substantially
the same shareholders of the Company and had total assets of $147,000 at
December 31, 1996. On December 15, 1997, the Company and GTS were merged.
This merger has been accounted for in a manner similar to a pooling of
interest and, accordingly, the combined financial statements presented
herein reflect the merged companies as if GTS had always been a subsidiary
of the Company.
Unaudited Interim Information - The financial information with respect to
the nine-month periods ended September 30, 1996 and 1997 is unaudited. In
the opinion of management, such information contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of such periods. The results of operations for
those periods are not necessarily indicative of the results to be expected
for the full year.
Pro Forma Adjustments - Upon completion of the contemplated initial public
offering of common stock and the merger with GTS, the Company and GTS will
be subject to federal and state income taxes from the effective date of the
sale of common stock by the Company. The pro forma consolidated statement
of operations income data for each of the three years in the period ended
December 31, 1996 and the nine-month periods ended September 30, 1996 and
1997 reflects adjustments for income taxes based upon income before
provision for income taxes as if the Company had been subject to additional
federal and state income taxes based upon a pro forma effective tax rate of
40%. In addition, the Company will be required to provide a deferred tax
asset for cumulative temporary differences between financial statement and
income tax basis of the Company's assets and liabilities by recording a
benefit for such deferred tax assets in its combined statement of
operations for the period following the effective date of the offerings.
Such deferred tax assets will be based on the cumulative temporary
difference upon the conversion from an S corporation to a C corporation at
the effective date of the sale of the common stock by the Company. The net
difference between the financial statement and income tax basis of the
Company's assets and liabilities is approximately $6,827,000 at December
31, 1996.
Pro Forma Net Income Per Share - Pro forma net income per share is based on
the weighted average number of shares of common stock outstanding and
dilutive common equivalent shares from stock options (using the treasury
stock method). The shares outstanding for all periods give effect to the
400-for-1 split as well as the following pro forma adjustments:
F-9
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, 1996 September 30, 1997
----------------- ------------------------------
<S> <C> <C>
Average shares outstanding
Voting 2,764,748 2,764,748
Nonvoting 27,922,823 27,922,823
---------- ----------
30,687,571 30,687,571
Effect of converting nonvoting
shares to voting shares (1) (906,759) (906,759)
Common stock equivalent 473,404 473,404
---------- ----------
30,254,216 30,254,216
Reverse stock split (2) (7,987,113) (7,987,113)
Shares issued to pay AAA account 22,267,103 22,267,103
Pro forma average shares 6,666,667 6,666,667
---------- ----------
28,933,770 28,933,770
========== ==========
- --------------------
<FN>
(1) Amounts reflect the reduction of shares as a result of the conversion of
nonvoting shares to voting shares which is planned to occur prior to
consummation of the planned offering of common stock by the Company.
(2) Reverse stock split of 0.736 shares for one share expected to occur prior
to consummation of the planned offering of common stock by the Company.
</FN>
</TABLE>
Common and common equivalent shares issued during the 12-month period prior
to the proposed offering have been included in the calculation using the
treasury stock method as if they were outstanding for all periods presented
with an offering price equivalent to $15 per share.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts have been eliminated.
Short-Term Investments - Amounts consist of monies invested in certificates
of deposit with original maturities greater than three months.
Inventories are carried at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property, Plant, and Equipment - Property, plant, and equipment are stated
at cost. Depreciation of equipment and amortization of leasehold
improvements is provided using the straight-line method over the estimated
useful lives of the assets, ranging from 3 to 10 years. Buildings are
depreciated using the straight-line method over 30 years.
Intangibles - Goodwill is being amortized on a straight-line basis over
eight years.
Common Stock - In 1996, the Company's Board of Directors declared a
400-for-1 stock split of its common stock. All per share information in the
accompanying consolidated financial statements has been retroactively
adjusted to reflect this stock split.
Taxes on Income - Shareholders of the Company have elected to have the
Company be treated as an S corporation under provisions of the Internal
Revenue Code of 1986. Accordingly, payment of federal and state taxes on
income is the responsibility of the shareholders rather than the Company.
The Company and its Board of Directors have declared distributions to
shareholders in amounts approximately equal to the
F-10
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
shareholders' federal and state tax liability on the earnings of the
Company. In the states of California and New York, the Company has elected
C corporation status and is subject to those states' income taxes. CSCL is
subject to federal and provincial income tax in Canada. The provision for
income taxes differs from the amounts computed by applying the statutory
federal income tax rate to income before income taxes since the Company's
income is not subject to federal and certain state income taxes.
Foreign Currency Translation - The assets and liabilities of the Company's
foreign subsidiaries have been translated into U.S. dollars using the
exchange rates in effect at period end, and the revenues and expenses have
been translated into U.S. dollars using the average exchange rates in
effect during the period. Adjustments resulting from translation
adjustments are included as a separate component of stockholders' equity.
Product Warranty - Substantially all of the Company's products carry
lifetime warranty provisions for defects in quality and workmanship. The
Company's estimated liability for future warranty claims related to past
sales at December 31, 1995 and 1996 is approximately $2,024,000 and
$2,699,000, respectively, and is recorded in accrued expenses. Warranty
expense was approximately $718,000, $2,738,000, and $2,848,000 for the
years ended December 31, 1994, 1995, and 1996, respectively.
Statement of Cash Flows - For purposes of the statement of cash flows, cash
and cash equivalents includes cash on hand, amounts in demand deposit
accounts, and pooled investment funds with original maturities of three
months or less.
Adoption of Accounting Pronouncements - The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of,
for the year ended December 31, 1996. SFAS No. 121 establishes recognition
and measurement criteria for losses whenever events or changes in
circumstances indicate the carrying value of assets may not be recoverable
on an undiscounted cash flow basis. There was no effect on the Company's
combined financial statements as a result of the adoption of SFAS No. 121.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. This statement is effective in fiscal 1997 with the
establishment of the Stock Incentive Plan (see Note 10). The Company
intends to adopt the disclosure provisions of SFAS No. 123 and account for
stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
will be effective for the Company upon completion of the public offering.
This statement establishes standards for computing and presenting earnings
per share ("EPS") and applies to entities with publicly held common stock
or potential common stock. It replaces the presentation of primary EPS with
a presentation of basis EPS and requires the dual presentation of basic and
diluted EPS on the face of the income statement. This statement requires
restatement of all prior period EPS data presented.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
F-11
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
3. INVENTORIES
Inventories as of December 31, 1995 and 1996 and September 30, 1997
(unaudited) consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Raw materials $ 5,540 $ 4,020 $ 4,608
Work-in-process 5,084 5,936 5,499
Finished goods 37,780 24,682 59,142
------- ------- -------
Total $48,404 $34,638 $69,249
======= ======= =======
</TABLE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of December 31, 1995 and 1996 consist of
the following (in thousands):
1995 1996
Land $ 225 $ 1,359
Buildings 4,569 12,330
Machinery and equipment 19,621 20,488
Furniture and fixtures 3,736 4,432
Leasehold improvements 4,012 5,062
Automobiles 362 438
------- -------
Subtotal 32,525 44,109
Less accumulated depreciation and amortization 11,254 15,912
------- -------
Total $21,271 $28,197
======= =======
5. INTANGIBLES AND OTHER ASSETS
Other assets as of December 31, 1995 and 1996 consist of the following (in
thousands):
1995 1996
Note receivable from shareholder $ -- $3,818
Goodwill 1,402 1,099
Other 59 1,988
------ ------
Total $1,461 $6,905
====== ======
The note receivable from shareholder matures December 31, 2001 and bears
interest at the federal rate under the Internal Revenue Code of 1986 (6.31%
at December 31, 1996).
F-12
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
6. ACCRUED EXPENSES
Accrued expenses as of December 31, 1995 and 1996 consist of the following
(in thousands):
1995 1996
Accrued bonuses $ 2,746 $ 4,460
Accrued warranty reserve 2,024 2,698
Other 7,514 4,008
------- -------
Total $12,284 $11,166
======= =======
7. NOTES PAYABLE TO BANK
The Company has available an unsecured operating line of credit providing
for borrowings to a maximum of $70,000,000 during August 1, 1996 to
December 15, 1996 and $50,000,000 at all other times. Interest, due
monthly, is computed at the bank's prime rate minus 1.9% per annum, which
was 6.35% at December 31, 1996. If the Company defaults on its payments, it
is prohibited, subject to certain exceptions, from making dividend payments
or other distributions. The balance outstanding was $24,797,000 and
$6,250,000 at December 31, 1995 and 1996, respectively. The amended
agreement also includes a fixed rate option based on the Eurodollar rate
plus 75 basis points. The agreement extends to June 30, 1997 and the
Company intends to extend the operating line another year.
The Company also has available an unsecured revolving line of credit of
$25,000,000 with a $45,000,000 import line of credit to issue documentary
letters of credit on a sight basis. The combined Limit under this agreement
is $60,000,000. The revolving line accrues interest at the bank's prime
rate minus 2% per annum. The revolving line also has a fixed rate option
based on the bank's cost of funds plus 35 basis points. At December 31,
1995, the Company had borrowings of $20,000,000 under the fixed rate option
at an average rate of 6.3% per annum. There was no balance outstanding on
this line as of December 31, 1996.
The Company is party to a Buying Agency Agreement with Nissho Iwai American
Corporation and its Canadian affiliate ("Nissho") pursuant to which Nissho
provides the Company an unsecured line of credit. This line of credit is
used to finance the purchase of goods outside the U.S. which are produced
by the Company's independent manufacturers worldwide. The available funds
are limited to $120,000,000 with a sublimit of $70,000,000 on the import
line of credit. Borrowings bear interest at a rate of .5% above the three
month LIBOR rate. In addition, the Company is obligated to pay Nissho a
commission of 1.5% of the FOB price of the goods purchased by Nissho in its
capacity as buying agent. The agreement expires September 30, 1998 but will
automatically renew for a five year term unless either party elects
otherwise. The balance outstanding on the import line of credit was
$12,961,000 and $11,664,000 at December 31, 1995 and 1996, respectively,
and is included in accounts payable. At December 31, 1996, Columbia
Sportswear had $42,453,000 of firm purchase orders placed under these
financing arrangements.
F-13
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
CSCL has available a line of credit providing for borrowing to a maximum of
$18,000,000 Canadian (US$13,138,000). Interest, due monthly, is computed at
the Canadian prime lending rate, which was 4.75% at December 31, 1996. The
credit facility also includes a bankers acceptances ("B/As") option at the
bank's prime acceptance fee minus 50 basis points. B/As are issued in
multiples of C$100,000 with a maturity of not less than 30 days and not
more than 360 days. The facility is guaranteed by the Company. At December
31, 1996, the balance outstanding was C$720,000 and C$6,500,000 (US$525,000
and US$4,745,000) under the prime and B/A options, respectively and the
B/A's average rate of interest was 3.06%. At December 31, 1995, C$9,034,000
(US$6,615,000) was outstanding under the prime option.
8. LONG-TERM DEBT
Long-term debt as of December 31, 1995 and 1996 consists of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Senior notes payable, unsecured, interest at 10.75%, payable
quarterly; principal payments due semi-annually, maturing
June 1996 $ 1,250 $ -
Mortgage note payable - 3,123
Less current portion 1,250 160
------- ------
Total long-term debt $ - $2,963
======= ======
</TABLE>
The senior notes were paid off at maturity in 1996. The Company assumed a
mortgage in conjunction with the acquisition of a distribution center (Note
14). The loan matures in June 2009 and bears interest at 8.76%. Principal
payments due on the mortgage note payable as of December 31, 1996 were as
follows: $160,000 in 1997; $157,000 in 1998; $171,000 in 1999; $187,000 in
2000; $204,000 in 2001; and $2,244,000 thereafter.
9. SHAREHOLDERS' EQUITY
The Company is authorized to issue 50,000,000 shares of common stock,
10,000,000 of which are voting shares and 40,000,000 of which are nonvoting
shares. At December 31, 1994, 1995 and 1996, 2,488,800, 2,488,800, and
2,764,748 shares of voting, and 25,134,271, 25,166,372, and 27,922,823
shares of nonvoting stock are issued and outstanding. Shares for all
periods are restated to reflect a 400-for-1 split in 1996 for each share of
voting and nonvoting stock.
F-14
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
10. STOCK INCENTIVE PLANS
On March 12, 1997, the Board of Directors of the Company approved an
Employee Stock Incentive Plan (the "Plan"). The Company has reserved
2,000,000 shares of common stock for issuance pursuant to the Plan. At that
date, 1,017,000 incentive stock options and 15,000 nonqualified options
were granted under the Plan at an exercise price of $5.71 per share, the
estimated fair value at the date of grant. The options are exercisable, if
the Company completes a final underwritten public offering of Common Stock
registered with the Securities and Exchange Commission, ratably over a
five-year period beginning from the date of grant, and expire ten years
from the date of grant. If an offering is not completed, the options are
exercisable nine years from the date of the grant.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments when it is practicable to estimate that value. The carrying
value of cash and cash equivalents, short-term certificates of deposit,
accounts receivable, notes payable, and long-term debt reflect their
approximate fair value at December 31, 1995 and 1996 based on their stated
terms and conditions.
12. PROFIT-SHARING PLAN
The Company has a 401(k) profit-sharing plan, which covers substantially
all employees with more than one year of service.
The Company may elect to make discretionary matching and/or non-matching
contributions. All contributions to the plan are determined by the Board of
Directors and totaled $948,000, $1,269,000, and $1,465,000 for the years
ended December 31, 1994, 1995, and 1996, respectively.
13. PARTICIPATION SHARE AGREEMENT
Effective December 1990, the Company adopted a Participation Share
Agreement (the "Plan") with a key employee. The Plan provided for the grant
of participation shares equivalent to 10% of the Company, which were to be
awarded at various dates through January 2000. Shares awarded were
subjected to vesting at a rate of 20% per year. The original Plan granted
the employee deferred compensation in the appreciation of a defined
per-share book value of the Company since January 1987 and contained an
anti-dilutive provision.
Effective December 31, 1996, the original Plan was terminated and a
Deferred Compensation Conversion Agreement (the "Agreement") was entered
into. Under the Agreement, the participation shares, whether or not vested
or awarded under the Plan, were converted to 276,000 shares of voting
common stock and 2,756,000 shares of nonvoting common stock. Of the
converted shares, 111,000 shares of voting common stock and 1,110,000
shares of nonvoting common stock awarded are subject to vesting through
December 2004.
F-15
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
The total value of the share conversion is $15,693,000, of which $6,320,000
is subjected to vesting. The unvested portion is recorded as a reduction in
shareholders' equity at December 31, 1996 and will be amortized to
compensation expense through December 2004 as shares are earned.
Compensation expense related to the Plan and the 1996 conversion totaled
$1,311,000, $922,000, and $5,742,000 for the years ended December 31, 1994,
1995, and 1996, respectively. Additionally, the Agreement also provided for
a cash bonus of $2,750,000 in consideration for past services and for
future bonuses to be paid in amounts equal to the accrued interest due and
owing on the note receivable from shareholder (Note 5). Of the total
expense for 1996 of $8,492,000, the normal recurring amount of $1,015,000
was reported as Selling, General, and Administrative expense and the
balance of $7,477,000 was reported as other expense in the consolidated
statement of operations.
14. LEASE OBLIGATIONS
The Company has a long-term lease agreement for a manufacturing facility
constructed to the Company's specifications. The initial lease term is for
ten years with three five-year renewal options and the lease also contains
purchase options at the end of five and ten years.
In December 1995, the Company acquired a long-term operating lease on a
commercial building with the intent of operating a retail outlet. The
remaining lease term is 33 years. The agreement contains a payment
escalation clause which increases the payment amount every four years with
the minimum increase the greater of the Consumer Price Index or 4% per
annum. Rent expense is recognized on a straight-line basis over the life of
the lease. The minimum lease payments are included in the schedule below.
Additionally, the Company leases certain operating facilities from
shareholders/directors of the Company. Total rent expense, including
month-to-month rentals, for these leases amounted to $462,000, $626,000,
and $277,000 for the years ended December 31, 1994, 1995, and 1996,
respectively.
In March 1996, the Company acquired the existing distribution center for
approximately $4.5 million from a shareholder and an officer of the Company
from whom the Company had previously leased the facility on a long-term
basis.
Rent expense was $1,205,000, $1,998,000, and $2,408,000 for third-party
leases during the years ended December 31, 1994, 1995, and 1996,
respectively.
F-16
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
Future minimum payments on all lease obligations greater than one year are
as follows (amounts in thousands):
<TABLE>
<CAPTION>
Year Ending Third Related
December 31, Parties Parties Total
<S> <C> <C> <C>
1997 $ 2,521 $ 194 $ 2,715
1998 1,665 61 1,726
1999 1,485 61 1,546
2000 1,319 61 1,379
2001 738 61 799
Thereafter 8,486 121 8,608
------- ------- -------
$16,214 $ 559 $16,773
======= ======= =======
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
Contingencies - The Company is a party to various legal claims, actions and
complaints. Although the ultimate resolution of legal proceedings cannot be
predicted with certainty, management believes that disposition of these
matters will not have a material adverse effect on the Company's
consolidated financial statements.
In 1995, the Company settled a dispute for the right to use the name
"Columbia" with a payment of $2,500,000 which has been reported as other
expense in the consolidated statement of operations.
16. GEOGRAPHIC INFORMATION
The majority of the Company's revenues are derived from its North American
operations. Such revenues amounted to 96%, 95%, and 91% of total revenues
for the years ended December 31, 1994, 1995, and 1996, respectively. The
remaining revenues are derived from throughout the world, with the majority
occurring in Europe for each of the past three years.
17. SUBSEQUENT EVENTS
On April 8, 1997, the Company loaned $1,904,777 to a shareholder to fund
the tax payment for stock bonuses received in fiscal year ending December
31, 1996. The note receivable matures on April 15, 2002, and bears interest
at the applicable federal rate under the Internal Revenue Code of 1986.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, Disclosures About Segments of an Enterprise and Related
Information, which will be effective for the Company beginning January 1,
1998. SFAS No. 131 redefines how operating segments are determined and
requires qualitative disclosure of certain financial and descriptive
information about a company's operating segments. The Company believes the
segment information required to be disclosed under SFAS No. 131 will be
more comprehensive than previously provided, including expended disclosure
of income statement and balance sheet items for each of its reportable
operating segments. The Company has not yet completed its analysis of which
operating segments it will report on.
On July 21, 1997, the Board of Directors of the Company granted an
additional 45,000 shares of common stock under the Employee Stock Incentive
Plan (see Note 10) and 7,500 nonqualified options, at an exercise price of
$5.71 per share, the estimated fair value at the date of grant.
F-17
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
On July 31, 1997, the Company extended its unsecured operating line of
credit. This extension granted available credit by which the aggregate of
the outstanding principal amount of loans is less than $70,000,000 during
August 1, 1997 through December 15, 1997, and $50,000,000 at all other
times. The maturity date is June 30, 1998 at which time both parties can
elect to extend the financing agreements.
On November 14, 1997, the Board of Directors of the Company granted an
additional 48,768 shares of common stock under the Employee Stock Incentive
Plan (see Note 10) and 115,000 nonqualified options at an exercise price of
$8.97 a share, the estimated fair value at the date of grant.
* * * * * *
F-18
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co, NationsBanc
Montgomery Securities, Inc. and PaineWebber Incorporated are acting as
representatives, has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:
Number of Shares
U.S. Underwriter of Common Stock
---------------- ----------------
Goldman, Sachs & Co................................
NationsBanc Montgomery Securities, Inc.............
PaineWebber Incorporated...........................
----------------
Total......................................... 5,333,334
================
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $_____ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $_____ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and sale
of 1,333,333 shares of Common Stock in an international offering outside the
United States. The offering price and aggregate underwriting discounts and
commissions per share for the two Offerings are identical. The closing of the
offering made hereby is a condition to the closing of the International
Offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International, NationsBanc Montgomery Securities, Inc. and
PaineWebber International (U.K.) Ltd.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to
U-1
<PAGE>
certain exceptions, it will offer, sell or deliver the shares of Common Stock,
directly or indirectly, only in the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (the "United States") and to U.S. persons,
which term shall mean, for purposes of this paragraph: (a) any individual who is
a resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as a part of the International Offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b) to
any person who it believes intends to reoffer, resell or deliver the shares in
the United States or to any U.S. persons, and (ii) cause any dealer to whom it
may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 800,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
5,333,334 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
200,000 additional shares of Common Stock.
The Company, its directors and officers and the holders of all of the
Company's outstanding Common Stock as of the date hereof have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
(other than (i) pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus, (ii) bona fide gifts to transferees who agree to be
bound by a like restriction or (iii) private sales to persons who were
shareholders prior to the closing of the Offerings) or any securities of the
Company that are substantially similar to the shares of the Common Stock or
which are convertible into or exchangeable for securities that are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives, except for the shares of Common Stock offered in connection
with the concurrent U.S. and international offerings.
U-2
<PAGE>
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will be
the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.
The Common Stock will be quoted on the Nasdaq National Market under the
symbol "COLM."
In connection with the Offerings, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock; and syndicate
short positions involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Company in
the Offerings. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the Common Stock sold in the Offerings for their account may be reclaimed by the
syndicate if such securities are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the Nasdaq National Market, in the over-the-counter market or otherwise.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.
U-3
<PAGE>
==================================== ====================================
No person has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus, and,
if given or made, such information
or representations must not be 6,666,667 Shares
relied upon as having been
authorized. This Prospectus does
not constitute an offer to sell or
the solicitation of an offer to buy Columbia Sportswear
any securities other than the Company
securities to which it relates or
an offer to sell or the
solicitation of an offer to buy
such securities in any
circumstances in which such offer
or solicitation is unlawful.
Neither the delivery of this Common Stock
Prospectus nor any sale made
hereunder shall, under any
circumstances, create any
implication that there has been no
change in the affairs of the
Company since the date hereof or
that the information contained
herein is correct as of any time ----------
subsequent to its date.
--------------- [LOGO]
TABLE OF CONTENTS
----------
Page
Prospectus Summary............. 3
Risk Factors................... 8
Use of Proceeds................ 17
Dividend Policy and S
Corporation Status........... 17
Dilution....................... 18
Capitalization................. 19
Selected Consolidated Financial
Data......................... 21 Goldman, Sachs & Co.
Management's Discussion and
Analysis of Financial NationsBanc Montgomery
Condition and Results of Securities, Inc.
Operations................... 23
Business....................... 32 PaineWebber Incorporated
Management..................... 51
Certain Transactions........... 58 Representatives of the Underwriters
Principal Shareholders......... 60
Description of Capital Stock... 62
Shares Eligible for Future Sale 65
Validity of the Issuance of the
Common Stock................. 66
Experts........................ 66
Additional Information......... 66
Index to Consolidated Financial
Statements................... F-1
Underwriting................... U-1
---------------
Through and including ____________,
_____ (the 25th day after the date
of this Prospectus), all dealers
effecting transactions in the
Common Stock, whether or not
participating in this distribution,
may be required to deliver a
Prospectus. This is in addition to
the obligation of dealers to
deliver a Prospectus when acting as
Underwriters and with respect to
their unsold allotments or
subscriptions.
==================================== ========================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than
underwriting discounts, payable by the Registrant in connection with the offer
and sale of the Common Stock being registered. All amounts are estimates except
the registration fee, the NASD filing fee and the Nasdaq National Market entry
fee.
Registration fee.......................................... $ 36,187
NASD filing fee........................................... 12,767
Blue Sky fees and expenses (including legal fees)......... 8,500
Nasdaq National Market entry fee.......................... 50,000
Accounting fees and expenses.............................. 200,000
Other legal fees and expenses............................. 200,000
Transfer agent and registrar fee.......................... 15,000
Printing and engraving.................................... 100,000
Miscellaneous............................................. 77,546
----------
Total............................................... $ 700,000
==========
- ----------------
Item 14. Indemnification of Directors and Officers
Article IV of the Registrant's Second Amended and Restated Articles of
Incorporation (the "Articles"), to be effective upon completion of the
Offerings, requires indemnification of current or former directors of the
Registrant to the fullest extent not prohibited by the Oregon Business
Corporation Act (the "Act"). The Act permits or requires indemnification of
directors and officers in certain circumstances. The effects of the Articles and
the Act (the "Indemnification Provisions") are summarized as follows:
(a) The Indemnification Provisions grant a right of indemnification in
respect of any proceeding (other than an action by or in the right of the
Company), if the person concerned acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
Company, was not adjudged liable on the basis of receipt of an improper personal
benefit and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The termination of a
proceeding by judgment, order, settlement, conviction or plea of nolo
contendere, or its equivalent, is not, of itself, determinative that the person
did not meet the required standards of conduct.
(b) The Indemnification Provisions grant a right of indemnification in
respect of any proceeding by or in the right of the Company against the expenses
(including attorney fees) actually and reasonably incurred if the person
concerned acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the Company, except
II-1
<PAGE>
that no right of indemnification will be granted if the person is adjudged to be
liable to the Company.
(c) Every person who has been wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person was a party
because of the person's status as a director or officer of a controversy
described in (a) or (b) above is entitled to indemnification as a matter of
right.
(d) Because the limits of permissible indemnification under Oregon law are
not clearly defined, the Indemnification Provisions may provide indemnification
broader than that described in (a) and (b).
(e) The Registrant may advance to a director or officer the expenses
incurred in defending any proceeding in advance of its final disposition if the
director or officer affirms in writing in good faith that he or she has met the
standard of conduct to be entitled to indemnification as described in (a) or (b)
above and undertakes to repay any amount advanced if it is determined that the
person did not meet the required standard of conduct.
The Company has entered into indemnification agreements with each of the
Company's directors, a form of which is attached as an exhibit hereto and
is incorporated herein by reference.
The Registrant may obtain insurance for the protection of its directors and
officers against any liability asserted against them in their official
capacities. The rights of indemnification described above are not exclusive of
any other rights of indemnification to which the persons indemnified may be
entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise.
Item 15. Recent Sales of Unregistered Securities
(a) In December 1996 the Registrant entered into a Deferred Compensation
Conversion Agreement with Don Richard Santorufo, the Registrant's Chief
Operating Officer, providing for the conversion of deferred compensation units
granted under a prior agreement into an aggregate of 2,099,979 shares of the
Registrant's Common Stock. The issuance to Mr. Santorufo was made pursuant to
Section 4(2) of the Securities Act of 1933 (the "Securities Act") as a
transaction not involving a public offering. The Registrant reasonably believed
that the purchaser had such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the investment.
Mr. Santorufo represented his intention to acquire the securities for investment
and not with a view to distribution thereof.
(b) In December 1997 the Registrant issued an aggregate of 264,902 shares
of Common Stock to Gertrude Boyle, Timothy P. Boyle and Sarah Bany in exchange
for the capital stock of GTS, Inc., a minority shareholder in certain of the
Registrant's subsidiaries. The issuance was made pursuant to Section 4(2) of the
Securities Act as a transaction not involving a public offering. The Registrant
reasonably believed that each purchaser had such knowledge
II-2
<PAGE>
and experience in financial and business matters as to be capable of evaluating
the merits and risks of the investment. Each represented an intention to acquire
the securities for investment and not with a view to distribution thereof.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Form of U.S. Underwriting Agreement
1.2 Form of International Underwriting Agreement
2.1 Plan of Share Exchange Exchanging Shares of Columbia Sportswear
Company for all of the Shares of GTS, Inc.
*3.1 Second Amended and Restated Articles of Incorporation
*3.2 1998 Restated Bylaws
4.1 See Articles II of Exhibit 3.1 and Articles I of Exhibit 3.2
*5.1 Opinion of Stoel Rives LLP
10.1 1997 Stock Incentive Plan
10.2 Form of Incentive Stock Option Agreement
10.3 Form of Nonstatutory Stock Option Agreement
10.4 Credit Agreement between the Hong Kong and Shanghai Banking
Corporation Limited and the Registrant dated September 17, 1991,
as amended.
10.5 Buying Agency Agreement between Nissho Iwai American Corporation
and the Registrant dated January 1, 1992, as amended.
10.6 Credit Agreement between the Registrant and Wells Fargo Bank,
N.A. dated July 31, 1997.
10.7 Assumption Agreement by and between the Registrant, Timothy P.
Boyle and Don Santorufo and First Interstate Bank of Oregon,
N.A., dated February 1997.
10.8 Lease between Penzel & Company and the Registrant dated February
23, 1988, as amended.
*10.9 Lease between Timothy P. Boyle and Gertrude Boyle and the
Registrant, dated _______, 1997.
*10.10 Lease between Gertrude Boyle and the Registrant dated ________,
1997.
*10.11 Lease between BB&S Development Company and the Registrant, dated
February 12, 1996.
10.12 Lease between B.A.R.K. Holdings, Inc. and Columbia Sportswear
Canada Limited, dated January 3, 1994.
10.13 Form of Stock Purchase Agreement between Columbia Sportswear
Holdings Limited and Douglas Hamilton and Doug Hamilton in trust
for Elizabeth K. Hamilton, dated August 24, 1992.
10.14 Deferred Compensation Conversion Agreement between the Registrant
and Don Santorufo, dated December 31, 1996.
*10.15 Form of Tax Indemnification Agreement for existing shareholders.
10.16 Employment Agreement between Carl K. Davis and the Registrant
dated as of December 5, 1997.
10.17 Form of Indemnity Agreement for Directors
21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Stoel Rives LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
- ----------------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Portland,
State of Oregon, on December 23, 1997.
COLUMBIA SPORTSWEAR COMPANY
By TIMOTHY P. BOYLE
------------------------------------------
Timothy P. Boyle
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each such person whose signature
appears below hereby constitutes and appoints Timothy P. Boyle and Patrick D.
Anderson, or any of them, his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
amendments (whether pre-effective or post-effective) to this Registration
Statement and any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same with all exhibits thereto and other documents
in connection therewith with the Securities and Exchange Commission, granting
unto each of said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the following capacities on December 23, 1997.
Signature Title
- --------- -----
Principal Executive Officer:
TIMOTHY P. BOYLE President, Secretary, Treasurer and
- ----------------------------------- Director
Timothy P. Boyle
II-5
<PAGE>
Principal Financial and Accounting Officer:
PATRICK D. ANDERSON
- ----------------------------------- Chief Financial Officer
Patrick D. Anderson
GERTRUDE BOYLE Chairman of the Board of Directors
- -----------------------------------
Gertrude Boyle
SARAH BANY Director
- -----------------------------------
Sarah Bany
Director
- -----------------------------------
Murrey R. Albers
EDWARD S. GEORGE Director
- -----------------------------------
Edward S. George
JOHN STANTON Director
- -----------------------------------
John Stanton
II-6
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
1.1 Form of U.S. Underwriting Agreement
1.2 Form of International Underwriting Agreement
2.1 Plan of Share Exchange Exchanging Shares of Columbia Sportswear
Company for all of the Shares of GTS, Inc.
*3.1 Restated Articles of Incorporation
*3.2 Bylaws
4.1 See Articles II of Exhibit 3.1 and Articles I of Exhibit 3.2
*5.1 Opinion of Stoel Rives LLP
10.1 1997 Stock Incentive Plan
10.2 Form of Incentive Stock Option Agreement
10.3 Form of Nonstatutory Stock Option Agreement
10.4 Credit Agreement between the Hong Kong and Shanghai Banking
Corporation Limited and the Registrant dated September 17, 1991,
as amended.
10.5 Buying Agency Agreement between Nissho Iwai American Corporation
and the Registrant dated January 1, 1992, as amended.
10.6 Credit Agreement between the Registrant and Wells Fargo Bank,
N.A. dated July 31, 1997.
10.7 Assumption Agreement by and between the Registrant, Timothy P.
Boyle and Don Santorufo and First Interstate Bank of Oregon,
N.A., dated February 1997.
10.8 Lease between Penzel & Company and the Registrant dated February
23, 1988, as amended.
*10.9 Lease between Timothy P. Boyle and Gertrude Boyle and the
Registrant, dated _______, 1997.
*10.10 Lease between Gertrude Boyle and the Registrant dated ________,
1997.
*10.11 Lease between BB&S Development Company and the Registrant, dated
February 12, 1996.
10.12 Lease between B.A.R.K. Holdings, Inc. and Columbia Sportswear
Canada Limited, dated January 3, 1994.
10.13 Form of Stock Purchase Agreement between Columbia Sportswear
Holdings Limited and Douglas Hamilton and Doug Hamilton in trust
for Elizabeth K. Hamilton, dated August 24, 1992.
10.14 Deferred Compensation Conversion Agreement between the Registrant
and Don Santorufo, dated December 31, 1996.
*10.15 Form of Tax Indemnification Agreement for existing shareholders.
10.16 Employment Agreement between Carl K. Davis and the Registrant
dated as of December 5, 1997.
10.17 Form of Indemnity Agreement for Directors
21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Stoel Rives LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
- ----------------
* To be filed by amendment.
S&C Draft of November 4, 1997
Columbia Sportswear Company
Common Stock
---------------
Underwriting Agreement
(U.S. Version)
---------------
..................., 1998
Goldman, Sachs & Co.,
NationsBanc Montgomery Securities, Inc.,
PaineWebber Incorporated,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Columbia Sportswear Company, an Oregon corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ........ shares (the "Firm Shares") and, at the election of the Underwriters,
up to ......... additional shares (the "Optional Shares") of Common Stock
("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of ........
shares of Stock (the "International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters outside the United
States (the "International Underwriters"), for whom Goldman Sachs International,
NationsBanc Montgomery Securities, Inc. and PaineWebber International (U.K.)
Ltd. are acting as lead managers. Anything herein or therein to the contrary
notwithstanding, the respective closings under this Agreement and the
International Agreement are hereby expressly made conditional on one another.
The Underwriters hereunder and the International Underwriters are simultaneously
entering into an Agreement between U.S. and International Underwriting
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates. Two
forms of prospectus are to be used in connection with the offering and sale of
shares of Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the International Shares. The latter form of
prospectus will be identical to the former except for certain substitute pages
as included in the registration statement and amendments thereto as mentioned
below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the
1
<PAGE>
context may otherwise require, references hereinafter to the Shares shall
include all the shares of Stock which may be sold pursuant to either this
Agreement or the International Underwriting Agreement, and references herein to
any prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-....) (the
"Initial Registration Statement") and Amendment No. [insert numbers of
pre-effective amendments] in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement, as so amended, and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the various
parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration Statement, if any,
became or hereafter becomes effective, each as amended at the time such
part of the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act,
is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as
2
<PAGE>
to the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken a a whole, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(f) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Oregon, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification, or
is subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and each subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
3
<PAGE>
(h) The unissued Shares to be issued and sold by the Company to
the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and in the
International Underwriting Agreement, will be duly and validly issued and
fully paid and non-assessable and will conform to the description of the
Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company hereunder and
under the International Underwriting Agreement and the compliance by the
Company with all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the Restated Articles of Incorporation or Restated Bylaws
of the Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(j) Neither the Company nor any of its subsidiaries is in
violation of its Restated Articles of Incorporation or Restated Bylaws or
in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except for such
defaults that, individually or in the aggregate, would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the captions "Certain United
States Federal Tax Consequences To Non-United States Holders of Common
Stock", "Certain Transactions", and "Shares Eligible for Future Sale",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) Each of the Company and its subsidiaries owns or has rights
to adequate foreign and domestic trademarks, service marks, trade names,
inventions, copyrights and
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know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
(collectively, the "Intellectual Property") necessary to carry on their
respective businesses as they have been and are being conducted, and
neither the Company nor any of its subsidiaries is aware that it would
interfere with, infringe upon or otherwise come into conflict with any
Intellectual Property rights of third parties as a result of the operation
of the business of the Company or any subsidiary as of the date hereof
that, individually or in the aggregate, if subject to an unfavorable
decision, ruling or finding would have a material adverse effect;
(n) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
and
(o) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $........................, the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ............ Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against
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payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of immediately available funds to the Company. The Company will
cause the certificates representing the Shares to be made available at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of the Depository Trust Company, or the custodian therefor
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 7:00 a.m., Portland time, on .............,
1998 or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 7:00 a.m.,
Portland time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase
such Optional Shares, or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing. Such time and date for delivery of the
Firm Shares is herein called the "First Time of Delivery", such time and date
for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of [Stoel
Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204] (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
3:00 p.m., Portland time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and
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dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 A.M. New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent;
(f) To furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and to
deliver to you (i) as soon as they are available promptly after filing,
copies of
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any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional public
information concerning the business and financial condition of the Company
as you may from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the Company and
its subsidiaries are consolidated in reports furnished to its shareholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in
the manner specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market ("NASDAQ"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the International Underwriting Agreement, the
Agreement between Syndicates, the Selling Agreement, the Blue Sky Memorandum,
closing documents (including compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with achieving the quotation of the Shares on NASDAQ; (v)
the filing fees incident to, and the fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vi) the cost of preparing stock certificates; (vii) the cost and charges of any
transfer agent or registrar; and (viii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
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(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (vii), (xi) and (xiv) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Stoel Rives LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of each such opinion is
attached as Annex II(b) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Oregon,
with power and authority (corporate and other) to own its
properties and conduct its business as described in the
Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the Shares being delivered at
such Time of Delivery) have been duly and validly authorized and
issued and are fully paid and nonassessable; and the Shares
conform to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of the Company, provided that such counsel shall state
that they believe that both you and they are justified in relying
upon such opinions and certificates);
(iv) Each material subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and
all of the issued shares of capital stock of each such subsidiary
have been duly and validly authorized and issued, are fully paid
and non-assessable, and (except for directors' qualifying shares)
are owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect to matters of fact
upon certificates of officers of the Company or its subsidiaries,
provided that such
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counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(v) To such counsel's actual knowledge and other than
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position,
shareholders' equity or results of operations of the Company and
its subsidiaries; and, to the best of such counsel's actual
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by
the Company;
(vii) The issue and sale of the Shares being delivered at
such Time of Delivery by the Company and the compliance by the
Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not (A)
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject, or result in a violation of any statute or any order,
rule or regulation known to
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such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties, except in each such case for such conflicts,
breaches, violations or defaults that would not individually or
in the aggregate, (x) have a material adverse effect on the
Company and its subsidiaries, taken as a whole, or (y) impair the
validity of the Securities or the validity or enforceability of
this Agreement or (B) result in any violation of the provisions
of the Restated Articles of Incorporation or Restated Bylaws of
the Company;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares,
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters;
(ix) Neither the Company nor any of its material
subsidiaries is in violation of its Restated Articles of
Incorporation or Restated Bylaws or in default in the performance
or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be
bound, except for such defaults that, individually or in the
aggregate, would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(x) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport
to constitute a summary of the terms of the Stock, and under the
captions "Certain United States Federal Tax Consequences to
Non-United States Holders of Common Stock", "Certain
Transactions", and "Shares Eligible for Future Sale", insofar as
they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
(xi) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act; and
(xii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations
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thereunder, although they do not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except
for those referred to in the opinion in subsection (x) of this
Section 7(c), nothing has come to such counsel's attention that
has caused such counsel to believe that, as of its effective
date, the Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related statements and related
schedules and other financial data included or omitted therein,
as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that,
as of such Time of Delivery, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as
required;
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at each
Time of Delivery, Deloitte & Touche LLP shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in form
and substance satisfactory to you, to the effect set forth in Annex I
hereto (the executed copy of the letter delivered prior to the execution of
this Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(e)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the
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judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading shall have occurred
in the rating, if any, accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating, if
any, of any of the Company's debt securities;
(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on Nasdaq; (ii) a
suspension or material limitation in trading in the Company's securities on
Nasdaq; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or [Oregon] State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from its directors and officers and the
shareholders listed in Schedule II hereto substantially to the effect set
forth in Subsection 5(e) hereof in form and substance satisfactory to you;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the
New York Business Day next succeeding the date of this Agreement; and
(k) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration
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Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not
14
<PAGE>
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary.
15
<PAGE>
The term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had originally
been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex
16
<PAGE>
or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
17
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters (U.S. Version), the form of which shall be submitted to the Company
for examination upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
Columbia Sportswear Company
By:
-----------------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
NationsBanc Montgomery Securities, Inc.
PaineWebber Incorporated
By:
-------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
18
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
<S> <C> <C>
Goldman, Sachs & Co...............................
NationsBanc Montgomery Securities, Inc............
PaineWebber Incorporated..........................
Total
</TABLE>
19
<PAGE>
SCHEDULE II
[to be discussed]
20
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the Act
and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
furnished separately to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have been
separately furnished to the Representatives and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where applicable)
in the audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's Annual
Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
1
<PAGE>
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
2
<PAGE>
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures, inspection
of minute books, inquiries and other procedures referred to in paragraphs
(iii) and (vi) above, they have carried out certain specified procedures,
not constituting an examination in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives, which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representatives,
and have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its subsidiaries
and have found them to be in agreement.
3
! S&C Draft of November 4, 1997
Columbia Sportswear Company
Common Stock
-------------
Underwriting Agreement
(International Version)
-----------------------
..............., 1998.
Goldman Sachs International,
NationsBanc Montgomery Securities, Inc.,
PaineWebber International (U.K.) Ltd.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Columbia Sportswear Company, an Oregon corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ...... shares (the "Firm Shares") and, at the election of the Underwriters,
up to ........ additional shares (the "Optional Shares") of Common Stock (the
"Stock") of the Company (the Firm Shares and the Optional Shares which the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement, a copy of which is attached hereto (the
"U.S. Underwriting Agreement"), providing for the offering by the Company of up
to a total of .... shares of Stock (the "U.S. Shares") including the
overallotment option thereunder through arrangements with certain underwriters
in the United States (the "U.S. Underwriters"), for whom Goldman, Sachs & Co.,
NationsBanc Montgomery Securities, Inc. and PaineWebber Incorporated are acting
as representatives. Anything herein and therein to the contrary notwithstanding,
the respective closings under this Agreement and the U.S. Underwriting Agreement
are hereby expressly made conditional on one another. The Underwriters hereunder
and the U.S. Underwriters are simultaneously entering into an Agreement
<PAGE>
between U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates and for consultation by the Lead Managers
hereunder with Goldman, Sachs & Co. prior to exercising the rights of the
Underwriters under Section 7 hereof. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
U.S. Shares. The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the registration statement
and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9
and 11 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all of the shares of Stock which may be
sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both of the U.S. and the
international versions thereof.
In addition, this Agreement incorporates by reference certain
provisions from the U.S. Underwriting Agreement (including the related
definitions of terms, which are also used elsewhere herein) and, for purposes of
applying the same, references (whether in these precise words or their
equivalent) in the incorporated provisions to the "Underwriters" shall be to the
Underwriters hereunder, to the "Shares" shall be to the Shares hereunder as just
defined, to "this Agreement" (meaning therein the U.S. Underwriting Agreement)
shall be to this Agreement (except where this Agreement is already referred to
or as the context may otherwise require) and to the representatives of the
Underwriters or to Goldman, Sachs & Co. shall be to the addressees of this
Agreement and to Goldman Sachs International ("GSI"), and, in general, all such
provisions and defined terms shall be applied mutatis mutandis as if the
incorporated provisions were set forth in full herein having regard to their
context in this Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company hereby makes with the Underwriters the same
representations, warranties and agreements as are set forth in Section 1 of the
U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $......, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
<PAGE>
The Company hereby grants to the Underwriters the right to purchase at
their election up to ........ Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to and
with the Company the representations and agreements of such Underwriter as a
member of the selling group contained in Sections 3(d) and 3(e) of the form of
Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as GSI may request upon at least forty-eight hours' prior notice to the
Company shall be delivered by or on behalf of the Company to GSI, for the
account of such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by wire transfer of immediately avialable funds
to the Company. The Company will cause the certificates representing the Shares
to be made available at least twenty-four hours prior to the Time of Delivery
(as defined below) with respect thereto at the office of the Depository Trust
Company, or the custodian therefor (the "Designated Office"). The time and date
of such delivery and payment shall be, with respect to the Firm Shares, 7:00
a.m., Portland time, on ............., 1998 or such other time and date as GSI
and the Company may agree upon in writing, and, with respect to the Optional
Shares, 7:00 a.m., Portland time, on the date specified by GSI in the written
notice given by GSI of the Underwriters' election to purchase such Optional
Shares, or such other time and date as GSI and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(k) of the U.S.
Underwriting Agreement hereof, will be delivered at the offices of [Stoel Rives
LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204] (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 3:00
p.m., Portland time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to
<PAGE>
be delivered pursuant to the preceding sentence will be available for review by
the parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company hereby makes to the Underwriters the same agreements as
are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company and the Underwriters hereby agree with respect to
certain expenses on the same terms as are set forth in Section 6 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of such
Time of Delivery, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and
additional conditions identical to those set forth in Section 7 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such
<PAGE>
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through GSI
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, clpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on
<PAGE>
the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters
with respect to the Shares purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus relating to such Shares.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact rlates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so
<PAGE>
arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligation of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Section 6 and Section 8 hereof, but, if for any other reason any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through GSI for all out-of-pocket
expenses approved in writing by GSI, including fees and disbursements of
counsel, reasonably
<PAGE>
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall then be under no
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on your behalf.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774- 1550; and if to the
Company shall be delivered or sent by registered mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by GSI upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, United States of America.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (International Version), the form of which shall be
furnished to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Columbia Sportswear Company
By:..........................
Name:
Title:
Accepted as of the date hereof:
Goldman Sachs International
NationsBanc Montgomery Securities, Inc.
PaineWebber International (U.K.) Ltd.
By: Goldman Sachs International
By:.......................................
(Attorney-in-fact)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
<S> <C> <C>
Goldman Sachs International........................
NationsBanc Montgomery Securities, Inc.............
PaineWebber International (U.K.) Ltd...............
</TABLE>
Total
PLAN OF SHARE EXCHANGE
EXCHANGING SHARES OF
COLUMBIA SPORTSWEAR COMPANY
FOR ALL OF THE SHARES OF
GTS, INC.
1. Parties. The names of the corporations proposing to exchange shares are
Columbia Sportswear Company, an Oregon corporation ("Columbia"), and GTS, Inc.,
an Oregon corporation ("GTS"). Columbia will acquire all of the GTS Capital
Stock in the share exchange (the "Exchange").
2. Terms and Conditions. Upon consummation of the Exchange (the "Effective
Time"), Columbia will acquire all of the outstanding capital stock of GTS, and
the shareholders of GTS will receive shares of nonvoting Common Stock of
Columbia, as set forth in paragraph 3, in the manner and with the effect
provided by the Oregon Business Corporation Act.
3. Exchange for Columbia Nonvoting Common Stock. Columbia, the acquiring
corporation, has issued one class of capital stock, divided into voting and
nonvoting Common Stock. GTS has issued one class of capital stock, divided into
voting and nonvoting Common Stock. The manner and basis of exchanging the shares
of capital stock of GTS and Columbia shall be as follows:
Each of the 6,220 shares of GTS voting Common Stock outstanding
immediately before the Effective Time shall by virtue of the Exchange be
exchanged for 5.72 shares Columbia nonvoting Common Stock, and each of the
61,980 shares of GTS nonvoting Common Stock outstanding immediately before the
effective time shall by virtue of the Exchange be exchanged for 5.35 shares of
Columbia nonvoting Common Stock.
1
COLUMBIA SPORTSWEAR COMPANY
1997 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to
enable Columbia Sportswear Company (the "Company") to attract and retain the
services of (1) selected employees, officers and directors of the Company and
(2) selected nonemployee agents, consultants, advisors and independent
contractors of the Company.
2. Shares Subject to the Plan. Subject to adjustment as provided below and
in Section 13, the shares to be offered under the Plan shall consist of
Nonvoting Common Stock of the Company, and the total number of shares of
Nonvoting Common Stock that may be issued under the Plan shall not exceed
2,000,000 shares. The shares issued under the Plan may be authorized and
unissued shares or reacquired shares. If an option, stock appreciation right or
performance unit granted under the Plan expires, terminates or is cancelled, the
unissued shares subject to such option, stock appreciation right or performance
unit shall again be available under the Plan. If shares sold or awarded as a
bonus under the Plan are forfeited to or repurchased by the Company, the number
of shares forfeited or repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective as of March 12,
1997. No option, stock appreciation right or performance unit granted under the
Plan shall become exercisable, however, until the Plan is approved by the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at a shareholders meeting at which a quorum is present, and any such
awards under the Plan before such approval shall be conditioned on and subject
to such approval. Subject to this limitation, options, stock appreciation rights
and performance units may be granted and shares may be awarded as bonuses or
sold under the Plan at any time after the effective date and before termination
of the Plan.
(b) Duration. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
1
<PAGE>
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to time
the individuals to whom awards shall be made, the amount of the awards and the
other terms and conditions of the awards. Subject to the provisions of the Plan,
the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) Committee. The Board of Directors may delegate to the Compensation
Committee of the Board of Directors (the "Committee") any or all authority for
administration of the Plan. If authority is delegated to the Committee, all
references to the Board of Directors in the Plan shall mean and relate to the
Committee, except (i) as otherwise provided by the Board of Directors, (ii) that
only the Board of Directors may amend or terminate the Plan as provided in
Sections 3 and 13 and (iii) that if the Committee includes officers of the
Company, the Committee shall not be permitted to grant options to persons who
are officers of the Company.
5. Types of Awards; Eligibility. The Board of Directors may, from time to
time, take the following action, separately or in combination, under the Plan:
(i) grant Incentive Stock Options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in Sections 6(a) and
6(b); (ii) grant options other than Incentive Stock Options ("Non-Statutory
Stock Options") as provided in Sections 6(a) and 6(c); (iii) award stock bonuses
as provided in Section 7; (iv) sell shares subject to restrictions as provided
in Section 8; (v) grant stock appreciation rights as provided in Section 9; (vi)
grant cash bonus rights as provided in Section 10; and (vii) grant performance
units as provided in Section 11. Any such awards may be made to employees,
including employees who are officers or directors, and to other individuals
described in Section 1 who the Board of Directors believes have made or will
make an important contribution to the Company; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock Options
under the Plan. The Board of Directors shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to each
individual to whom an award is made. At the discretion of the Board of
Directors, an individual may be given an election to surrender an award in
exchange for the grant of a new award. No employee may be granted options or
stock appreciation rights under the Plan for more than an aggregate of 100,000
shares
2
<PAGE>
of Nonvoting Common Stock in connection with the hiring of the employee or
100,000 shares of Nonvoting Common Stock in any calendar year otherwise.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of Directors
shall determine the number of shares subject to the option, the option
price, the period of the option, the time or times at which the option may
be exercised and whether the option is an Incentive Stock Option (subject
to the provisions of Section 6(b)) or a Non-Statutory Stock Option. At the
time of the grant of an option or at any time thereafter, the Board of
Directors may provide that an optionee who exercised an option with
Nonvoting Common Stock of the Company shall automatically receive a new
option to purchase additional shares equal to the number of shares
surrendered and may specify the terms and conditions of such new options.
(ii) Exercise of Options. Except as provided in Section 6(a)(iv)
or as determined by the Board of Directors, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee is
employed by or in the service of the Company and shall have been so
employed or provided such service continuously since the date the option
was granted. Absence on leave or on account of illness or disability under
rules established by the Board of Directors shall not, however, be deemed
an interruption of employment or service for this purpose. Unless otherwise
determined by the Board of Directors, vesting of options shall not continue
during an absence on leave (including an extended illness) or on account of
disability. Except as provided in Sections 6(a)(iv) and 12, options granted
under the Plan may be exercised from time to time over the period stated in
each option in such amounts and at such times as shall be prescribed by the
Board of Directors, provided that options shall not be exercised for
fractional shares. Unless otherwise determined by the Board of Directors,
if an optionee does not exercise an option in any one year with respect to
the full number of shares to which the optionee is entitled in that year,
the optionee's rights shall be cumulative and the optionee may purchase
those shares in any subsequent year during the term of the option.
(iii) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors, each other option granted
under the Plan by its terms shall be nonassignable and nontransferable by
the optionee, either voluntarily or by operation of law, except by will or
by the laws of descent and distribution of the state or country of the
optionee's domicile at the time of death.
3
<PAGE>
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the Board
of Directors, in the event an optionee's employment or service with
the Company terminates for any reason other than because of physical
disability or death as provided in Sections 6(a)(iv)(B) and (C), his
or her option may be exercised at any time before the expiration date
of the option or the expiration of 30 days after the date of
termination, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date of
termination.
(B) Termination Because of Total Disability. Unless
otherwise determined by the Board of Directors, in the event an
optionee's employment or service with the Company terminates because
of total disability, his or her option may be exercised at any time
before the expiration date of the option or the expiration of 12
months after the date of termination, whichever is the shorter period,
but only if and to the extent the optionee was entitled to exercise
the option at the date of termination. The term "total disability"
means a medically determinable mental or physical impairment that is
expected to result in death or has lasted or is expected to last for a
continuous period of 12 months or more and that causes the optionee to
be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the
Company.
(C) Termination Because of Death. Unless otherwise
determined by the Board of Directors, in the event of an optionee's
death while employed by or providing service to the Company, his or
her option may be exercised at any time before the expiration date of
the option or the expiration of 12 months after the date of death,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of death and
only by the person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(D) Amendment of Exercise Period Applicable to Termination.
The Board of Directors, at the time of grant or, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of time
not longer than the original expiration date of the option, and may
increase
4
<PAGE>
the portion of an option that is exercisable, subject to such terms
and conditions as the Board of Directors may determine.
(E) Failure to Exercise Option. To the extent that the
option of any deceased optionee or any optionee whose employment or
service terminates is not exercised within the applicable period, all
further rights to purchase shares pursuant to the option shall cease
and terminate.
(v) Purchase of Shares. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted under the
Plan only upon the Company's receipt of written notice from the optionee of
the optionee's intention to exercise, specifying the number of shares as to
which the optionee desires to exercise the option and the date on which the
optionee desires to complete the transaction, and if required in order to
comply with the Securities Act of 1933, as amended, containing a
representation that it is the optionee's present intention to acquire the
shares for investment and not with a view to distribution. Unless the Board
of Directors determines otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the optionee
must have paid the Company the full purchase price of those shares in cash
(including, with the consent of the Board of Directors, cash that may be
the proceeds of a loan from the Company (provided that, with respect to an
Incentive Stock Option, such loan is approved at the time of option grant))
or, with the consent of the Board of Directors, in whole or in part, in
Common Stock of the Company valued at fair market value, restricted stock,
performance units or other contingent awards denominated in either stock or
cash, promissory notes and other forms of consideration. The fair market
value of Common Stock provided in payment of the purchase price shall be
the closing price of the Common Stock as reported in The Wall Street
Journal on the last trading day before the date the option is exercised if
the Common Stock is publicly traded, or such other reported value of the
Common Stock as shall be specified by the Board of Directors. No shares
shall be issued until full payment for the shares has been made. With the
consent of the Board of Directors (which, in the case of an Incentive Stock
Option, shall be given only at the time of grant), an optionee may request
the Company to apply automatically the shares to be received upon the
exercise of a portion of a stock option (even though stock certificates
have not yet been issued) to satisfy the purchase price for additional
portions of the option. Each optionee who has exercised an option shall,
immediately upon notification of the amount due, if any, pay to the Company
in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates,
the optionee shall pay such amount to the Company on demand. If the
optionee fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the optionee, including
salary, subject to applicable law. With the consent of the Board of
Directors an optionee may satisfy this obligation, in whole or in part, by
having the Company
5
<PAGE>
withhold from the shares to be issued upon exercise that number of shares
that would satisfy the withholding amount due or by delivering to the
Company Common Stock to satisfy the withholding amount. Upon the exercise
of an option, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued upon exercise of the
option.
(b) Incentive Stock Options. Incentive Stock Options shall be subject
to the following additional terms and conditions:
(i) Limitation on Amount of Grants. If the aggregate fair market
value of stock (determined as of the date the option with respect to such
stock is granted) with respect to which Incentive Stock Options granted
under this Plan (and any other stock incentive plan of the Company or its
parent or subsidiary corporations) are exercisable for the first time by an
employee during any calendar year exceeds $100,000, the portion of the
option or options not exceeding $100,000 will be treated as an Incentive
Stock Option and the portion of the option exceeding $100,000 will be
treated as a Non-Statutory Stock Option. The preceding sentence will be
applied by taking options into account in the order in which they were
granted. The Company may designate stock that is treated as acquired
pursuant to exercise of an option that is in part an Incentive Stock Option
and in part a Non-Statutory Stock Option as Incentive Stock Option stock
by issuing a separate certificate for that stock and identifying the
certificate as Incentive Stock Option stock in its stock records. In the
absence of such a designation, each share of stock issued pursuant to
exercise of the option will be treated in part as Incentive Stock Option
stock and in part as Non-Statutory Stock Option stock.
(ii) Limitations on Grants to 10 Percent Shareholders. An
Incentive Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company only if the option price is at least 110
percent of the fair market value, as described in Section 6(b)(iv), of the
Nonvoting Common Stock subject to the option on the date it is granted and
the option by its terms is not exercisable after the expiration of five
years from the date it is granted.
(iii) Duration of Options. Subject to Sections 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors, except that no
Incentive Stock Option shall be exercisable after the expiration of 10
years from the date it is granted.
(iv) Option Price. The option price per share shall be determined
by the Board of Directors at the time of grant. Except as provided in
Section 6(b)(ii), the option price shall not be less than 100 percent of
the fair market value of the Nonvoting Common Stock covered by the
Incentive Stock Option at the date the option is granted. The fair market
value shall be deemed to be the closing
6
<PAGE>
price of the Nonvoting Common Stock as reported in The Wall Street Journal
on the day before the date the option is granted if the stock is publicly
traded, or, if there has been no sale on that date, on the last preceding
date on which a sale occurred, or such other value of the Nonvoting Common
Stock as shall be specified by the Board of Directors.
(v) Limitation on Time of Grant. No Incentive Stock Option shall
be granted on or after the 10th anniversary of the effective date of the
Plan.
(vi) Conversion of Incentive Stock Options. The Board of
Directors may at any time, without the optionee's consent, convert an
Incentive Stock Option to a Non-Statutory Stock Option.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options shall be
subject to the following terms and conditions, in addition to those set forth in
Section 6(a) above:
(i) Option Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of grant
and may be any amount determined by the Board of Directors.
(ii) Duration of Options. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the Board
of Directors.
7. Stock Bonuses. The Board of Directors may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. The Board of Directors may require the
recipient to sign an agreement as a condition of the award, but may not require
the recipient to pay any monetary consideration other than amounts necessary to
satisfy tax withholding requirements. The agreement may contain any terms,
conditions, restrictions, representations and warranties required by the Board
of Directors. The certificates representing the shares awarded shall bear any
legends required by the Board of Directors. The Company may require any
recipient of a stock bonus to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the recipient fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the recipient,
including salary, subject to applicable law. With the consent of the Board of
Directors, a recipient may deliver Nonvoting Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of a stock bonus, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.
7
<PAGE>
8. Restricted Stock. The Board of Directors may issue shares under the Plan
for such consideration (including promissory notes and services) as determined
by the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. All Nonvoting
Common Stock issued pursuant to this Section 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective recipient
of the shares before the delivery of certificates representing such shares to
the recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the shares shall bear any legends required by the
Board of Directors. The Company may require any purchaser of restricted stock to
pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the purchaser, including salary,
subject to applicable law. With the consent of the Board of Directors, a
purchaser may deliver Nonvoting Common Stock to the Company to satisfy this
withholding obligation. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms and conditions as the Board
of Directors may determine.
(b) Exercise.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of exercise of
one share of Nonvoting Common Stock of the Company over its fair market
value on the date of grant (or, in the case of a stock appreciation right
granted in connection with an option, the excess of the fair market value
of one share of Nonvoting Common Stock of the Company over the option price
per share under the option to which the stock appreciation right relates),
multiplied by the number of shares covered by the stock appreciation right
or the option, or portion thereof, that is surrendered. Payment by the
Company upon exercise of a stock appreciation right may be made in
Nonvoting Common Stock valued at fair market value, in cash or partly in
Nonvoting Common Stock and partly in cash, all as determined by the Board
of Directors.
8
<PAGE>
(ii) A stock appreciation right shall be exercisable only at the
time or times established by the Board of Directors. If a stock
appreciation right is granted in connection with an option, the following
rules shall apply: (1) the stock appreciation right shall be exercisable
only to the extent and on the same conditions that the related option may
be exercised; (2) the stock appreciation right shall be exercisable only
when the fair market value of the stock exceeds the option price of the
related option; (3) the stock appreciation right shall be for no more than
100 percent of the excess of the fair market value of the stock at the time
of exercise over the option price; (4) upon exercise of the stock
appreciation right, the option or portion thereof to which the stock
appreciation right relates terminates; and (5) upon exercise of the option,
the related stock appreciation right or portion thereof terminates.
(iii) The Board of Directors may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions upon
the exercise of a stock appreciation right or adopt rules and regulations
from time to time affecting the rights of holders of stock appreciation
rights. Such rules and regulations may govern the right to exercise stock
appreciation rights granted before adoption or amendment of such rules and
regulations, as well as stock appreciation rights granted thereafter.
(iv) For purposes of this Section 9, the fair market value of the
Nonvoting Common Stock shall be determined as of the date the stock
appreciation right is exercised, under the methods set forth in Section
6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to
the value of the fraction or, if the Board of Directors shall determine,
the number of shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors, each other stock appreciation right granted under the Plan by
its terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder's domicile
at the time of death, and each stock appreciation right by its terms shall
be exercisable during the holder's lifetime only by the holder.
(vii) Each participant who has exercised a stock appreciation
right shall, upon notification of the amount due, pay to the Company in
cash amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant, including salary, subject to applicable
law. With the consent of the
9
<PAGE>
Board of Directors, a participant may satisfy this obligation, in whole or
in part, by having the Company withhold from any shares to be issued upon
exercise that number of shares that would satisfy the withholding amount
due or by delivering Nonvoting Common Stock to the Company to satisfy the
withholding amount.
(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued. Cash payments of stock appreciation
rights shall not reduce the number of shares of Nonvoting Common Stock
reserved for issuance under the Plan.
10. Cash Bonus Rights.
(a) Grant. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii)
stock appreciation rights granted or previously granted, (iii) stock bonuses
awarded or previously awarded and (iv) shares sold or previously sold under the
Plan. Cash bonus rights will be subject to such rules, terms and conditions as
the Board of Directors may determine. Unless otherwise determined by the Board
of Directors, each cash bonus right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the holder's domicile at the time of death. The payment
of a cash bonus shall not reduce the number of shares of Nonvoting Common Stock
reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Options. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon exercise over the total option price for the shares
by the applicable bonus percentage. If the optionee exercises a related stock
appreciation right in connection with the termination of an option, the amount
of the bonus, if any, shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right, including a previously granted bonus right, may be
changed from time to time at the sole discretion of the Board of Directors but
shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to a
cash bonus payable when the stock bonus is awarded or restrictions, if any, to
which the stock is
10
<PAGE>
subject lapse. If bonus stock awarded is subject to restrictions and is
repurchased by the Company or forfeited by the holder, the cash bonus right
granted in connection with the stock bonus shall terminate and may not be
exercised. The amount and timing of payment of a cash bonus shall be determined
by the Board of Directors.
(d) Cash Bonus Rights in Connection With Stock Purchases. A cash bonus
right granted in connection with the purchase of stock pursuant to Section 8
will entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Any cash bonus right
granted in connection with shares purchased pursuant to Section 8 shall
terminate and may not be exercised in the event the shares are repurchased by
the Company or forfeited by the holder pursuant to applicable restrictions. The
amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid
pursuant to this Section 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
11. Performance Units. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital and such other goals as the
Board of Directors may establish. In the event that the minimum performance goal
established by the Board of Directors is not achieved at the conclusion of a
period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent of the monetary value of the performance
units shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in Nonvoting Common Stock or a combination of both, and may be
made when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors. Unless otherwise determined by the Board of Directors, each
performance unit granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state or country of
the holder's domicile at the time of death. Each participant who has been
awarded a performance unit shall, upon notification of the amount due, pay to
the Company in cash amounts necessary to satisfy any applicable federal, state
and local tax withholding requirements. If the participant fails to pay the
amount demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant, including salary, subject to applicable law.
With the consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from any shares
to be issued that number of shares that would satisfy the withholding amount due
or by delivering Nonvoting Common Stock
11
<PAGE>
to the Company to satisfy the withholding amount. The payment of a performance
unit in cash shall not reduce the number of shares of Nonvoting Common Stock
reserved for issuance under the Plan. The number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued upon payment of
an award.
12. Changes in Capital Structure.
(a) Stock Splits; Stock Dividends. If the outstanding Nonvoting Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares, dividend payable in
shares, recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares available for
grants under the Plan. In addition, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be exercisable, so that the
optionee's proportionate interest before and after the occurrence of the event
is maintained. Notwithstanding the foregoing, the Board of Directors shall have
no obligation to effect any adjustment that would or might result in the
issuance of fractional shares, and any fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by the
Board of Directors. Any such adjustments made by the Board of Directors shall be
conclusive.
(b) Mergers, Reorganizations, Etc. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock, separation,
reorganization or liquidation to which the Company is a party or a sale of all
or substantially all of the Company's assets (each, a "Transaction"), the Board
of Directors shall, in its sole discretion and to the extent possible under the
structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance with
their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be determined by
the Board of Directors of the Company, taking into account the relative
values of the companies involved in the Transaction and the exchange rate,
if any, used in determining shares of the surviving corporation to be
issued to holders of shares of the Company. Unless otherwise determined by
the Board of Directors, the converted options shall be vested only to the
extent that the vesting requirements relating to options granted hereunder
have been satisfied.
12
<PAGE>
(iii) The Board of Directors shall provide a 30-day period before
the consummation of the Transaction during which outstanding options may be
exercised to the extent then exercisable, and upon the expiration of that
30-day period, all unexercised options shall immediately terminate. The
Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during that
30-day period.
(c) Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with Section 12(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock bonuses
and cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan, provided
that any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
13. Amendment of Plan. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in Sections 6(a)(iv), 9, 10 and 12, however, no
change in an award already granted shall be made without the written consent of
the holder of such award.
14. Approvals. The Company's obligations under the Plan are subject to the
approval of state and federal authorities or agencies with jurisdiction in the
matter. The Company will use its best efforts to take steps required by state or
federal law or applicable regulations, including rules and regulations of the
Securities and Exchange Commission and any stock exchange on which the Company's
shares may then be listed, in connection with the grants under the Plan. The
foregoing notwithstanding, the Company shall not be obligated to issue or
deliver Nonvoting Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
15. Employment and Service Rights. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or interfere in any way with the
Company's right to terminate such employee's employment at any time, for any
reason, with or without cause, or to decrease such employee's compensation or
benefits, or (ii) confer upon any person engaged by the Company any right to be
retained or employed by the Company or to the continuation, extension, renewal
or modification of any compensation, contract or arrangement with or by the
Company.
16. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Nonvoting Common Stock
until the
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<PAGE>
date of issue to the recipient of a stock certificate for those shares. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs before the date such
stock certificate is issued.
Adopted: March 12, 1997
14
COLUMBIA SPORTSWEAR COMPANY
STOCK OPTION AGREEMENT
Incentive Stock Option
This STOCK OPTION AGREEMENT is made between COLUMBIA SPORTSWEAR
COMPANY, an Oregon corporation (the "Company"), and ___________________ (the
"Optionee"), pursuant to the Company's 1997 Stock Incentive Plan (the "Plan").
The Company and the Optionee agree as follows:
1. Option Grant. The Company hereby grants to the Optionee on the terms and
conditions of this Agreement the right and the option (the "Option") to purchase
all or any part of ____ shares of the Company's Nonvoting Common Stock at a
purchase price of $_____ per share. The terms and conditions of the Option grant
set forth in the attached Exhibit A are hereby incorporated into and made a part
of this Agreement. The Option is intended to be an Incentive Stock Option, as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Grant Date. The Grant Date for this Option is ___________. The Option
shall continue in effect until the date ten years after the Grant Date (the
"Expiration Date") unless earlier terminated as provided in Sections 1 or 4 of
Exhibit A.
3. Exercise of Option. The Option shall not be exercisable with regard to
any shares of Nonvoting Common Stock until the earlier of (a) two months after
the Company or an "Affiliated Entity" has completed its initial firm
underwritten public offering of stock registered with the Securities and
Exchange Commission (the "Initial Public Offering"), or (b) the ninth
anniversary of the Grant Date. The Initial Public Offering and the ninth
anniversary of the grant date are each an "Exercise Event." Subject to the
occurrence of an Exercise Event, the Option shall become exercisable ratably
over a period of 60 months from the Grant Date. The term "Affiliated Entity"
includes only an entity controlled by or under common control with the Company
but only if (i) all or substantially all assets of the Company have been
transferred to such entity or (ii) the Company's nonvoting common stock is
convertible into or exchangeable for securities of such entity.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate as of the date written above.
COLUMBIA SPORTSWEAR COMPANY OPTIONEE
By:
-------------------------------- ---------------------------------------
[signature]
Title:
----------------------------- ---------------------------------------
[print name]
---------------------------------------
---------------------------------------
[address]
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
EXHIBIT A TO STOCK OPTION AGREEMENT
1. Termination of Service.
1.1 Unless otherwise determined by the Board of Directors of the
Company, if the Optionee's employment by or service with the Company terminates
for any reason other than because of total disability or death, the Option may
be exercised at any time prior to the Expiration Date or the expiration of 30
days after the date of the termination, whichever is the shorter period, but
only if and to the extent the Optionee was entitled to exercise the Option at
the date of termination.
1.2 If the Optionee's employment by or service with the Company
terminates because of death or total disability (as defined in Section
6(a)(iv)(B) and (C) of the Plan), the Option may be exercised at any time prior
to the Expiration Date or the expiration of 12 months after the date of
termination, whichever is the shorter period, but only if and to the extent the
Optionee was entitled to exercise the Option at the date of termination. If the
Optionee's employment or service is terminated by death, the Option shall be
exercisable only by the person or persons to whom the Optionee's rights under
the Option pass by the Optionee's will or by the laws of descent and
distribution of the state or country of the Optionee's domicile at the time of
death.
2. Method of Exercise of Option.
2.1 Unless the Board of Directors determines otherwise, to exercise
the Option, the Optionee must give written notice to the Company stating the
Optionee's intention to exercise, specifying the number of shares as to which
the Optionee desires to exercise the Option and the date on which the Optionee
desires to complete the transaction. Unless the Board of Directors determines
otherwise, on or before the date specified for completion of the purchase of
shares pursuant to the Option, the Optionee must pay the Company the full
purchase price of such shares in cash or, in whole or in part, in Nonvoting
Common Stock of the Company valued at fair market value. No shares shall be
issued until full payment for the shares has been made.
2.2 After exercise of all or a part of the Option, the Optionee shall
immediately upon notification of the amount due, if any, pay to the Company in
cash the amount necessary to satisfy any applicable federal, state and local tax
withholding requirements. If additional withholding is or becomes required
beyond any amount deposited before delivery of the certificates for the Option
shares, the Optionee shall pay such amount to the Company on demand. If the
Optionee fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the Optionee, including salary or
compensation, subject to applicable law.
3. Nontransferability of Option. The Option may not be assigned or
transferred by the Optionee, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state or country of
the Optionee's domicile at the time of death.
A-1
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4. Changes in Capital Structure.
4.1 Stock Splits; Stock Dividends. If the outstanding Nonvoting Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares or dividend payable
in shares, recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares as to which the
Option, or portions thereof then unexercised, shall be exercisable. Adjustments
shall be made without change in the total price applicable to the unexercised
portion of the Option and with a corresponding adjustment in the Option price
per share and shall neither (i) make the ratio, immediately after the event, of
the Option price per share to the fair market value per share more favorable to
the Optionee than that ratio immediately before the event nor (ii) make the
aggregate spread, immediately after the event, between the fair market value of
shares as to which the Option is exercisable and the Option price of such shares
more favorable to the Optionee than that aggregate spread immediately before the
event. The Board of Directors shall have no obligation to effect any adjustment
that would or might result in the issuance of fractional shares, and any
fractional shares resulting from any adjustment may be disregarded or provided
for in any manner determined by the Board of Directors. Any such adjustments
made by the Board of Directors shall be conclusive.
4.2 Mergers, Reorganizations, Etc. In the event of a merger,
consolidation or plan of exchange to which the Company is a party or a sale of
all or substantially all of the Company's assets (each, a "Transaction"), the
Board of Directors shall, in its sole discretion and to the extent possible
under the structure of the Transaction, select one of the following alternatives
for treating the Option:
4.2-1 The Option shall remain in effect in accordance with its
terms.
4.2-2 The Option shall be converted into an option to purchase
stock in the corporation that is the surviving or acquiring corporation in
the Transaction. The amount, type of securities subject thereto and
exercise price of the converted option shall be determined by the Board of
Directors of the Company, taking into account the relative values of the
companies involved in the Transaction and the exchange rate, if any, used
in determining shares of the surviving corporation to be issued to holders
of shares of the Company. Conversions shall be made without change in the
total price applicable to the unexercised portion of the Option and with a
corresponding adjustment in the Option price per share and shall neither
(i) make the ratio, immediately after the event, of the Option price per
share to the fair market value per share more favorable to the Optionee
than that ratio immediately before the event nor (ii) make the aggregate
spread, immediately after the event, between the fair market value of
shares as to which the Option is exercisable and the Option price of such
shares more favorable to the Optionee than that aggregate spread
immediately before the event. Unless otherwise determined by the Board of
Directors, the converted
A-2
<PAGE>
option shall be exercisable only to the extent that the exercisability
requirements relating to the Option have been satisfied.
4.2-3 The Board of Directors shall provide a 30-day period before
the consummation of the Transaction during which the Option may be
exercised to the extent then exercisable, and, upon the expiration of such
30-day period, the Option shall immediately terminate to the extent not
exercised. The Board of Directors may, in its sole discretion, accelerate
the exercisability of the Option so that it is exercisable in full during
such 30-day period.
4.3 Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with Section 4.2-3.
5. Conditions on Obligations. The Company shall not be obligated to issue
shares of Nonvoting Common Stock upon exercise of the Option if the Company is
advised by its legal counsel that such issuance would violate applicable state
or federal laws, including securities laws. The Company will use its best
efforts to take steps required by state or federal law or applicable regulations
in connection with issuance of shares upon exercise of the Option.
6. Withholding. Upon notification of the amount due, if any, and prior to
or concurrently with delivery of the certificates representing the shares for
which the Option was exercised, Optionee shall pay to the Company amounts
necessary to satisfy any applicable federal, state, and local withholding tax
requirements. If additional withholding becomes required beyond any amount
deposited before delivery of the certificates, Optionee shall pay such amount to
the Company on demand. If Optionee fails to pay any amount demanded, the Company
shall have the right to withhold that amount from other amounts payable by the
Company to Optionee, including salary, subject to applicable law.
7. Successors of Company. This Agreement shall be binding upon and shall
inure to the benefit of any successor of the Company but, except as provided
herein, the Option may not be assigned or otherwise transferred by the Optionee.
8. Notices. Any notices under this Agreement must be in writing and will be
effective when actually delivered or, if mailed, three days after deposit into
the United States mails by registered or certified mail, postage prepaid. Mail
shall be directed to the addresses stated on the face page of this Agreement or
to such address as a party may certify by notice to the other party.
9. No Right to Employment or Service. Nothing in the Plan or this Agreement
shall (i) confer upon the Optionee any right to be employed or to continue in
the employment of or service to the Company; (ii) interfere in any way with the
right of the Company to terminate the Optionee's employment or service with the
Company at any time for any reason, with or without cause, or to decrease the
Optionee's compensation or benefits; or (iii) confer upon the Optionee any right
to continuation, extension, renewal, or modification of any compensation,
contract or arrangement with or by the Company.
A-3
<PAGE>
10. Tax Status; Restriction on Exercise or Transfer. If the Company is an S
corporation for federal tax purposes at the time the Optionee or the Optionee's
successor in interest exercises the Option, the Optionee or the Optionee's
successor in interest shall execute a stock transfer restriction agreement prior
to or concurrent with exercise of the Option in a form approved by the Company's
Board of Directors. The stock transfer restriction agreement will include only
those restrictions that the Board of Directors, in its sole discretion, deems
necessary or desirable to preserve the status of the Company. For so long as the
Company is an S corporation for federal tax purposes, the Option shall be
exercisable by the Optionee or succcessor in interest only if the Optionee or
successor in interest, as the case may be, is eligible to be a shareholder of
the Company without terminating the Company's S corporation election.
A-4
COLUMBIA SPORTSWEAR COMPANY
STOCK OPTION AGREEMENT
Non-Statutory Stock Option
This STOCK OPTION AGREEMENT is made between COLUMBIA SPORTSWEAR
COMPANY, an Oregon corporation (the "Company"), and ___________________ (the
"Optionee"), pursuant to the Company's 1997 Stock Incentive Plan (the "Plan").
The Company and the Optionee agree as follows:
1. Option Grant. The Company hereby grants to the Optionee on the terms and
conditions of this Agreement the right and the option (the "Option") to purchase
all or any part of ____ shares of the Company's Nonvoting Common Stock at a
purchase price of $_____ per share. The terms and conditions of the Option grant
set forth in the attached Exhibit A are hereby incorporated into and made a part
of this Agreement. The Option is not intended to be an Incentive Stock Option,
as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), and therefore is a Non-Statutory Stock Option.
2. Grant Date. The Grant Date for this Option is ___________. The Option
shall continue in effect until the date ten years after the Grant Date (the
"Expiration Date") unless earlier terminated as provided in Sections 1 or 4 of
Exhibit A.
3. Exercise of Option. The Option shall not be exercisable with regard to
any shares of Nonvoting Common Stock until the earlier of (a) two months after
the Company or an "Affiliated Entity" has completed its initial firm
underwritten public offering of stock registered with the Securities and
Exchange Commission (the "Initial Public Offering"), or (b) the ninth
anniversary of the Grant Date. The Initial Public Offering and the ninth
anniversary of the grant date are each an "Exercise Event." Subject to the
occurrence of an Exercise Event, the Option shall become exercisable ratably
over a period of 60 months from the Grant Date. The term "Affiliated Entity"
includes only an entity controlled by or under common control with the Company
and (i) into which substantially all of the assets of the Company have been
transferred, or (ii) whose securities are convertible into, or exchangeable for,
shares of Company Nonvoting Common Stock.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate as of the date written above.
COLUMBIA SPORTSWEAR COMPANY OPTIONEE
By:
-------------------------------- ---------------------------------------
Title: [signature]
-----------------------------
---------------------------------------
[print name]
---------------------------------------
---------------------------------------
[address]
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
EXHIBIT A TO STOCK OPTION AGREEMENT
1. Termination of Service.
1.1 Unless otherwise determined by the Board of Directors of the
Company, if the Optionee's employment by or service with the Company terminates
for any reason other than because of total disability or death, the Option may
be exercised at any time prior to the Expiration Date or the expiration of 30
days after the date of the termination, whichever is the shorter period, but
only if and to the extent the Optionee was entitled to exercise the Option at
the date of termination.
1.2 If the Optionee's employment by or service with the Company
terminates because of death or total disability (as defined in Section
6(a)(iv)(B) and (C) of the Plan), the Option may be exercised at any time prior
to the Expiration Date or the expiration of 12 months after the date of
termination, whichever is the shorter period, but only if and to the extent the
Optionee was entitled to exercise the Option at the date of termination. If the
Optionee's employment or service is terminated by death, the Option shall be
exercisable only by the person or persons to whom the Optionee's rights under
the Option pass by the Optionee's will or by the laws of descent and
distribution of the state or country of the Optionee's domicile at the time of
death.
2. Method of Exercise of Option.
2.1 Unless the Board of Directors determines otherwise, to exercise
the Option, the Optionee must give written notice to the Company stating the
Optionee's intention to exercise, specifying the number of shares as to which
the Optionee desires to exercise the Option and the date on which the Optionee
desires to complete the transaction. Unless the Board of Directors determines
otherwise, on or before the date specified for completion of the purchase of
shares pursuant to the Option, the Optionee must pay the Company the full
purchase price of such shares in cash or, in whole or in part, in Nonvoting
Common Stock of the Company valued at fair market value. No shares shall be
issued until full payment for the shares has been made.
2.2 After exercise of all or a part of the Option, the Optionee shall
immediately upon notification of the amount due, if any, pay to the Company in
cash the amount necessary to satisfy any applicable federal, state and local tax
withholding requirements. If additional withholding is or becomes required
beyond any amount deposited before delivery of the certificates for the Option
shares, the Optionee shall pay such amount to the Company on demand. If the
Optionee fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the Optionee, including salary or
compensation, subject to applicable law.
3. Nontransferability of Option. The Option may not be assigned or
transferred by the Optionee, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state or country of
the Optionee's domicile at the time of death.
A-1
<PAGE>
4. Changes in Capital Structure.
4.1 Stock Splits; Stock Dividends. If the outstanding Nonvoting Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares or dividend payable
in shares, recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares as to which the
Option, or portions thereof then unexercised, shall be exercisable. Adjustments
shall be made without change in the total price applicable to the unexercised
portion of the Option and with a corresponding adjustment in the Option price
per share and shall neither (i) make the ratio, immediately after the event, of
the Option price per share to the fair market value per share more favorable to
the Optionee than that ratio immediately before the event nor (ii) make the
aggregate spread, immediately after the event, between the fair market value of
shares as to which the Option is exercisable and the Option price of such shares
more favorable to the Optionee than that aggregate spread immediately before the
event. The Board of Directors shall have no obligation to effect any adjustment
that would or might result in the issuance of fractional shares, and any
fractional shares resulting from any adjustment may be disregarded or provided
for in any manner determined by the Board of Directors. Any such adjustments
made by the Board of Directors shall be conclusive.
4.2 Mergers, Reorganizations, Etc. In the event of a merger,
consolidation or plan of exchange to which the Company is a party or a sale of
all or substantially all of the Company's assets (each, a "Transaction"), the
Board of Directors shall, in its sole discretion and to the extent possible
under the structure of the Transaction, select one of the following alternatives
for treating the Option:
4.2-1 The Option shall remain in effect in accordance with its
terms.
4.2-2 The Option shall be converted into an option to purchase
stock in the corporation that is the surviving or acquiring corporation in
the Transaction. The amount, type of securities subject thereto and
exercise price of the converted option shall be determined by the Board of
Directors of the Company, taking into account the relative values of the
companies involved in the Transaction and the exchange rate, if any, used
in determining shares of the surviving corporation to be issued to holders
of shares of the Company. Conversions shall be made without change in the
total price applicable to the unexercised portion of the Option and with a
corresponding adjustment in the Option price per share and shall neither
(i) make the ratio, immediately after the event, of the Option price per
share to the fair market value per share more favorable to the Optionee
than that ratio immediately before the event nor (ii) make the aggregate
spread, immediately after the event, between the fair market value of
shares as to which the Option is exercisable and the Option price of such
shares more favorable to the Optionee than that aggregate spread
immediately before the event. Unless otherwise determined by the Board of
Directors, the converted
A-2
<PAGE>
option shall be exercisable only to the extent that the exercisability
requirements relating to the Option have been satisfied.
4.2-3 The Board of Directors shall provide a 30-day period before
the consummation of the Transaction during which the Option may be
exercised to the extent then exercisable, and, upon the expiration of such
30-day period, the Option shall immediately terminate to the extent not
exercised. The Board of Directors may, in its sole discretion, accelerate
the exercisability of the Option so that it is exercisable in full during
such 30-day period.
4.3 Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with Section 4.2-3.
5. Conditions on Obligations. The Company shall not be obligated to issue
shares of Nonvoting Common Stock upon exercise of the Option if the Company is
advised by its legal counsel that such issuance would violate applicable state
or federal laws, including securities laws. The Company will use its best
efforts to take steps required by state or federal law or applicable regulations
in connection with issuance of shares upon exercise of the Option.
6. Withholding. Upon notification of the amount due, if any, and prior to
or concurrently with delivery of the certificates representing the shares for
which the Option was exercised, Optionee shall pay to the Company amounts
necessary to satisfy any applicable federal, state, and local withholding tax
requirements. If additional withholding becomes required beyond any amount
deposited before delivery of the certificates, Optionee shall pay such amount to
the Company on demand. If Optionee fails to pay any amount demanded, the Company
shall have the right to withhold that amount from other amounts payable by the
Company to Optionee, including salary, subject to applicable law.
7. Successors of Company. This Agreement shall be binding upon and shall
inure to the benefit of any successor of the Company but, except as provided
herein, the Option may not be assigned or otherwise transferred by the Optionee.
8. Notices. Any notices under this Agreement must be in writing and will be
effective when actually delivered or, if mailed, three days after deposit into
the United States mails by registered or certified mail, postage prepaid. Mail
shall be directed to the addresses stated on the face page of this Agreement or
to such address as a party may certify by notice to the other party.
9. No Right to Employment or Service. Nothing in the Plan or this Agreement
shall (i) confer upon the Optionee any right to be employed or to continue in
the employment of or service to the Company; (ii) interfere in any way with the
right of the Company to terminate the Optionee's employment or service with the
Company at any time for any reason, with or without cause, or to decrease the
Optionee's compensation or benefits; or (iii) confer upon the Optionee any right
to continuation, extension, renewal, or modification of any compensation,
contract or arrangement with or by the Company.
A-3
<PAGE>
10. Tax Status; Restriction on Exercise or Transfer. If the Company is an S
corporation for federal tax purposes at the time the Optionee or the Optionee's
successor in interest exercises the Option, the Optionee or the Optionee's
successor in interest shall execute a stock transfer restriction agreement prior
to or concurrent with exercise of the Option in a form approved by the Company's
Board of Directors. The stock transfer restriction agreement will include only
those restrictions that the Board of Directors, in its sole discretion, deems
necessary or desirable to preserve the status of the Company. For so long as the
Company is an S corporation for federal tax purposes, the Option shall be
exercisable by the Optionee or succcessor in interest only if the Optionee or
successor in interest, as the case may be, is eligible to be a shareholder of
the Company without terminating the Company's S corporation election.
A-4
CREDIT AGREEMENT
Dated: September 17 , 1991,
Between: COLUMBIA SPORTSWEAR COMPANY, an Oregon corporation
("Borrower"), whose address is 6600 N. Baltimore,
Portland, Oregon 97283-0239, and
THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED ("Bank"), whose address is 900 S.W. Fifth
Avenue, P.O. Box 40208, Portland, Oregon 97204-1298.
Recitals
A. Borrower is a manufacturer, importer and seller of sportswear. The
chief executive offices of Borrower are located in Portland, Oregon.
B. The parties desire to enter into this credit agreement under which
Bank may issue documentary letters of credit for and make loans to Borrower of
up to $25 million to finance Borrower's purchase of sportswear from overseas
suppliers.
NOW, THEREFORE, for value, the current receipt and reasonable
equivalence of which are acknowledged it is agreed:
Article 1--Definitions
1.01 Defined Terms. In addition to the terms defined elsewhere in this
agreement:
.01 "Advance" means a loan or payment of money by Bank to or for the
account of Borrower under this agreement, including, but not limited to, a
payment made to third persons pursuant to a credit issued under this agreement.
An "overadvance" is an entirely discretionary loan or payment of money by Bank
(including coverage of checks where Borrower's account does not contain
sufficient funds for payment of such items) which exceeds the maximum amount of
the credit facility or facilities or occurs without a proper advance request
being submitted in a timely manner.
.02 "Affiliate" means any person that directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, another person through the ownership of equity securities or
beneficial interests, relationship, control, management of property or
otherwise.
.03 "Banking day" means that part of any day when Bank is open to the
public in Portland, Oregon, for carrying on substantially all of its banking
functions.
<PAGE>
.04 "Contract" means indenture, agreement, contract, lease, instrument
and like document.
.05 "Control" means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a person, or
the use or disposition of that person's-property, whether through the ownership
of voting securities, beneficial interests, contract or otherwise.
.06 "Credit" means a documentary letter of credit issued by Bank to
the beneficiary upon the request of Borrower under this agreement.
.07 "Debt" means a liability for borrowed money, including trade
accounts payable.
.08 "Default rate" means a rate of interest per annum equal to five
percent per annum in excess of the prime rate.
.09 "Documentary draft" means a sight draft accompanied by the
documents specified in the credit.
.10 "Governmental unit" means the United States, any foreign state or
nation, or any state, commonwealth, district, territory, agency, department,
subdivision, court, tribunal or other instrumentality thereof.
.11 "Incipient default" means a default under this agreement but for
the giving of notice or the passage of time, including any applicable cure
period.
.12 "Insolvent" means a financial condition such that either the
person's total liabilities are greater than the fair market value of all of the
person's property or the person is unable to pay its liabilities in the ordinary
course of business as they become due.
.13 "Insolvency proceeding" means an assignment for the benefit of
creditors or other proceedings intended to liquidate or rehabilitate the estate
of the person involved, including, but not limited to, state court receiverships
involving all or substantially all of a person's property and liquidation and
reorganization proceedings under the Bankruptcy Code of the United States.
.14 "Law" means an ordinance, statute, rule, regulation, order,
permit, approval, injunction, writ or decree of any federal, state or local
governmental unit as they now exist or may hereafter be amended. Without thereby
limiting the generality of the foregoing, the following are laws: the Internal
Revenue Code of 1986 ("IRC"), the Employee Retirement Income Security Act of
1974 ("ERISA"), the Fair Labor Standards Act ("FLSA") and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA").
2
<PAGE>
.15 "Liability" means an obligation for the payment of money whether
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured.
.16 "Lien" means a charge against or an interest in property to secure
payment of a liability or performance of an obligation, including a lien
obtained by contract, such as a mortgage, trust deed and security interest,
judgment, levy, sequestration or other legal or equitable process or proceeding.
.17 "Material" means that which in reasonable and objective
contemplation will or realistically might affect the business or property of a
person, or the person's creditworthiness as to such business or property in a
significant manner.
.18 "Obligation" means a duty imposed on a person by law, promise,
contract or otherwise.
.19 "Organization" means a corporation, business trust, estate, trust,
partnership or association, two or more persons, having a joint or common
interest, or any other legal or commercial entity.
.20 "Overseas" means with respect to a person, a person who is not
located, incorporated or residing in the United States.
.21 "Person" means an individual, an organization or a governmental
unit.
.22 "Prime rate" means for any day the base or reference rate of
interest per annum (based on the actual number of days over an annual period of
365/366 days) which is publicly announced by Marine Midland Bank, N.A., at its
principal New York City office as its prime rate. Use of the term "prime rate"
is only for convenient reference and is not an express or implied representation
as to the lowest or best rate of interest which may be available to Bank's most
creditworthy commercial customers. The rate payable by Borrower will fluctuate
contemporaneously with and to the full extent of any changes in Marine Midland
Bank's publicly-announced prime rate.
.23 "Subsidiary" means an affiliate of a person which is controlled by
that person directly or indirectly through one or more intermediaries.
1.02 Additional Definition Sources.
.01 Accounting terms not specifically defined in this agreement shall
be defined or interpreted, and all accounting procedures performed and
statements prepared in accordance with generally accepted accounting principles
and practices consistently applied ("GAAP").
3
<PAGE>
.02 Legal terms not specifically defined in this agreement shall be
defined, if and to the extent necessary, in accordance with the definitions
provided by the Uniform Commercial Code as enacted in Oregon (the "UCC"), the
Bankruptcy Code of the United States (the "Code"), and the Uniform Customs and
Practice for Documentary Credits/1983 Revision as published by the International
Chamber of Commerce ("ICC") in ICC Publication 400 (the "UCP") before resorting
to any other reference.
.03 In this agreement, all dollar amounts refer to U.S. dollars and
are payable in U.S. currency unless otherwise required or permitted.
.04 In this agreement, the singular includes the plural and vice versa
and the masculine includes the feminine and neuter and vice versa.
Article 2--Representations and Warranties
2.01 Borrower Representations and Warranties. Borrower represents and
warrants (and each time that Borrower requests an advance or credit will be
deemed to again represent and warrant) that:
.01 Borrower has been duly formed and organized in accordance with
applicable law and is duly qualified to transact business as a foreign
corporation in all states and countries where such qualification is necessary
for the proper conduct of its business or the ownership of property.
.02 The execution, delivery and performance of Borrower's obligations
under this agreement has been duly authorized by Borrower's board of directors
and, if legally required by law or its governance documents (articles bylaws and
like documents), by its shareholders.
.03 This agreement has been duly executed and delivered to Bank by a
representative of Borrower who has been duly authorized to perform such acts.
.04 This agreement is the legally valid and binding obligation of
Borrower enforceable against Borrower and third persons in accordance with its
terms.
.05 The execution, delivery and performance by Borrower of this
agreement do not violate any law applicable to it or constitute a default or
breach of any contract to which Borrower is a party or its property is bound.
.06 There is no litigation, prosecution, investigation or other
proceeding of any nature whatsoever (specifically including those related to
environmental matters) now pending or, to the knowledge of Borrower, threatened
involving Borrower or its
4
<PAGE>
business or property which is material except for the U.S. Customs matter which
has been disclosed to Bank.
.07 The financial statements provided by Borrower to Bank accurately
present the financial condition and operating results of Borrower as of the date
of such statements.
.08 Borrower is not in default in the performance of any material
obligation to any third person except for those obligations being contested by
Borrower in good faith, by appropriate means and with an adequate reserve be
maintained for payment in the event of an adverse outcome.
.09 Borrower is in compliance with all applicable laws, the
noncompliance of which would be material to Borrower's financial condition,
business or property, specifically including, but not limited to, the FLSA, the
IRC, ERISA, CERCLA and all other laws and regulations relating to the release,
storage, handling, remediation and removal of hazardous or toxic substances,
wastes, pollutants and contaminants, petroleum and natural gas products,
polychlorinated biphenyls and asbestos.
.10 Borrower has filed all federal and state tax returns required by
law to be filed and has paid all taxes and similar government impositions when
due except for those taxes and impositions being contested by the Borrower in
good faith, by appropriate means and with an adequate reserve be maintained for
payment in the event of an adverse outcome.
.11 Borrower is not insolvent or the subject of any insolvency
proceeding. There has been no material adverse change in the business, financial
condition or property of Borrower since the date of the last financial
statements provided to Bank by Borrower.
Article 3--Conditions Precedent
3.01 Conditions Precedent to First Advance or Credit. The following
are conditions precedent to issuance of the first credit by Bank under this
agreement.
0.1 Execution by Borrower of a counterpart of this agreement and
delivery thereof to Bank.
0.2 Delivery to Bank of true copies of the articles of incorporation
and bylaws, including all amendments and restatements, of Borrower.
0.3 Delivery to Bank of a certificate of existence of Borrower issued
by the Oregon Corporations Division within 30 days before this agreement is
executed and delivered by Borrower.
0.4 Delivery to Bank of copies of the resolutions of Borrower's board
of directors (a) authorizing Borrower to enter
5
<PAGE>
into and to perform its obligations under this agreement, (b) specifying the
officer or officers who are authorized and directed to sign this agreement and
application for credits on behalf of Borrower and (c) specifying the officer(s)
and employee(s) who are authorized to apply for credits, waive non-conformity of
drafts and/or documents presented to Bank via telephone or in writing and
execute notes on behalf of Borrower.
0.5 Delivery to Bank of certificates or policies of the insurance
required under this agreement.
3.02 Conditions Precedent to Subsequent Advances and Credits. In addition
to satisfaction of the foregoing conditions precedent, the following are
conditions precedent to issuance of any credit by Bank and to any advance by
Bank:
.01 There is no default or incipient default by Borrower under this
agreement.
.02 All representations and warranties stated above continue to be
true and correct in all material respects.
Article 4--Credit Facilities
4.01 Documentary Credits.
.01 Upon satisfaction of the conditions precedent and subject to the
terms of this agreement, Bank may, at its sole discretion, issue one or more
documentary credits to such beneficiaries, in such face amounts and upon such
terms as may be specified by Borrower in applications for such credits which are
submitted to Bank from time to time on or before May 1, 1992 (the "maturity
date") provided that (a) the aggregate of the face amount of all such credits
and all advances and overadvances to Borrower outstanding at any one time,
including the credit being applied for, does not exceed $25 million, (b) such
credits have been and are being used solely and exclusively for purchase of
sportswear from overseas suppliers, (c) the expiration date of each credit is
not more than 365 days after its issuance date, and (d) there is no default or
incipient default under this agreement at the time the credit is applied for or
issued.
.02 Borrower will apply for each credit in a form prescribed by Bank
which will, among other things, specify the amount of the credit, the proposed
date of issuance, the expiration date, the terms, the documents which will be
conditions to Bank's engagement to honor sight drafts presented with or pursuant
to the credit (including in all cases consignment to the shipper with blank
endorsement), and the goods to be involved in the transaction. Applications may
be submitted electronically or delivered by personal delivery, mail or facsimile
machine to Bank in Portland, Oregon, by a person authorized by the board of
directors of Borrower to make such applications. Each time that Borrower applies
for a credit, it will be deemed to reaffirm the
<PAGE>
continued accuracy and completeness of the representations and warranties of
Article 2. With respect to any facsimile transmitted application, Borrower will
deliver the manually signed original credit application to Bank within 24 hours
of transmission of the facsimile application. Bank will notify Borrower usually
within 24 hours if Bank will or will not issue the credit.
.03 Borrower will pay to Bank the following fees: (a) an issuance fee
of 1/8 percent (12.5 basis points) of the face amount of the credit (but in no
event less than $50) for issuance of a credit or for an amendment which
increases the face amount, plus a negotiation fee of 1/8 percent of the face
amount of each draft presented (but in no event less than $50), (b) an amendment
fee of $35 for amendment or extension of any credit not involving an increase in
the face amount, and (c) a handling fee of $40 if the credit is established by
telex and a fee equal to all courier charges if the credit is established by
courier.
.04 Subject to Borrower's ability to obtain advances under section
4.02, Borrower unconditionally promises and agrees to immediately reimburse Bank
on Bank's demand in the full amount of any payment made by Bank on any draft
presented to Bank under any credit issued by Bank upon Borrower's application.
Unless otherwise approved by Borrower, Bank will only honor conforming
documentary drafts. Upon receipt of a conforming documentary draft, Bank may
demand that Borrower prepay by wire transfer in immediately available funds the
amount to which Bank will be entitled by way of reimbursement upon honoring the
draft. In each instance, Bank may require such payment either in U.S. dollars or
the currency in which the draft is payable. If any amount is demanded by Bank,
but not reimbursed or repaid by Borrower, Borrower will pay interest on such
amount at the default rate unless Borrower has obtained an advance from Bank
under section 4.02 to fund such reimbursement obligation. Bank shall retain all
documents of title and, therefore, entitlement to possession of the goods until
reimbursement is received.
4.02 Trust Receipt/Clean Import Advances/Shipping Guaranties.
.01 Upon satisfaction of the conditions precedent and subject to the
terms of this agreement, Bank may, at its sole discretion, advance to Borrower
from time to time on or before the maturity date amounts up to an aggregate of
$15 million to finance Borrower's reimbursement obligations with respect to
credits issued under this agreement provided that the aggregate of all such
advances, overadvances and the face amount of all outstanding credits does not
exceed $25 million.
.02 Borrower will apply for each such advance by delivery to Bank of a
note in the form attached hereto as Exhibit A with the proposed amount of the
advance indicated as the face (principal) amount and the date of the advance
indicated as the date of the note. The note will be manually signed by a person
<PAGE>
authorized by the board of directors of Borrower to sign such notes. All such
notes will be delivered by personal delivery, mail or facsimile machine to Bank
in Portland, Oregon, no later than noon, Portland, Oregon, time, on the banking
day of the proposed advance. Each time that Borrower tenders a note, it shall be
deemed to reaffirm the continued accuracy and completeness of the
representations and warranties of Article 2. With respect to any facsimile
transmitted note, the manually signed original of such note will be delivered to
Bank within 24 hours of transmission of the facsimile note. Bank will promptly
return the note to Borrower if Bank declines to make the advance.
.03 Borrower may also request that Bank issue to shipping
organizations a shipping guaranty or letter of indemnity to obtain possession of
goods before documents arrive. In the event that Bank issues such a guaranty or
indemnity, it will be deemed an advance under section 4.02. As a condition
precedent to issuance of any such guaranty or indemnity, Borrower will execute a
note in the form of Exhibit A to further evidence Borrower's obligations and
will pay an issuance fee of $50 for each such guaranty or indemnity. Borrower
agrees to indemnify, defend and hold Bank harmless from and against any loss,
liability, claim, demand, damage, cost or expense, including reasonable attorney
fees, arising from or related to issuance of the guaranty or indemnity and any
payment by Bank pursuant thereto. Borrower authorizes Bank to honor all drafts
covering the shipment whether or not the draft or the accompanying documents
conform to the credit or any other conditions for honor. Borrower will arrange
for prompt release of such guaranty or indemnity immediately upon receipt of the
bill of lading or, if no bill of lading is received within 60 days of issuance
of the guaranty or indemnity, then by delivery of a bond or cash deposit to the
shipping organization.
.04 Borrower unconditionally promises and agrees to repay all such
advances on Bank's demand (or 90 days after the advance if no demand is made).
The outstanding balance of each such advance will bear interest at a rate equal
to the prime rate prior to demand or the maturity date.
4.03 Matters Relating to Both Facilities.
.01 Borrower acknowledges that Bank is not obligated to issue any
credit or make any advance under either facility whether or not the credit or
advance requested complies with the requirements for such credit facility.
.02 Borrower hereby assumes all risk of loss with respect to credits,
advances and overadvances, specifically including loss arising from mistakes or
fraud, and agrees to indemnify, defend and hold Bank harmless from and against
all loss, liability and expense, including reasonable attorney fees, arising
from or related to Bank's issuance of credits, guaranties and indemnities,
payment of drafts and making of loans under this agreement including those
applied for or approved in writing,
<PAGE>
electronically, or orally by telephone or in person, except for losses which
result from the gross negligence or fraud of Bank employees. Bank shall have no
duty to investigate or verify the authenticity or authorized nature of any
application, draft (except as to conformity to the credit) or loan request.
Borrower acknowledges and agrees that it will be unconditionally liable for
reimbursement of amounts paid by Bank against drafts presented under credits
issued under this agreement and repayment of all advances and overadvances
whether or not such credit extensions exceed the maximums stated herein for
Bank's protection or are requested by a duly authorized person and whether or
not the proceeds, once deposited in Borrower's checking account, are applied to
proper purposes. This indemnity expressly covers payments made on drafts which
do not conform to the credit where such nonconformity has been waived by
Borrower orally, electronically or in writing. If requested by Bank, Borrower
will execute and deliver to Bank a standard Bank form of facsimile indemnity
letter.
Without limiting the generality of the foregoing, Borrower assumes all
risk of loss resulting from the acts and omissions of credit beneficiaries and
transferees and of shippers and warehousemen, and laws, injunctions or similar
legal restrictions preventing payment of conforming drafts upon presentment,
forged or fraudulent documentation, contractual disputes, defenses and
counterclaims, errors in transmission (other than those made by Bank),
non-compliance with all laws relating to the underlying transactions, and the
failure to provide adequate insurance coverage.
.03 Bank shall have the right at any time to transfer any advance or
advances or any credit to any other U.S. or foreign branch or office of Bank and
to accommodate such transfer, a new advance, credit or acceptance may be made by
such branch or office to replace the advance, credit or acceptance booked at the
transferor branch or office. In the event that this entire credit facility is
transferred, all advance requests and payments will thereafter be made as
instructed by the transferee branch or office.
.04 Interest will be payable monthly in arrears on the last day of
each calendar month and upon the maturity of any advance. Borrower authorizes
and directs Bank to debit its general corporate checking account for the amount
of interest due on the last day of each calendar month-without further
instruction or authorization. Borrower acknowledges that it will have a duty to
ensure that its account contains sufficient collected funds to cover such a
debit by Bank. Borrower understands that Bank will settle provisionally (i.e.,
give credit for an item subject to charge back) on checks deposited into
Borrower's checking account at Bank one banking day after deposit if the check
is drawn on a financial institution headquartered in Oregon or Washington and
three banking days after deposit on all other checks drawn on domestic financial
institutions. Bank will settle as to checks
<PAGE>
drawn on overseas financial institutions only when final settlement is made
between Bank and the payor institution.
.05 All advances, overadvances, and unreimbursed costs not paid within
five days following demand (or the maturity date if no prior demand is made) for
payment will bear interest at the default rate.
.06 If any law is hereafter enacted or amended (including
interpretation of law by administrative agencies) which results in an increase
in capital or reserve requirements, in insurance premiums or in other direct or
indirect costs or in a decrease in the benefit to Bank in making advances to
Borrower or funding those advances above the current level of such costs and
such increase is not reflected in a change in the publicly announced prime rate
of Marine Midland Bank, then Bank shall have the right to adjust its margins
above the prime rate in order to recover such increased costs from Borrower.
.07 Borrower has paid Bank an arrangement fee of $5,000 prior to
execution of this agreement.
Article 5--Covenants
5.01 Borrower Covenants. Borrower covenants that:
.01 Borrower will take all steps necessary to preserve its corporate
status, comply with all federal, state and local laws, regulations and orders
will materially affect its business or property, including all laws relating to
release, storage, handling, remediation or removal of hazardous or toxic
substances, wastes, pollutants and contaminants, vigorously resist any
proceedings to enjoin, restrict or prevent occupancy or operation of its
business or property, and continue to manage and operate its business in the
ordinary course without material change in the size, nature or emphasis thereof.
.02 Borrower will obtain and maintain at its expense fire and extended
coverage insurance, general hazard insurance (if such insurance is different
from and available separately from fire and extended coverage insurance),
business interruption insurance, workers compensation insurance, public
liability and property damage insurance, with all such insurance to be issued by
such insurers, in coverage amounts and with such deductibles and other terms and
conditions as are consistent with trade standards and are reasonably acceptable
to Bank. Generally, Bank will require public liability and property damage
coverage in a combined single incident amount of not less than the amount deemed
prudent by Bank and fire insurance coverage of not less than the full insurable
value of all of the real and tangible personal property of Borrower.
<PAGE>
Borrower will provide to Bank copies of insurance policies or, if
approved by Bank, certificates of such insurance issued by the carriers or their
authorized agent and proof that premiums have been prepaid upon Bank's request.
.03 Borrower will pay and perform when due all material obligations to
all third persons except for those obligations being contested by Borrower in
good faith, by appropriate means and with an adequate reserve be maintained for
payment in the event of an adverse outcome.
.04 Borrower will file all tax returns required by law to be filed and
will pay all taxes and similar government impositions when due except for those
taxes and impositions being contested by Borrower in good faith, by appropriate
means and with an adequate reserve be maintained for payment in the event of an
adverse outcome.
.05 Borrower will provide to Bank reasonably detailed financial
statements (including balance sheet and related statement of income and expenses
and statement of cash flows with related footnotes and explanations prepared on
a comparative basis) prepared in accordance with GAAP except where specifically
noted otherwise:
(a) within 45 days following the end of each fiscal
quarter (except the quarter end coinciding with the end of
Borrower's fiscal year) as of the end of that period and for
that portion of Borrower's fiscal year then ended prepared
on an accrual basis, and
(b) within 120 days following the end of the fiscal
year as of the end of that fiscal year and for the fiscal
year then ended and audited by an independent certified
public accountant reasonably acceptable to Bank and not
containing any significant qualification by such accountant.
The quarterly statements will be signed by Borrower's chief financial officer,
and such signature shall be deemed to be a certification of the completeness and
accuracy of such statements. The annual statements will be accompanied by the
certificate of Borrower's chief financial officer that such officer has reviewed
this agreement and that to such officer's knowledge either (i) Borrower is not
in default under this agreement or (ii) Borrower is in default under this
agreement only by reason of the events specified in such officer's certificate.
<PAGE>
Bank shall have the right to inspect all of Borrower's books and
records, in whatever form such books and records are stored, at all reasonable
times and to discuss with Borrower's accounting employees and outside accountant
such books and records and the financial statements provided to Bank. Bank will
give prior notice to Borrower of its intention to discuss such matters with
Borrower's outside accountant so as to provide the opportunity to Borrower to be
present at such discussions.
.06 Borrower will provide to Bank such additional information as may
be required to keep Bank currently and completely informed as to all material
matters involving the business, financial condition and property of Borrower,
including pending and threatened litigation and other governmental proceedings.
.07 Borrower will comply with each and every covenant set forth in
section 7 of the Note Purchase Agreement dated as of May 30, 1989, among
Borrower, Massachusetts Mutual Life Insurance Company and certain other
financial institutions (the "Mass Mutual Lenders"), and any "Event of Default"
under that agreement also shall be a default under this agreement whether or not
such event of default is waived by the noteholders under that agreement.
Article 6--Default and Remedies
6.01 Events of Default. TIME IS OF THE ESSENCE. Without thereby limiting
Bank's prerogatives by reason of the optional advance, demand nature of the
credit facilities, it is agreed that Borrower shall be in default under this
agreement if (a) Borrower fails to make any payment (principal, interest, fees
or costs and expenses) upon Bank's demand, (b) Borrower makes an untrue
statement of any material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances under which
they are made, not misleading, (c) Borrower uses any loan proceeds for a purpose
or purposes not specified in this agreement or otherwise approved by Bank in
advance, (d) Borrower fails to comply with any of its other obligations under
this agreement or any other loan document within 30 days following the date such
compliance is required by this agreement, (e) Borrower is insolvent, becomes the
subject of any insolvency proceeding, or becomes a judgment debtor for more than
$500,000 when such liability is not either covered by insurance or bonded in
connection with an appeal, or (f) Borrower is in default under the
above-referenced Note Purchase Agreement or under any other agreement with or
instrument payable to a financial institution whether or not such default is
waived by the other party thereto.
6.02 Remedies. In the event of Borrower's default, Bank may without further
notice or demand immediately proceed with exercise of all rights and remedies
that Bank may have against Borrower in such order and at such time or times as
Bank may elect. Borrower's obligations under this agreement and the note will be
<PAGE>
automatically accelerated in the event of insolvency or the commencement of an
insolvency proceeding by or against Borrower or any guarantors. All rights and
remedies of Bank are cumulative and not exclusive and the commencement or
partial exercise of any such right or remedy shall not preclude Bank from the
exercise of any other right or remedy until the debts evidenced by this
agreement and the notes are paid in full. Bank's rights specifically include the
right of set off against any obligations owed by Bank to Borrower or any
guarantor against the obligations of Borrower and any guarantor to Bank.
6.03 Arbitration. Subject to any applicable statute of limitations, either
Bank or Borrower may require that any controversy or claim arising out of or
relating to this agreement (including offsets, defenses and counterclaims, and
whether arising in contract or tort) to be settled by arbitration in Portland,
Oregon, in accordance with the rules of an arbitration association of national
or regional reputation, such as the American Arbitration Association, as
supplemented by applicable law, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. One
arbitrator and expedited procedures will be used in cases involving claims and
counterclaims of less than $500,000. In all other cases, three arbitrators and
the general procedures will be used. In all cases, the arbitrator(s) shall be
neutral and an active member of the Oregon State Bar. This right to arbitration
shall supplement, and shall not be in derogation of, Bank's rights and remedies
upon the default of Borrower. Bank may exercise setoff, repossession and
nonjudicial foreclosure and disposition rights and remedies before, during and
after arbitration and may apply to the arbitrator(s) or to a court having
jurisdiction for orders appointing a receiver for the collateral and proceeds or
granting injunctive relief and provisional remedies to protect the collateral
and proceeds during the pendency of the arbitration. The fees, costs and
expenses of the arbitration panel shall be shared equally between Borrower and
Bank.
Article 7--Miscellaneous
7.01 Participations. Bank shall have the unconditional right to sell
participation interests in the credit facilities provided under this agreement,
the notes, the other loan documents and the collateral.
7.02 No Borrower Assignment. Borrower shall not have the right to assign
its rights or obligations under this agreement or the notes and any attempted
assignment also shall be a default by Borrower.
7.03 Costs. Borrower will pay upon Bank's demand all costs and expenses,
including reasonable attorney fees of up to $2,500, incurred by Bank in
preparing this agreement and the other loan documents, and all costs and
expenses, including reasonable attorney fees, in administration of the credit
facilities to be
<PAGE>
provided under this agreement. In the event attorney fees and costs are incurred
to enforce the provisions of this agreement or the other loan documents, the
prevailing party in a civil action or proceeding (or any appeal) shall be
entitled to an award for costs and expenses with such costs and expenses to
include reasonable attorney fees and the costs and expenses to include
reasonable attorney fees and the costs of title insurance and foreclosure
reports, environmental surveys and reports and search costs at UCC filing
offices. If no civil action or similar proceeding is started but Bank has
incurred such costs and expenses, then Borrower will reimburse Bank for the
actual amount thereof.
7.04 Successors and Assigns. Subject to the foregoing restrictions on
Borrower assignment, this agreement, the notes and the other loan documents
shall bind and inure to the benefit of the respective successors and assigns of
Borrower and Bank.
7.05 Integration; Construction.
.01 This agreement, the notes and the other loan documents are
intended as the complete and final expression of the agreement of the parties as
to the credit facilities provided hereunder and may not be contradicted or
supplemented by any evidence of any prior agreement or of a contemporaneous oral
agreement.
.02 This agreement, the note and the other loan documents are intended
to complement and supplement one another. However, in the event of a direct
conflict in terms or conditions, the terms and conditions of this agreement
shall govern those contained in the other loan documents.
7.06 Selection of Law. Borrower and Bank have selected Oregon law, except
for any of its choice of law provisions which would make the law of another
jurisdiction applicable, to govern the construction and enforcement of this
agreement, the notes and the other loan documents.
7.07 Jurisdictional Consent. Borrower hereby submits to the jurisdiction of
any state or federal court sitting in Portland, Oregon, in any action or
proceeding relating to this agreement, the notes and the other loan documents
and hereby waives any claim that such a forum is inconvenient or that there is a
more convenient forum.
7.08 Savings Clause. If any term of this agreement, the notes or the other
loan documents is hereafter determined to be illegal or unenforceable, that term
will be deemed deleted without invalidating the remaining terms. In the event
that (i) the amount of interest and fees payable by Borrower under the notes is
later determined to be usurious and (ii) Borrower is not prohibited from
pleading the defense of usury or maintaining any action thereon or therefor, any
such interest in excess of the
<PAGE>
maximum allowable rate automatically shall be deemed to have been applied to
principal.
7.09 Communications. All communications required or permitted under this
agreement shall be delivered either personally, electronically via computer
modem, telephone facsimile transmission or messenger delivery service where a
receipt showing the time of transmission or delivery is obtained.
7.10 Captions. The captions are only for convenient reference and are not a
part of this agreement.
7.11 Recitals. The recitals are incorporated into this agreement by this
reference.
7.12 Waiver and Estoppel. No waiver of any default or performance of any
term or condition of this agreement shall constitute or be construed as a waiver
of the term or condition or of any other or subsequent default. The forbearance
or other failure of Bank to exercise any right or remedy upon Borrower's default
shall be deemed to be a waiver of the default or Bank's rights and remedies nor
shall it be deemed to be grounds for the claim of estoppel.
7.13 Statutory Statement. Under Oregon law, most agreements, promises and
commitments made by a financial institution after October 3, 1989, concerning
loans and other credit extensions which are not for personal, family or
household purposes or secured solely by the borrower's residence must be in
writing, express consideration and be signed by the financial institution to be
enforceable.
THE HONGKONG AND SHANGHAI COLUMBIA SPORTSWEAR COMPANY
BANKING CORPORATION LIMITED
By D. DEW By BLAKE H. LARSEN
--------------------------------- -------------------------------------
D. Dew Blake H. Larsen, Chief
Senior Vice President Financial Officer
<PAGE>
HongkongBank
The Hongkong and Shanghai Banking Corporation
Portland Branch
900 S.W. 5th Avenue, Suite 1550, Portland, Oregon 97204
Mr. Timothy P. Boyle
President & CEO
Columbia Sportswear Company
6600 N Baltimore
Portland, OR 97283-0239 15 August 1996
Dear Tim
BANKING FACILITIES
We are pleased to advise that The Hongkong and Shanghai Banking Corporation
Limited is willing to amend and continue certain credit facilities to Columbia
Sportswear Company, subject to the following terms and conditions and subject to
the completion of additional documentation satisfactory to the Bank:
1. Borrower:
Columbia Sportswear Company (the "Borrower").
Lender:
The Hongkong and Shanghai Banking Corporation Limited (the "Bank").
2. Facility:
Combined Limit: Uncommitted USD45,000,000 within which
a) Import Line of Credit to issue Documentary Letters of Credit on a
Sight Basis: Up to a maximum of USD45,000,000; and
b) Revolving Line of Credit: Up to a maximum of USD25,000,000.
3. Purpose:
Import Line of Credit: To finance the purchase of apparel
and/or footwear from overseas
suppliers.
Revolving Line of Credit: To provide working capital
support for Borrower.
<PAGE>
Columbia Sportswear Company
Page 2 of 9
15 August 1996
4. Interest Rate:
The Borrower will have two options for interest rates under the Revolving
Line of Credit. The options are as follows:
a) Fixed Rate Interest:
The Fixed Rate Interest Rate shall be calculated at a rate equal
at all times to the Bank's Cost of Funds plus 0.35% per annum
calculated on a 360 day accrual basis.
Rates may be fixed for periods of 30 days, 60 days, 90 days, 120
days or 180 days. Cost of funds is defined as the Bank's cost of
borrowing in the domestic interbank market for the term requested
plus any applicable reserves, taxes, or other expenses relating
to the transaction.
b) Floating Interest Rate:
The Floating Interest Rate shall be calculated at a rate equal at
all times to Prime Rate, subject to fluctuation, minus 2% per
annum and calculated on a 365 day accrual basis.
"Prime Rate" means for any day, the rate of interest publicly
announced by Marine Midland Bank at its principal new York City
office as its Prime Rate and in effect for such day. Prime Rate
is a base rate for calculating interest on certain loans and is
not necessarily the lowest rate offered by the Bank to any one
customer or any particular group of customers. Any change in the
interest rate on this note resulting from a change in Marine
Midland Bank's Prime Rate shall be effective on the date of such
change.
5. Prepayment Penalty:
Borrower may incur a penalty on prepayment of funds which have been
advanced at fixed interest rates. The amount of such penalty would be equal
to the cost to the Bank in placing the prepaid funds with another Borrower.
Borrower may prepay funds advanced at the floating rate without incurring a
penalty.
<PAGE>
Columbia Sportswear Company
Page 3 of 9
15 August 1996
6. Repayment Terms:
The maximum term for Documentary Letters of Credits is 365 days.
The Import Line of Credit is not intended to be nor shall it constitute any
obligation or commitment on the part of the Bank to issue any Documentary
Letter of Credit under such line.
Borrower may request the Bank to advance funds under the Revolving Line of
Credit with maturity dates not to exceed 31 December 1997.
The Revolving Line of Credit is not intended to be nor shall it constitute
any obligation or commitment on the part of the Bank to fund any loan under
such line.
7. Availability:
Fixed rate loans shall be available for minimum draws of USD500,000.
Outstandings under the Revolving Line of Credit shall not exceed the lessor
USD25,000,000 or the following sum: a) 90% of Borrower's accounts
receivable; plus b) 50% of Borrower's inventories; less c) any outstanding,
interest-bearing liabilities.
Borrower's availability under the Revolving Line of Credit shall be
calculated by applying the above referenced formula to Borrower's monthly
financial statements.
Notwithstanding the above, advances under the Line of Credit shall be made
at the Bank's sole discretion.
8. Fees:
a) Issuance of Documentary Credits (Sight basis): 1/24% per month of the
face amount of credit (minimum of USD35).
b) Negotiation of drawings under Documentary Credits: USD45 flat.
c) Amendments to Documentary Credits which increase the amount or extend
the term of a credit:
1/24% per month of the face amount of credit (minimum USD35).
<PAGE>
Columbia Sportswear Company
Page 4 of 9
15 August 1996
d) All other amendments:
USD35 flat.
e) Tariff rates shall apply to out of pocket expenses (see enclosed fee
schedule).
9. Evidence of Indebtedness:
Prior to the extension of the Facility, Borrower shall execute such
documentation as the Bank may reasonably request to evidence and secure the
banking facility.
Documentation will be prepared by the Bank's legal counsel and will contain
other terms, conditions, representations, warranties and other covenants,
considered by the Bank (and its counsel) as normal for a transaction of
this nature.
Borrower acknowledges that the Bank has previously advanced credit to
Borrower and documents evidencing such indebtedness continue in effect with
amendments thereto.
10. Facility Review:
A review of facilities may be initiated by the Bank from time to time and
Borrower shall be requested to supply additional information to facilitate
such review. The next review is scheduled for July 1997. As this facility
has been extended on an uncommitted basis, the above mentioned review
process does not imply a renewal, and the facility shall at all times be
subject to satisfactory review at least annually.
11. Insurance:
Borrower must maintain at its expense fire and extended coverage insurance,
general hazard insurance (if such insurance is different from and available
separately from fire and extended coverage insurance), business
interruption insurance, workers compensation insurance, public liability
and property damage insurance, with all such insurance to be issued by such
insurers, in coverage amounts and with such deductibles and other terms and
conditions as are consistent with trade standards and are reasonably
acceptable to the Bank. Generally, the Bank will require public liability
and property damage coverage in a combined single incident amount of not
less than the amount deemed prudent by the Bank and fire insurance coverage
of not less than the full insurable value of all of the real and tangible
personal property of Borrower.
<PAGE>
Columbia Sportswear Company
Page 5 of 9
15 August 1996
Borrower will provide to the Bank copies of insurance policies or, if
approved by the Bank, certificates of such insurance issued by the carriers
or their authorized agent and proof that premiums have been prepaid upon
the Bank's request.
12. Credit Information:
a) Within 120 days after the close of each fiscal year, Borrower shall
provide the Bank, at Borrower's expense, with a 12 month financial
statement audited by an independent certified public accountant in
accordance with Generally Accepted Accounting Principles consistently
applied and consisting of balance sheets, profit and loss statements,
and statements of cash flows.
b) In addition, Borrower shall, at Borrower's expense, make available to
the Bank, within 30 days of month end, monthly financial statements
and operating statements prepared on an accrual basis.
c) Borrower shall, at Borrower's expense, make available to the Bank,
within 45 days of quarter end, quarterly financial statements and
operating statements prepared on an accrual basis.
d) Quarterly and annual statements shall be accompanied by the
certificate of Borrower's Chief Financial Officer that such officer
has reviewed the Loan Agreement and that to such officer's knowledge
either i) Borrower is not in default under the agreement or ii)
Borrower is in default under the agreement only by reason of the
events specified in such Officer's certificate.
13. Covenants:
The following covenants, in effect since September 1995, were adopted
and/or amended from the Loan Agreement between the Borrower and
Massachusetts Mutual Life Insurance Company, which matured 30 June 1996.
The covenants shall be temporarily maintained until such time that the new
covenants being negotiated with Wells Fargo Bank are finalized and in
effect:
a) Borrower's Debt to Equity shall not exceed 1.50:1 at the end of any
fiscal year;
<PAGE>
Columbia Sportswear Company
Page 6 of 9
15 August 1996
b) Borrower's total interest-bearing debt shall not exceed 90% of
Accounts Receivable plus 50% of Inventory at the end of any month;
c) Borrower shall maintain a minimum current ratio of 1.30:1 at the end
of any fiscal quarter;
d) Borrower shall maintain a minimum tangible net worth of USD50,000,000
at the end of any fiscal quarter;
e) Borrower shall maintain working capital (defined as total current
assets less total current liabilities) of not less than USD35,000,000
at the end of any fiscal quarter;
f) Dividends paid by Borrower shall not exceed amounts needed by
shareholders to meet Subchapter S tax payments plus 50% of adjusted
net income;
g) Copies of compliance certificates and event of default certificates
which may be called for under the Loan Agreement currently under
negotiation between Borrower and Wells Fargo Bank will be required;
and
h) Facilities granted by the Bank will at all times rank pari passu with
other senior lenders.
14. Loan Expenditure:
Borrower shall bear all reasonable costs and expenses involved in this
facility including but not limited to all legal fees up to a maximum of
USD1,000, charges for company searches and UCC filing fees.
15. Additional Documents:
Borrower agrees to execute such additional documents as may be reasonably
requested by the Bank to accomplish the purpose of this facility letter.
16. No Assignment:
The facility hereunder is made to Borrower and may not be assigned or
otherwise transferred without the prior written consent of the Bank.
<PAGE>
Columbia Sportswear Company
Page 7 of 9
15 August 1996
17. Transfer:
The Bank retains the right to transfer any or all facilities to its Cayman
Island Branch or any other HSBC Group office as it so desires.
18. Reliance on Information:
This facility is granted with reliance on information provided by Borrower
in the application and other supporting documents. In the event that this
information should prove to be inaccurate or substantially incomplete, or
if Bank determines in its sole discretion that there has been a material
adverse change in the financial condition or management of Borrower, Bank
may elect to terminate this entire facility.
19. Representations Regarding Materially Adverse Agreement; Performance:
A. Agreements. Borrower is not a party to or subject to any material
agreement or instrument or charter or other internal restriction
materially adversely affecting the business, properties, assets,
operations or condition (financial or otherwise) of Borrower.
B. Performance. Borrower is not in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions
contained in any contractual Obligation of Borrower and no condition
exists which, with the giving of notice of the lapse of time or both,
would constitute such a default, except where the consequences, direct
or indirect, of such default or defaults, if any, would not have a
material adverse effect on the business, properties, assets,
operations or condition (financial or otherwise) of Borrower.
20. Other Conditions:
Checks deposited to any Borrower's account with Bank will be subject to the
following holds:
Local checks - One (1) business day (defined as Oregon and
Washington).
Out of state checks - Three (3) business days (defined as all other
areas).
<PAGE>
Columbia Sportswear Company
Page 8 of 9
15 August 1996
21. Statutory Disclosure:
By Oregon Statute (ORS41.580) the following disclosure is required: UNDER
OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY A LENDER
AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY A LENDER TO BE ENFORCEABLE.
All instruments and documents and the satisfaction of any other requirement
in this facility letter must be in a form acceptable to the Bank.
We enclose a brochure detailing the implications of ORS41.580.
Please signify your agreement to this facility letter by signing and returning
to us the original. Please ensure that you make a copy for your records. Before
doing so, please read this letter carefully and if there is any matter which you
do not understand or wish to discuss, please do not hesitate to contact the
undersigned at the number listed.
This facility letter shall expire unless accepted by 30 August 1996. This
facility letter replaces and supersedes all previous facility letters which are
hereby cancelled. This facility letter is, however, an amendment to past
facilities extending financing.
Yours sincerely
L R Todd
Senior VP and Manager
<PAGE>
Columbia Sportswear Company
Page 9 of 9
15 August 1996
I have read, understood, agree and accept the terms and conditions outlined in
this Banking Facilities Letter.
BORROWER: Columbia Sportswear Company
By: TIMOTHY P. BOYLE 8/21/90
------------------------------------- ----------------------------------
Timothy P. Boyle Date
President and CEO
<PAGE>
HongkongBank
The Hongkong and Shanghai Banking Corporation
Portland Branch
900 S.W. 5th Avenue, Suite 1550, Portland, Oregon 97204
Mr. Timothy P. Boyle
President & CEO
Columbia Sportswear Company
6600 N Baltimore
Portland, OR 97283-0239 08 November 1996
Dear Tim
BANKING FACILITIES
We are pleased to advise that The Hongkong and Shanghai Banking Corporation
Limited is willing to amend certain credit facilities to Columbia Sportswear
Company which were originally outlined in our Banking Facilities Letter dated 15
August 1996. Such a change is subject to the following terms and conditions and
subject to the completion of additional documentation satisfactory to the Bank.
Specifically, we agree to amend the facility amount as follows:
2. Facility:
Combined Limit: Uncommitted USD60,000,000 (increased from
USD45,000,000) within which:
a) Import Line of Credit to issue Documentary Letters of Credit on a
Sight Basis: Up to a maximum of USD45,000,000 (Unchanged); and
b) Revolving Line of Credit: Up to a maximum of USD25,000,000
(Unchanged).
Additionally, per Section 13, Covenants, we have incorporated the financial
covenants as established in the recently negotiated credit agreement between
Columbia Sportswear Company and Wells Fargo Bank.
This facility letter is an amendment only to sections 2 and 13 of the previous
facility letter extending financing. All other terms and conditions outlined in
our Banking Facilities Letter dated 15 August 1996 remain in full force and
effect.
(continued)
<PAGE>
Columbia Sportswear Company
Page 2 of 2
08 November 1996
Please signify your agreement to this facility letter by signing and returning
to us the original. Please ensure that you make a copy for your records. Before
doing so, please read this letter carefully and if there is any matter which you
do not understand or wish to discuss, please do not hesitate to contact the
undersigned at the number listed.
Yours sincerely,
L R Todd
Senior VP and Manager
I have read, understood, agree and accept the terms and conditions outlined in
this Banking Facilities Letter.
BORROWER: Columbia Sportswear Company
By: TIMOTHY P. BOYLE 11/15/96
------------------------------------- ----------------------------------
Timothy P. Boyle Date
President & CEO
<PAGE>
HSBC Corporate Banking
The Hongkong and Shanghai Banking Corporation Limited
New York Branch: 140 Broadway, New York, NY 10005-1196
14 November 1997
Columbia Sportswear Company
6600 N Baltimore
Portland, OR 97283-0239
Attention: Mr. Timothy P. Boyle
President & CEO
Dear Mr. Boyle:
BANKING FACILITIES
We are pleased to advise you that The Hongkong and Shanghai Banking Corporation
Limited is willing to continue to provide certain credit facilities to Columbia
Sportswear Company, subject to the following terms and conditions:
BORROWER Columbia Sportswear Company ("Borrower").
LENDER The Hongkong and Shanghai Banking Corporation Limited ("Bank").
FACILITY Combined Limit (CBL01) USD60,000,000
- within which:
a. Import Line (IMP01) (USD45,000,000)
for sight DCs
b. Import Cash Limit (IMC01) (USD45,000,000)
for Trust Receipts (T/R)
C. Revolving Loan (RLN01) (USD25,000,000)
Total USD60,000,000
PURPOSE a. To finance the purchase of apparel and/or footwear from
overseas suppliers.
b. To reflect the underlying transaction risk when Bank does
not control documents of title to underlying goods.
c. To provide working capital support for Borrower.
INTEREST The Borrower will have two options for interest
RATE rates under the Revolving Line of Credit. The
options are as follows:
1) Fixed Rate Interest:
Fixed Rate Interest shall be calculated at a
rate equal at all times to the Bank's Cost of
Funds (COF) plus 0.35% per annum calculated on a
360 day accrual basis.
<PAGE>
Rates may be fixed for periods of 30 days, 60
days, 90 days, 120 days or 180 days. Cost of
Funds is defined as the Bank's cost of borrowing
in the domestic interbank market for the term
requested plus any applicable reserves, taxes, or
other expenses relating to the transaction.
2) Floating Interest Rate:
The Floating Interest Rate shall be calculated at
a rate equal at all times to Prime Rate, subject
to fluctuation, minus 2% per annum and calculated
on a 365 day accrual basis.
Prime Rate means the rate of interest per annum
publicly announced by Marine Midland Bank at its
New York City office from time to time as its
prime rate and is a base rate for calculating
interest on certain loans. Any change in the
interest on these facilities resulting from a
change in Marine Midland Bank's Prime Rate shall
be effective on the date of such change.
PENALTY 2.0% p.a. over the rate of interest otherwise
INTEREST applicable to these advances.
REPAYMENT On demand.
All payments will be automatically debited to the Borrower's
Account 000-014472-016 with the Bank.
PREPAYMENT Borrower may incur a penalty on prepayment of
PENALTY funds which have been advanced at fixed interest
rates. The amount of such penalty would be equal
to the cost to the Bank in placing the prepaid
funds with another Borrower.
Borrower may prepay funds advanced at the
floating rate without incurring a penalty.
REPAYMENT The maximum term for Documentary Letters of
TERMS Credit is 365 days, with date of issuance to be
up to 30 September 1998, with no DC maturing
beyond 31 July 1999.
The Import Line of Credit is not intended to be nor shall it
constitute any obligation or commitment on the part of the Bank
to issue any Documentary Letter of Credit under such line.
Borrower may request the Bank to advance funds under the
Revolving Line of Credit with maturity dates not to exceed 31
December 1998.
<PAGE>
The Revolving Line of Credit is not intended to be nor shall it
constitute any obligation or commitment on the part of the Bank
to fund any loan under such line.
SECURITY AND The Bank shall continue to hold:
COLLATERAL 1) Optional Advance Time or Demand Grid Note
DOCUMENTATION dated 26 March 1996.
2) Articles of Incorporation of Columbia
Sportswear Company.
3) Corporate By-laws of Columbia Sportswear
Company.
4) Continuing Indemnity Agreement dated 3
August 1993.
5) Continuing Commercial Letter of Credit and
Security Agreement dated 12 August 1994.
AVAILABILITY LIBOR based loans are available in minimum draws
of USD500,000 for periods of 30, 60, 90 and 180
days. RLN01 is available against a monthly
asset base which restricts total interest
bearing debt to 60% or 70% of accounts
receivable (depending on time of year) plus 60%
or 70% of inventory, based on the prior month's
financial statement (refer to Financial
Covenants).
Borrower's availability under the Revolving Line
of Credit shall be calculated by applying the
above referenced formula to Borrower's monthly
financial statements.
Notwithstanding the above, advances under the
Line of Credit shall be made at the Bank's sole
discretion
FEES DC Issuance: 1/24% per month of the face
amount (minimum of USD35).
Negotiation/
Drawings: USD45 flat.
Amendments: 1/24% per month on the face
amount to increase the amount
or extend the term of a credit
(minimum USD35).
Other Amendments: USD35 flat.
Tariff rates shall apply to out of pocket
expenses.
EVIDENCE OF Prior to the extension of the Facility, Borrower
INDEBTEDNESS shall execute such documentation as the Bank may
reasonably request to evidence and secure the
banking facility.
<PAGE>
Borrower acknowledges that the Bank has previously advanced
credit to Borrower and documents evidencing such indebtedness
continue in effect with amendments thereto.
TENURE This facility is subject to review by 30 September 1998 when we
shall require submission of the Borrower's latest reviewed
financial information.
INSURANCE Borrower must maintain at its expense fire and extended coverage
insurance, general hazard insurance (if such insurance is
different from and available separately from fire and extended
coverage insurance), business interruption insurance, workers
compensation insurance, public liability and property damage
insurance, with all such insurance to be issued by such insurers,
in coverage amounts and with such deductibles and other terms and
conditions as are consistent with trade standards and are
reasonable acceptable to the Bank. Generally, the Bank will
require public liability and property damage coverage in a
combined single incident amount of not less than the amount
deemed prudent by the Bank and fire insurance coverage of not
less than the full insurable value of all of the real and
tangible personal property of Borrower.
Borrower will provide to the Bank copies of insurance policies
or, if approved by the Bank, certificates of such insurance
issued by the carriers or their authorized agent and proof that
premiums have been prepaid upon the Bank's request.
FINANCIAL 1. Within 120 days after the close of each fiscal year,
Borrower shall provide the Bank, at Borrower's expense, with
a 12 month financial statement audited by an independent
certified public account in accordance with Generally
Accepted Accounting Principles consistently applied and
consisting of balance sheets, profit and loss statements,
and statements of cash flows.
2. In addition, Borrower shall, at Borrower's expense, make
available to the Bank, within 30 days of month end, monthly
financial statements and operating statements prepared on an
accrual basis.
3. Borrower shall, at Borrower's expense, make available to the
Bank, within 45 days of quarter end, quarterly financial
statements and operating statements prepared on an accrual
basis.
<PAGE>
4. Quarterly and annual statements shall be accompanied by the
certificate of Borrower's Chief Financial Officer that such
officer has reviewed the Loan Agreement and that to such
officer's knowledge either i) Borrower is not in default
under the agreement or ii) Borrower is in default under the
agreement only by reason of the events specified in such
Officer's Certificate.
FINANCIAL Availability under the revolving loan will be made
COVENANTS against a monthly borrowing base. This restricts
total notes payable, trade accounts payable and bank
advances to 60% of A/R plus 60% of inventory
(70% during May - December).
This calculation is to be provided to the Bank on a monthly
basis, duly certified by the Borrower's Chief Financial Officer.
COSTS AND Should we require that documentation be prepared
EXPENSES or reviewed by the Bank's lawyers, all costs, legal
fees and other out-of-pocket expenses will be for the
account of the Borrower. All other costs, including
UCC charges, costs incurred by the Bank in performing
credit checks and other related expenses will be paid
by the Borrower.
CONDITIONS Delivery to the Bank of the documentation as
PRECEDENT required under "Security and other Collateral
Documentation" section and other documents that the
Bank shall require evidencing the Borrower's
power and authority to enter into the
transactions described in this Facility Letter.
Reliance on Information This facility is granted with
reliance on information provided by borrower in the
application and other supporting document. In the
event that this information should prove to be
inaccurate or substantially incomplete, or if the
Bank determines in its sole discretion that there has
been a material adverse change in the financial
condition or management of Borrower, Bank may elect
to terminate this entire facility.
Representations Regarding Materially Adverse
Agreement; Performance:
A. Agreements. Borrower is not a party to or
subject to any material agreement or instrument
or charter or other internal restriction
materially adversely affecting the business,
properties, assets, operations or condition
(financial or otherwise) of Borrower.
<PAGE>
B. Performance. Borrower is not in default in the
performance, observance or fulfillment of any of
the obligations, covenants or conditions
contained in any Contractual Obligation of
Borrower and no condition exists which, with
the giving of notice or the lapse of time or
both, would constitute such a default, except
where the consequences, direct or indirect, of
such default or defaults, if any, would not have
a material adverse effect on the business,
properties, assets, operations or condition
(financial or otherwise) of Borrower.
GOVERNING LAW New York State.
Please be advised that your relationship officers are:
Anastasia Micklethwaite (212) 658-1403
Adriana Collins (212) 658-5115
(212) 658-2813 (facsimile)
Should you have any matters of an operational nature to discuss, however, we
suggest you contact the following officers:
Customer Services Department
Barry Zabell (212) 658-2949
Liz Chaverria (212) 658-2954
Trade Finance Department - for DC/LAI:
Barbara Henderson (212) 658-2927
Loan Operations Department - for RLN:
David Colberg (212) 658-2825
Please arrange for authorized signatories of your company, in accordance with
the terms of the mandate given to the Bank, to sign and return to us the
duplicate copy of this letter to signify your understanding and acceptance of
the terms and conditions under which this uncommitted facility is granted.
This uncommitted facility offer will expire at 5:00 p.m. on 30 November 197
unless we have received a fully executed copy of this letter from your company
by such time.
We are pleased to be of continued assistance.
Yours sincerely,
A. Micklethwaite A D Collins
Assistant Vice President Assistant Vice President
CBU Trade Services CBU Trade Services
<PAGE>
Confirmed and Accepted:
on behalf of
Columbia Sportswear Company
- -----------------------------------
Authorized Signature
Date: 11/24/97
Title: Pres.
Date: 11/24/97
<PAGE>
CONTINUING INDEMNITY AGREEMENT
between
COLUMBIA
SPORTSWEAR COMPANY
and
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
Dated 8/3, 1993
<PAGE>
CONTINUING INDEMNITY AGREEMENT
In consideration of the extension of credit by The Hongkong and Shanghai
Banking Corporation Limited (Bank), by Bank's giving its Letter of Indemnity
(Indemnity) from time to time upon request by the undersigned (Applicant),
pursuant to which Bank shall agree to hold carriers named by Applicant harmless
by reason of such carriers releasing Goods without surrender to them of the
endorsed Bill of Lading covering the shipment (Shipment) of those Goods.
Applicant agrees as follows:
1. Indemnification.
Applicant agrees to indemnify and hold Bank, and the officers,
directors, employees, attorneys, agents and affiliates of Bank (Indemnitees)
harmless from, and to pay to Bank on demand for, any loss, liability, costs,
fees (including attorney's fees), expenses, claims, actions, proceedings or
damages incurred by Bank or any Indemnitee by reason of Bank's issuance of an
indemnity, or by reason of any action taken or not taken by Bank with respect to
any indemnity or any transaction related thereto.
2. Commission and Costs.
(a) Applicant agrees to pay to Bank on demand Bank's usual commission
and all charges and expenses incurred by Bank or its correspondents in
connection with this Agreement.
(b) If Applicant fails to pay Bank pursuant to Section 2(a), Applicant
shall pay a charge equal to 1-1/2% per month of the amount so due from the date
of such demand to the date which Applicant makes payment to Bank.
3. Bank's Ownership of Property.
(a) As security for payment of the Indebtedness (as hereinafter
defined), Applicant hereby acknowledges and agrees that Bank is the owner, and
shall have an unqualified right to the possession and disposal, of all of the
following, regardless of whether released to Applicant on trust or bailee
receipt or other form of security agreement: (i) all Goods (including, without
limitation, Inventory and Equipment) released to Applicant pursuant to or in
connection with this Agreement or any Indemnity, and all property and rights in
any way related thereto; (ii) any instruments, including, without limitation,
drafts, relating to such Goods; (iii) all shipping documents (including, without
limitation, Bills of Lading), warehouse receipts, policies or certificates of
insurance and other Documents accompanying or relative to such drafts; and (iv)
all Proceeds and Products of all of the foregoing until such time as all of the
obligations under this Agreement have been fully paid (the foregoing
collectively referred to herein as Collateral). The receipt by Bank or any of
Bank's correspondents, at any time of other security of any nature, including
cash, shall not be deemed a waiver of any of Bank's rights, specified in this
Agreement. "Indebtedness" as used in this Agreement shall mean any and all
obligations of Applicant under this Agreement and any and all indebtedness and
other liabilities of Applicant to Bank of every kind and character and all
extensions, renewals, modifications and replacements thereof, including, without
<PAGE>
limitation, all unpaid accrued interest thereon and all costs and expenses
payable as hereinafter provided: (i) whether now existing or hereafter incurred;
(ii) whether direct, indirect, primary, absolute, secondary, contingent,
secured, unsecured, matured or unmatured; (iii) whether such indebtedness is
from time to time reduced and thereafter increased, or entirely extinguished and
thereafter reincurred; (iv) whether such indebtedness was originally contracted
with Bank or with another or others; (v) whether or not such indebtedness is
evidenced by a negotiable or non-negotiable instrument or any other writing; and
(vi) whether such indebtedness is contracted by Applicant alone or jointly or
severally with another or others.
(b) Applicant will hold the Collateral in trust for Bank, for the
purpose of selling the Collateral and delivering to Bank immediately on receipt
thereof all Proceeds of sale or other disposition of the Collateral, to be
applied by Bank to the payment of Indebtedness. If such Proceeds consist of
Instruments or Chattel Paper, they shall not be so applied until fully paid.
Bank may, in its sole discretion, at any time sell or discount any such
Instrument or Chattel Paper and apply the net Proceeds thereof conditionally
upon final payment of such Instrument or Chattel Paper. Bank shall have full
power and authority to compromise and collect such Proceeds in its own name or
in that of Applicant, but shall be under no duty to do so, or to take any steps
necessary to preserve rights against prior parties.
(c) Applicant agrees that Bank may at any time cancel the trust and
take possession of the Collateral, including without limitation: (i) Goods,
manufactured or non-manufactured (until the sale and delivery of the Goods to a
bona fide purchaser pursuant to a sale authorized by Bank, and Applicant's
receipt of the Proceeds of such sale); (ii) Documents relating to such Goods;
and (iii) Proceeds of any sale, wherever such Goods, Documents or Proceeds may
be found.
4. Matters Pertaining to Issuance of an Indemnity.
(a) If an Indemnity is issued for a Shipment that is financed by
letter of credit (Letter of Credit), Applicant authorizes Bank to honor any and
all drafts under such Letter of Credit covering the Shipment, even if the
accompanying Documents do not in all respects conform to the requirements of
such Letter of Credit or certain Documents do not accompany the draft or drafts.
Applicant agrees that any such discrepancy or omission in the accompanying
Documents shall in no way affect Bank's rights against Applicant under this
Agreement or any other agreement between Bank and Applicant.
(b) If an Indemnity is issued for a Shipment that is not financed by
Letter of Credit, Applicant authorizes Bank to honor any drafts covering such
Shipment, even if the conditions for honor have not been complied with due to
some deficiency or variation in the Documents or Goods relating to such
Shipment.
(c) Application will, immediately on receipt of the original Bill(s)
of Lading, arrange for the prompt release or return to Bank of the Indemnity
issued pursuant to this Agreement, which relates to such Bill(s) of Lading. If
an Indemnity is not released within 60 days
2
<PAGE>
from the date of Bank's issuing such Indemnity, or such shorter time as Bank may
request, Applicant shall, at Bank's request, deliver to the carrier company or
its agent a bond issued by an independent surety company to replace the
Indemnity, and shall request such carrier company or its agent to return such
Indemnity or to confirm that it has been cancelled. Notwithstanding any other
provision of the Agreement, in order to obtain the release of an indemnity, Bank
may send to a carrier company any documents remitted to Bank directly from
overseas.
(d) Applicant agrees that Bank and any of Bank's correspondents may
receive and accept, as Bills of Lading, any Documents issued or purporting to be
issued by or on behalf of any carrier which acknowledge receipt of Goods for
transportation, whatever the specific provisions of such Documents. The date of
each such Document shall be deemed the date of shipment of the property
mentioned therein; each such Document shall be deemed if order if such date is
within the time limit fixed by the relevant agreement pursuant to which such
Shipment was financed (a copy of any such agreement being previously delivered
to Bank by Applicant).
(e) Bank is authorized to accept instructions from Applicant, relating
to the issuance of an indemnity, in writing or orally, including, without
limitation, by telephone. Each oral request for an indemnity shall be
conclusively presumed to be made by a person authorized by Applicant to do so,
and the issuance of an indemnity as herein provided shall conclusively establish
Applicant's obligations hereunder.
(f) If Bank issues, or takes action respecting, an indemnity pursuant
to any communication of any kind from Application, then the provisions of this
Agreement shall apply to such indemnity or such action, notwithstanding any lack
of reference to the Agreement in such communications.
(g) Neither Bank, nor Bank's correspondents, shall be responsible, and
neither shall incur liability, for any matter respecting any Goods or the
Documents relating to such Goods, issued in connection with this Agreement,
including, without limitation, the existence, character, quality, quantity,
condition, packing, value, or delivery of the Goods released to Applicant
pursuant to the Agreement: any difference in character, quality, quantity,
condition, or value of the Goods from that expressed in Documents; the validity,
sufficiency or genuineness of Documents, even if such Documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which any Shipment is made, partial or
incomplete Shipment, or failure or omission to ship any or all of the Goods
referred to in any Shipment; the character, adequacy, validity or genuineness of
any insurance, the solvency or responsibility of any insurer, or any other risk
connected with insurance; a deviation from instructions, delay, default or fraud
by a carrier or anyone else in connection with any Goods or the shipping
thereof; the solvency, responsibility or relationship to the Goods of any party
issuing any Documents in connection with the Goods; delay in arrival or failure
to arrive of either the Goods or any of the Documents relating thereto; delay in
giving or failure to give notice of arrival or any other notice; any breach of
contract between the carriers or vendors and Applicant; failure of any draft to
bear any reference or adequate reference to the relevant Shipment; or failure to
send forward Documents
3
<PAGE>
apart from drafts as required by the terms of any Shipment, or to accompany the
drafts by a certificate that Documents have been sent.
(h) In furtherance and extension and not in limitation of the specific
provisions set forth in this section, Applicant agrees that Bank and Bank's
correspondents shall incur no liability with respect to any action taken or not
taken in good faith by Bank or by any of Bank's correspondents under or in
connection with any Shipment, or the relevant drafts, Documents or Goods, and
that any such action taken or not taken such be binding on Applicant.
5. Representations and Covenants.
(a) Applicant represents and warrants that Applicant is authorized to
enter into this Agreement.
(b) So long as this Agreement is in effect, Applicant will furnish to
Bank financial statements in such form and at such intervals as Bank shall
request, and will keep, in accordance with generally accepted accounting
principles consistently applied, accurate and complete books and records.
(c) Applicant will pay to Bank, on demand, all costs and expenses of
every kind paid or incurred by Bank or any of Bank's correspondents in
connection with this Agreement, in enforcing this Agreement, or in realizing
upon or protecting any Collateral "Costs and expenses" as used in the preceding
sentence shall include, without limitation, the actual attorneys' fees incurred
by Bank in retaining counsel for advice, suit, appeal, any insolvency or other
proceedings under the Federal Bankruptcy Code or otherwise, or for any purpose
specified in the preceding sentence. Payment of all sums referred to in this
paragraph is secured by all Collateral held by Bank.
(d) Applicant will furnish to Bank such additional collateral as Bank
may from time to time request as security for the Indebtedness. If Bank in its
sole discretion and at any time or from time to time determines that the
liquidation value of the Collateral held by it is or has become inadequate,
Applicant will immediately on demand (i) deliver to Bank additional collateral
of a kind and value satisfactory to Bank, or (ii) make payments of Indebtedness
sufficient to cause the relationship of the liquidation value of Collateral
Indebtedness (including Indebtedness for which a commitment to lend exists) to
become satisfactory to Bank.
(e) Applicant will furnish to Bank any information which Bank may
reasonably request with respect to any financial statement, or like document, or
security agreement relating to Applicant or to any of Applicant's property.
Without Bank's prior written consent, Applicant will not enter into any security
agreement or file or present to be filed in any public office any financing
statement naming Applicant as debtor and not naming Bank as secured party, which
creates a security interest in (i) any property released to Applicant pursuant
to this Agreement; or (ii) in any of Applicant's after-acquired property, other
than Accessions and Fixtures to items of specific property.
4
<PAGE>
(f) Applicant will execute and deliver to Bank such trust receipts,
security agreements, financing statements, amendments, extensions, assignments
and other documents and do such other things relating to any security interest
as Bank may request.
(g) Applicant will insure the Collateral against risks, in coverage,
form and amount, and by insurer, satisfactory to Bank, and, at Bank's request,
will cause each policy to be payable to Bank as a named insured or loss payee,
as its interest may appear and deliver each policy or certificate of insurance
to Bank. Bank may receive and accept as documents of insurance either insurance
policies or insurance certificates.
(h) Applicant will at all times hold the Collateral separate and apart
from Applicant's property, and will cause such separation to be reflected in all
its records.
6. Events of Default and Remedies.
(a) Any of the following events or conditions shall constitute an
event of default (Event of Default) hereunder: (i) nonpayment, when due, whether
by acceleration or otherwise, of principal of or interest on any Indebtedness,
or default by Applicant in the performance of any obligation, covenant, term or
condition of this Agreement or any other agreement between Applicant and Bank;
(ii) death or judicial declaration of incompetency of Applicant, if any
individual; (iii) the filing by or against Applicant of a request or petition
for liquidation, reorganization, arrangement, adjustment of debts, adjudication
as a bankrupt, relief as a debtor or other relief under the bankruptcy,
insolvency or similar laws of the United States or any state or territory
thereof or any foreign jurisdiction, now or hereafter in effect; (iv) the making
of any general assignment by Applicant for the benefit of creditors; Applicant
shall have made or suffered a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; the
appointment of a receiver or trustee for Applicant or for any assets of
Applicant, including, without limitation, the appointment of or taking
possession by a "custodian", as defined in the Federal Bankruptcy Code; the
making of any, or sending notice of any intended, bulk sales; or the institution
by or against Applicant of any type of insolvency proceeding (under the Federal
Bankruptcy Code or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against or winding up of
affairs of, Applicant; (v) the sale, assignment, transfer or delivery of all or
substantially all of the assets of Applicant; the cessation by Applicant as a
going business concern, the entry of judgment against Applicant, other than a
judgment for which Applicant is fully insured, if ten days thereafter such
judgment is not satisfied, vacated, bonded or stayed pending appeal; or if
Applicant is generally not paying Applicant's debts as such debts become due;
(vi) the occurrence of any event described in paragraph 6(a)(ii), (iii), (iv) or
(v) hereof with respect to any indorser, guarantor or any other party liable
for, or whose assets or any interest therein secures, payment of any
Indebtedness (Third Party), or the occurrence of any such event with respect to
any general partner of Applicant, if Applicant is a partnership; (vii) if any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished by or on behalf of Applicant or any Third Party, pursuant to
or in connection with this Agreement, or otherwise (including, without
limitation, representations and warranties continued herein), or as an
inducement to Bank to extend any credit to or to enter into
5
<PAGE>
this or any other agreement with Applicant, proves to have been false in any
material respect at the time as of which the facts therein set forth were stated
or certified, or to have omitted any substantial contingent or unliquidated
liability or claim against Applicant or any such Third Party; or, if upon the
date of execution of this Agreement there shall have been any materially adverse
change in any of the facts disclosed by any such certificate, statement,
representation, warranty or audit, which change shall not have been disclosed in
writing to Bank at or prior to the time of such execution; (viii) nonpayment by
Applicant when due of any indebtedness for borrowed money owing to any third
party, or the occurrence of any event which could result in acceleration of
payment of any such indebtedness; or (ix) the reorganization, merger or
consolidation of Applicant (or the making of any agreement therefor) without the
prior written consent of Bank.
(b) Bank, at its sole election, may declare all or any part of any
indebtedness not payable on demand to be immediately due and payable without
demand or notice of any kind (including, without limitation, notice of intent to
accelerate and notice of acceleration, all such demands and notice being hereby
expressly waived) upon the happening of any Event of Default (other than an
Event of Default under either paragraph 6(a)(iii) or (iv) hereof), or if Bank in
good faith believes that the prospect of payment of all or any part of the
indebtedness or performance of Applicant's obligations under this Agreement or
any other agreement now or hereafter in effect between Applicant and Bank is
impaired. All or any part of any Indebtedness not payable on demand shall be
immediately due and payable without demand or notice of any kind upon the
happening of one or more Events of Default under paragraph 6(a)(iii) or (iv)
hereof. The provisions of this paragraph are not intended in any way to affect
any rights of Bank with respect to any Indebtedness which may now or hereafter
be payable on demand.
(c) Applicant agrees that any notice of sale, disposition or other
intended action with respect to the Collateral or otherwise which is required by
law and which is given at least five (5) days prior to such action shall
constitute reasonable notice to Applicant. Upon the existence or occurrence of
an Event of Default, Bank may require Applicant to assemble the Collateral and
make it available to Bank at a place or places designated by Bank, and Bank may
use and operate the Collateral.
(d) Bank's rights and remedies under this Agreement shall be those of
a secured party under the Uniform Commercial Code and under any other applicable
law, as the same may from time to time be in effect, in addition to those rights
granted herein and in any other agreement now or hereafter in effect between
Applicant and Bank, and to those rights otherwise available at law or equity.
7. Miscellaneous.
(a)(i) As further security for payment of the obligations arising
under this Agreement, Applicant hereby grants to Bank a security interest in and
lien on any and all property of Applicant which is or may hereafter be in the
possession or control of Bank in any capacity or of any third party acting on
its behalf, including, without limitation, all deposit and other accounts and
all moneys owed or to be owed by Bank to Applicant; and with respect to all of
such property,
6
<PAGE>
Bank shall have the same rights hereunder as it has with respect to the
Collateral; (ii) without limiting any other right of Bank, whenever Bank has the
right to declare any of the obligations under this Agreement to be immediately
due and payable (whether or not it has so declared). Bank at its sole election
may set off against the obligations any and all moneys then or thereafter owed
to Applicant by Bank in any capacity, whether or not the obligation to pay such
moneys owed by Bank is then due, and Bank shall be deemed to have exercised such
right of set off immediately at the time of such election even though any charge
therefor is made or entered on Bank's records subsequent thereto.
(b) All payments to be made to Bank under this Agreement shall be
immediately available funds.
(c) No course of dealing between Applicant and Bank and no delay or
omission by Bank in exercising any right or remedy hereunder or with respect to
any obligation arising under this Agreement shall operate as a waiver thereof or
of any other right or remedy hereunder, under any document or instrument
executed in connection with or as security for the Indebtedness, at law or in
equity, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. Bank may
remedy any default by Applicant hereunder or with respect to any obligation in
any reasonable manner without waiving the default remedies and without waiving
any other prior or subsequent default by Applicant. All of Bank's rights and
remedies hereunder are cumulative.
(d) The rights and remedies of Bank hereunder shall, if Bank so
directs, inure to any party acquiring any interest in all or any part of this
Agreement.
(e) Bank and Applicant as used herein shall include the respective
heirs, executors or administrators, legal representatives, beneficiaries,
trustees or successors or assigns, of those parties.
(f) If more than one party executes this Agreement, the term
"Applicant" shall include each as well as all of them, and their obligations,
representations, covenants, warranties and indemnities hereunder shall be joint
and several.
(g) Bank shall have no obligation to issue any indemnity, the issuance
of any indemnity being in Bank's sole and absolute discretion. This Agreement
shall remain in full force and effect until an appropriate officer of Bank shall
actually receive from Applicant written notice of its discontinuance; provided,
however, this Agreement shall remain in full force and effect thereafter until
(i) all of Applicant's outstanding obligations under this Agreement, or
obligations contracted or committed for (whether or not outstanding before the
receipt of such notice by Bank, and any extensions or renewals thereof (whether
made before or after receipt of such notice), together with interest accruing
thereon after such notice, shall be finally and irrevocably paid in full, and
(ii) all of Applicant's covenants and obligations hereunder and under any other
document, instrument or agreement at any time evidencing, securing or in any way
relating to
7
<PAGE>
the Indebtedness, have been performed and satisfied in full, as determined in
Bank's sole and absolute discretion.
(h) The obligations hereunder shall continue in force, notwithstanding
any change in the membership of Applicant, if a partnership, whether arising
from the death or retirement of one or more partners of the accession of one or
more new partners.
(i) No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made, except by a written agreement
subscribed by Applicant and a duly authorized officer of Bank.
(j) Captions of the paragraphs of this Agreement are solely for the
convenience of Bank and Applicant, and are not an aid in the interpretation of
this Agreement.
(k) All terms, unless otherwise defined in this Agreement, shall have
the definitions set forth in the Uniform Commercial Code adopted in Oregon, as
the same may from time to time be in effect.
(l) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN NEGOTIATED AND ENTERED
INTO IN, AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF OREGON, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
(m) THE APPLICANT IRREVOCABLY AGREES THAT, SUBJECT TO THE BANK'S SOLE
AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR
RELATED TO THIS AGREEMENT, ANY LETTER OF CREDIT, OR ANY DOCUMENTS SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF PORTLAND, STATE OF OREGON.
THE APPLICANT HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED WITHIN SUCH CITY AND STATE AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON THE APPLICANT AND AGREES THAT ALL SUCH
SERVICE OR PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO THE APPLICANT AT
THE ADDRESS REFLECTED IN THE BANK'S RECORDS OR IN ANY OTHER MANNER PERMITTED BY
LAW. THE APPLICANT HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST THE APPLICANT BY THE BANK IN ACCORDANCE
WITH THIS PARAGRAPH.
(n) THE APPLICANT AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN
ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY LETTER OF CREDIT, OR
ANY DOCUMENTS OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, ANY LETTER OF CREDIT OR ANY DOCUMENTS, AND AGREE THAT
8
<PAGE>
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY. THE APPLICANT REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF
THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WILL NOT, IN THE
EVENT OF ANY LITIGATION, SEEK TO ENFORCE THIS WAIVER OF JURY TRIAL. THE
APPLICANT ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT IN RELIANCE UPON, AMONG OTHER THINGS, THE PROVISIONS OF THIS
PARAGRAPH.
Applicant:
Blake H. Larsen
--------------------------------------------
BLAKE H. LARSEN
--------------------------------------------
Chief Financial Officer
--------------------------------------------
Columbia Sportswear Company
6600 N. Baltimore
Portland, OR 97203
9
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF OREGON )
) SS.
COUNTY OF MULTNOMAH )
On this 3rd day of August, in the year 1993 to be personally known came
Blake Larsen, who being by me duly sworn, did depose and say that (s)he resides
in Portland, Oregon; that (s)he is the CFO of Columbia Sportswear, the
corporation described in, and which executed, the within instrument; that (s)he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that (s)he signed his name thereto by like order.
SAMANTHA COLLETTE KAISER
---------------------------------------
Notary Public
PARTNERSHIP ACKNOWLEDGMENT
STATE OF OREGON )
) SS.
COUNTY OF MULTNOMAH )
On this _______ day of ____________, in the year 19__
_________________ before me personally came _________________________, to be
known to be a partner in the partnership described in and which executed the
foregoing instrument, and acknowledged to me that such partnership executed the
same.
---------------------------------------
Notary Public
10
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF OREGON )
) SS.
COUNTY OF MULTNOMAH )
On this _______ day of ____________, in the year 19__ ________________
to me personally came _________________________, to be known to be the person
described in and who executed the foregoing instrument, and acknowledged to me
that such partnership executed the same.
--------------------------------------------
Notary Public
11
<PAGE>
OPTIONAL ADVANCE TIME OR DEMAND GRID NOTE
Variable Interest Rate
Promissory Note ____ Portland, Oregon
#960006 26 MARCH, 1996
FOR VALUE RECEIVED, the undersigned (jointly and severally, if the
undersigned be more than one) promise(s) to pay to the order of THE HONGKONG AND
SHANGHAI BANKING CORPORATION LIMITED (Bank), on demand or when due as provided
herein, at its Office at Portland, Oregon, the aggregate unpaid principal amount
of all advances made by the Bank to the undersigned from time to time, as
evidenced by the inscriptions made on the schedule on the reverse side hereof or
any continuations thereof (Schedule) or, at the Bank's option, on the records of
the Bank, together with interest on each advance at a variable per annum rate
equal to the prime rate as defined below, LESS 2%.
All advances, the due dates thereof and all payments of principal made on
this Note may be inscribed by the Bank on the Schedule or, at the Bank's option,
on its records. Each advance shall be payable on the earlier of (a) the due date
thereof or on demand, as inscribed by the Bank on the Schedule or, at the Bank's
option, on its records, or (b) ninety-two (92) days after the date upon which
such advance is made.
The Bank will endeavor (but shall be under no obligation) to send to the
undersigned written confirmation of the due date of each advance, but any
failure to do so shall not relieve the undersigned of the obligation to repay
the advance when due. Unless the undersigned shall object to such confirmation
in writing within three (3) days after receipt thereof, such confirmation shall
be prima facie evidence of the facts stated therein.
Each entry set forth on the Schedule or on the Bank's records shall be
prima facie evidence of the facts so set forth, except for any such facts as to
which the Bank has sent to the undersigned a written confirmation and the
undersigned has timely objected as provided herein. No failure by the Bank to
make, and no error by the Bank in making any inscription on the Schedule or on
its records shall affect the undersigned's obligation to repay the full
principal amount advanced by the Bank to or for the account of the undersigned,
or the undersigned's obligation to pay interest thereon at the agreed upon rate.
The Prime Rate means the rate of interest publicly announced by Marine
Midland Bank, N.A. from time to time at its office in New York, New York as its
prime rate and is a base rate for calculating interest on certain loans. After
maturity (whether by acceleration or otherwise), if an advance is not payable on
demand, or after demand, if an advance is payable on demand, such advance shall
bear interest at a per annum rate 3% greater than the rate of interest otherwise
applicable to the advances. In no event shall the interest rate on any advance
exceed the maximum rate authorized by applicable law. Interest will be
calculated for each day at 1/360th of the applicable per annum rate, which will
result in a higher effective annual rate. Accrued interest shall be payable |X|
monthly on the first day of each month. |_| quarterly on the first day of each
calendar
<PAGE>
quarter. After maturity, whether by acceleration or otherwise, accrued interest
shall be payable on demand.
All or any part of the indebtedness evidenced by this Note not payable on
demand may be prepaid without penalty at any time, together with the accrued
interest on the principal so prepaid to the date of such prepayment, provided
that any payments or prepayments shall be applied to the oldest outstanding
advance, unless otherwise agreed in writing by the Bank and the undersigned.
Any holder of this Note may declare all indebtedness evidenced by this
Note, not payable on demand, to be immediately due and payable whenever such
holder has the right to do so under any Security Agreement or other agreement,
now or hereafter in effect, pursuant to which payment of the indebtedness
evidenced by this Note is secured; or irrespective of the terms or existence of
any such Security Agreement, or other agreement, upon the happening of any of
the following: (1) nonpayment, when due, of principal of, or interest on, any
indebtedness evidenced by this Note; (2) default by any maker hereof in the
payment or performance of any obligation, term or condition of any agreement
between such maker and the holder hereof, (3) death of judicial declaration of
incompetency of any maker hereof, if an individual; (4) the filing by or against
any make hereof of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, relief as a debtor
or other relief under the bankruptcy, insolvency or similar laws of the United
States or any state or territory thereof or any foreign jurisdiction, now or
hereafter in effect; (5) the making , by any maker hereof, of any general
assignment for the benefit of creditors; (6) the appointment of a receiver or
trustee for any maker hereof or for any assets of any such maker, including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the Federal Bankruptcy Code; (7) the occurrence of any event
described in clause (3), (4), (5) or (6) of this paragraph with respect to any
indorser, guarantor or any other party liable for, or whose assets or any
interest therein secures, payment of any indebtedness evidenced by this Note, or
the occurrence of any such event with respect to any general partner of any
maker hereof, if any such maker is a partnership; (8) nonpayment when due by any
maker hereof of any indebtedness for borrowed money owing to any party other
than the Bank, or the occurrence of any event which could result in acceleration
of the time for payment of any such indebtedness; or (9) if the holder hereof in
good faith believes that the prospect of payment of all or any part of the
indebtedness evidence by this Note is impaired.
Nothing contained in this Note or otherwise is intended, nor shall
constitute, any obligation of the Bank to make any advance.
No failure by the holder hereof to exercise, and no delay in exercising,
any right or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by such holder of any right or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right or remedy. The rights and remedies of the holder hereof as herein
specified are cumulative and not exclusive of any other rights or remedies which
such holder may otherwise have. The undersigned hereby waives presentment,
protest, demand and notice of presentment, demand, protest and nonpayment.
2
<PAGE>
The Bank may, in its sole discretion, make an advance to the undersigned
upon an oral request. Each oral request shall be conclusively presumed to have
been made by a person authorized by the undersigned to do so, and any credit by
the Bank of an advance to or for the account of the undersigned shall
conclusively establish the undersigned's obligation to repay same. The Bank
shall incur no liability of any kind to any party by reason of making an advance
upon an oral request.
This Note shall be governed by the laws of the State of Oregon without
regard to principles of conflict of laws. The undersigned agrees to pay all
costs and expenses incurred by the holder hereof in enforcing this Note,
including without limitation, actual attorneys' fees and legal expenses.
If payment of this Note is secured by collateral, the collateral is
specified in the collateral records of the Bank.
THE UNDERSIGNED IRREVOCABLY AGREES THAT, SUBJECT TO THE BANK'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR
RELATED TO THIS NOTE SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY
OF PORTLAND, STATE OF OREGON. THE UNDERSIGNED HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SUCH CITY AND
STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE UNDERSIGNED
AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL
DIRECTED TO THE UNDERSIGNED AT THE LAST KNOWN ADDRESS OF THE UNDERSIGNED AS
SHOWN ON THE RECORDS OF THE BANK OR IN ANY OTHER MANNER PERMITTED BY LAW.
THE UNDERSIGNED IRREVOCABLY WAIVES ANY RIGHT TO TRAIL BY JURY IN ANY ACTION
OR PROCEEDING IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
BLAKE H. LARSEN
--------------------------------------------
BLAKE H LARSEN - CFO FOR COLUMBIA
SPORTSWEAR COMPANY
3
BUYING AGENCY AGREEMENT
BETWEEN
NISSHO IWAI AMERICAN CORPORATION
AND
COLUMBIA SPORTSWEAR COMPANY
JANUARY 1, 1992
<PAGE>
BUYING AGENCY AGREEMENT
DATED: JANUARY 1, 1992
BETWEEN: NISSHO IWAI AMERICAN CORPORATION "NIAC"
1211 S.W. Fifth Avenue
Portland, Oregon 97204
AND: COLUMBIA SPORTS COMPANY "COLUMBIA"
6600 N. Baltimore Street
Portland, Oregon 97203
NIAC and COLUMBIA entered into the Buying Agency Agreement dated as of
January 1, 1989, pursuant to which COLUMBIA appointed NIAC as its buying agent
with respect to all clothing goods, materials and products which COLUMBIA would
purchase outside of the United States for resale by COLUMBIA in the United
States (collectively the "Goods"); and NIAC and COLUMBIA desire to terminate
said prior agreement as of December 31, 1991 and to create a new agreement
governing their relationship commencing on January 1, 1992.
THEREFORE, the parties agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE
During each year of this Agreement, COLUMBIA agrees that it shall purchase
through NIAC, as its buying agent, at least eighty percent (80%) of the Goods
which COLUMBIA purchases outside of the United States for resale by COLUMBIA in
the United States.
ARTICLE II
AGREEMENT TO PROCURE GOODS FOR RESALE
During the term of this Agreement, NIAC will purchase as COLUMBIA's agent,
on F.O.B. vessel loading port of country of origin (hereinafter referred to as
"F.O.B. price"), all Goods requested by COLUMBIA, and deliver such Goods or
arrange for their delivery to a port specified by COLUMBIA within the United
States. COLUMBIA shall be responsible for locating the source of Goods and
negotiating the purchase, the price, and delivery schedules for such Goods with
the suppliers.
<PAGE>
On behalf of COLUMBIA, NIAC shall advance the costs for acquisition of the
Goods and other costs incurred in bringing the Goods, cleared through customs,
to the point of delivery. Reimbursable Costs will include, without limitation,
the amount paid by NIAC to the supplier for Goods purchased, transportation
costs, costs of loading and unloading, costs of insurance, any costs incurred in
protecting the Goods, custom duties, and fees of custom brokers for air
shipment. Reimbursable Costs will not include bank service charges, fees of
custom brokers (except for air shipment), and salaries paid to NIAC's own
employees or NIAC's overhead costs. COLUMBIA shall reimburse NIAC for all such
Reimbursable Costs together with a commission for its services as COLUMBIA's
buying agent in the amount of two percent (2%) of the F.O.B. price of the Goods
purchased, country of origin.
ARTICLE III
REIMBURSEMENT TERMS
3.1 NIAC shall invoice COLUMBIA after delivery of the Goods for all
Reimbursable Costs for the Goods and for NIAC's commission. Any unanticipated
Reimbursable Costs incurred thereafter shall be billed by NIAC as soon as
possible after such costs are incurred.
3.2 The Reimbursement Starting Date shall be each disbursement date of the
letter of credit opened by NIAC for the supplier. COLUMBIA shall pay NIAC for
all Reimbursable Costs and the applicable commission for Goods in United States
currency within Ninety (90) days from the Reimbursement Starting Date (the "Due
Date").
3.3 COLUMBIA shall pay interest to NIAC on all Reimbursable Costs and
NIAC's commission at a rate equal to one and one quarter percent (1.25%) over
the three month LIBOR printed in the Wall Street Journal in effect on the first
day of each month. Interest shall accrue from the Reimbursement Starting Date to
the date of payment by COLUMBIA for such invoice.
3.4 Overdue interest shall be payable on all amounts due NIAC from the Due
Date of said amount to the date NIAC actually receives payments thereof. The
applicable overdue interest rate shall be the Prime Rate announced by Citibank
N.A., New York plus five percent (5%) or the maximum rate allowed by law,
whichever is lower as set forth on each invoice issued by NIAC.
ARTICLE IV
LINE OF CREDIT
4.1 Prior to November 10 of each year, COLUMBIA shall submit to NIAC its
annual preliminary financial plan for COLUMBIA's forthcoming fiscal year. Such
plan will consist of monthly income statements, balance sheets, and statements
of cash flows and
3
<PAGE>
will be in substantially the same format as the 1991 plan. By November 10 of
each year, COLUMBIA also shall submit its financial statements for the current
fiscal year through September and its preliminary income statement for October.
Such statements shall be prepared in accordance with generally accepted
accounting principles, and such statements shall be certified by the chief
financial officer of COLUMBIA as being accurate and having been prepared in this
manner. Following a reasonable review of said annual financial plan and the
financial statements, and provided NIAC is reasonably satisfied with the
financial plan and the financial statements, NIAC shall specify the amount of
the credit line which it is willing to establish for COLUMBIA for the purchase
of Goods under Articles II and III above for the forthcoming COLUMBIA fiscal
year. The amount of credit which shall be applied against the credit line shall
be equal to the amount of outstanding invoices from NIAC to COLUMBIA which have
not been paid.
4.2 Notwithstanding the above, however, NIAC shall have no obligation to
place orders for Goods requested by COLUMBIA or extend credit under the credit
line if at any time:
1. COLUMBIA has operated at a loss during any three consecutive fiscal
quarters or COLUMBIA has accumulated a loss in the current fiscal
year, the total amount of which exceeds 50 percent of the amount of
retained earnings at the end of the preceding fiscal year;
2. There are outstanding invoices which have not yet been paid by
COLUMBIA and existing purchase orders which have not yet been invoiced
to COLUMBIA for payment both of which total more than 100 percent of
the approved credit line; or
3. There is any default by COLUMBIA under this Agreement.
ARTICLE V
WARRANTY LIMITATIONS AND INDEMNIFICATION
5.1 NIAC shall purchase the Goods ordered by COLUMBIA from those Suppliers
chosen by COLUMBIA. NIAC shall assign to COLUMBIA any warranties regarding the
Goods which are provided by the suppliers, but shall not provide any warranties
itself. NIAC EXPRESSLY DISCLAIMS ALL WARRANTIES, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY OR FITNESS. NIAC shall not be obligated to pay or
give any purchase discount or allowance to COLUMBIA for defective or B Grade
goods. NIAC shall, however, give COLUMBIA any discounts or allowance given to
NIAC by the supplier for Goods.
5.2 COLUMBIA hereby releases and shall indemnify and hold harmless NIAC
from any claim, loss, or liability arising from any claim by any third party
against NIAC arising out of this Agreement, any actions or omissions of NIAC
pursuant to this Agreement,
4
<PAGE>
or the Goods purchased hereunder unless and to the extent such claim, loss or
liability arises from the sole negligence of NIAC.
5.3 COLUMBIA shall maintain with a reasonably acceptable insurance company
product liability insurance in an amount per occurrence of not less than
$1,000,000 covering any claim of product liability with respect to the Goods
delivered by NIAC to COLUMBIA under this Agreement, naming NIAC as an additional
named insured, and providing for not less than ten (10) days' advance notice to
NIAC of cancellation. COLUMBIA shall submit to NIAC promptly upon issuance of
such policy of insurance and upon each anniversary thereof a certificate issued
by the insurance company evidencing such insurance.
5.4 NIAC, at COLUMBIA's expense, shall have the obligation of maintaining
appropriate insurance on the Goods until delivered to the point of delivery.
ARTICLE VI
REPORTS AND RECORDS
For so long as COLUMBIA is indebted to NIAC, COLUMBIA shall prepare and
submit to NIAC the following reports and documents:
6.1 Within forty-five (45) days following the end of each calendar month,
COLUMBIA shall submit the following:
1. A balance sheet (a consolidated balance sheet if COLUMBIA has any
subsidiaries in the future) as of the close of the month just ended.
2. A statement of income and retained earnings (a consolidated
statement if COLUMBIA has any subsidiaries in the future) for the
period ended at the close of the month just ended, for such month and
for the fiscal year to date.
3. The month-end borrowing base certificate, submitted to COLUMBIA's
lead bank, under its revolving credit agreement.
6.2 Within forty-five (45) days following the end of each calendar quarter
COLUMBIA shall submit the following:
1. A report showing the amount owed to COLUMBIA by each major customer
of COLUMBIA as of the close of each calendar quarter just ended, and
the amount owed by COLUMBIA to NIAC at such time.
2. A report in such detail as NIAC reasonably shall require showing
the inventory of COLUMBIA on hand at the close of each calendar
quarter just ended by location and by category and, if possible, the
movement of the inventory during that quarter.
5
<PAGE>
6.3 By April 30 following the end of fiscal year of COLUMBIA, which fiscal
year will end December 31, COLUMBIA shall furnish to NIAC a report of the
certified public accountants regularly employed by COLUMBIA concerning their
examination of the financial statements of COLUMBIA as of the end of the last
fiscal year of COLUMBIA.
6.4 Miscellaneous:
1. All financial statements to be submitted to COLUMBIA to NIAC shall
be prepared in accordance with generally accepted accounting
principles consistently maintained by COLUMBIA.
2. COLUMBIA shall inform NIAC of the credit limit it has been extended
by its leading bank and of the interest rate it is paying for funds at
its earliest convenience after negotiating its line of credit.
3. COLUMBIA shall prepare and submit to NIAC from time to time such
other information and reports relating to the affairs of COLUMBIA as
NIAC may reasonably request.
4. In the event that COLUMBIA provides NIAC with confidential
information which is marked in writing to be confidential, NIAC shall
use its best efforts to maintain the confidentiality of all such
confidential information in the same manner in which NIAC maintains
its own confidential information. Upon termination of this Agreement,
if requested by COLUMBIA in writing, NIAC, at its option, will deliver
to COLUMBIA or destroy that confidential information of COLUMBIA which
NIAC does not need to retain for its own business purposes in
connection with this Agreement.
ARTICLE VII
ORDERING FORECASTS
7.1 In order to facilitate NIAC's procurement of Goods, COLUMBIA shall
provide NIAC from time to time and as requested by NIAC with forecasts of the
quantity and type of Goods COLUMBIA intends to purchase using NIAC.
7.2 COLUMBIA shall give NIAC any orders for Goods to be purchased under
this Agreement as far in advance as is reasonably practical from the planned
time of production.
7.3 NIAC will place orders with suppliers and if applicable, open its sight
letter of credit, for such orders as soon as reasonably possible after the date
on which NIAC receives an order from COLUMBIA.
7.4 NIAC may delay placing said orders and opening letters of credit if
there is any condition as described in Article IV which would permit NIAC to
refuse to continue its extension of credit to COLUMBIA.
6
<PAGE>
ARTICLE VIII
TERM
This Agreement shall be in effect as of January 1, 1992 and, unless sooner
terminated pursuant to its provisions, shall remain in full force and effect
until December 31, 1994. This Agreement shall be automatically extended for a
5-year period thereafter unless a party desiring not to renew the Agreement
gives the other party written notice of its election not to renew no later than
June 30, 1994.
ARTICLE IX
TERMINATION AND DEFAULT
9.1 In the event of a change of control of COLUMBIA, then such event shall
be a default under this Agreement and NIAC shall have the right to terminate
this Agreement upon ten (10) days' prior written notice to COLUMBIA. A change of
control shall be deemed to have occurred if Gertrude Boyle or Tim Boyle is not
the chief executive officer of COLUMBIA, or if Gertrude Boyle or Tim Boyle, by
themselves or together, do not own a majority of the shares of common stock of
COLUMBIA.
9.2 If any party shall cease to conduct its business or shall make any
involuntary assignment of either its assets or its business for the benefit of
creditors; if a trustee or receiver is appointed to administer or conduct its
business affairs; if it is adjudged in any legal proceeding to be a debtor in
bankruptcy; or if any insolvency proceedings are commenced against it and not
terminated or dismissed within ninety (90) days, then such event shall be
considered a default of the Agreement and the other party may terminate this
Agreement.
9.3 In addition to the special rights of termination provided in the
sections above, if any party fails to perform any of its obligations in this
Agreement, such failure shall constitute a default of this Agreement. If such
non-performance is not cured within thirty (30) days after notice of such
failure is sent, then the party giving the notice of non-performance may elect
to terminate this Agreement. If written election to terminate is give, this
Agreement shall terminate ten (10) days following delivery of this notice.
9.4 Upon any default the non-defaulting party shall have all rights
permitted to it under law including, without limitation, the rights arising from
default specified in this Agreement.
7
<PAGE>
ARTICLE X
LIMITATION OF LIABILITY
Without limiting NIAC's right and COLUMBIA's obligation under Article V of
this Agreement, in the event there is any dispute or claim arising from this
Agreement or the Goods purchased hereunder, NIAC shall not be liable for any
amount in excess of the purchase price of the Goods giving rise to the claim or
the dispute, and in no event shall NIAC be liable for any incidental or
consequential damages, including without limitation, lost profits. These
limitations shall apply to any and all claims or disputes, whether arising from
contract, warranty, tort (including negligence) or strict liability.
ARTICLE XI
SECURITY
COLUMBIA shall not grant (or suffer the existence of) any liens, security
interests or encumbrances on any of COLUMBIA's assets to any vendor other than
NIAC without (A at least thirty (30) days in advance of such intended grant,
giving NIAC written notice thereof and (B) granting NIAC a superior security
interest in such assets, provided that this article shall not limit COLUMBIA's
ability to grant any liens, security interests or encumbrances to COLUMBIA's
banks or other institutional lenders.
ARTICLE XII
"S" CORPORATION
At all times during the term of this Agreement, COLUMBIA will not make any
distribution of cash or other assets to its shareholder in excess of:
1. Those amount that are required by such shareholders to pay any and
all federal and state income tax obligations on the net income of
COLUMBIA that passes through to the shareholders under subchapter S of
the Internal Revenue Code, including required estimate payments;
2. 50% of income after provision for state and federal income taxes
for such period; and
3. 100% of the proceeds of any primary common stock offering.
Within ten (10) days after making any distribution permitted hereunder, COLUMBIA
shall deliver to NIAC a statement showing the amount of the distribution and how
it was calculated for each shareholder.
8
<PAGE>
ARTICLE XIII
GOVERNING LAW
This Agreement is made in the State of Oregon and its effectiveness,
interpretation and enforcement shall be governed by the law of such state.
ARTICLE XIV
WAIVER
The waiver of non-performance of an obligation of a party under this
Agreement in one case shall not be deemed to be waiver of non-performance of the
same obligation m any other case.
ARTICLE XV
FORCE MAJEURE
No party shall be liable for the failure to carry out its obligations
hereunder in the event that it is prevented from doing so by any act beyond its
control, including without limitation, war or warlike condition, unavailability
of shipping vessels, insurrection, labor disturbances, casualty, governmental
tariffs or quotas, or U.S. Government credit restrictions. This Article shall
not apply to COLUMBIA's obligation to make any payment as provided in this
Agreement.
ARTICLE XVI
NOTICES
All communications and notices provided for hereunder shall be effective
when delivered to the parties at their addresses specified above or to such
other parties or places as a party shall designate by written notice to the
other. Notices sent by mail shall be effective when delivered.
ARTICLE XVII
This instrument constitutes the entire agreement and understanding of the
parties hereto with respect to the subject matter of this Agreement, and
supersedes all prior discussions, agreements and understandings between the
parties with respect to the said matter. No amendment, modification or
assignment of this Agreement shall be binding on the parties unless made in
writing expressly referring to this Agreement and signed by authorized officers
or representatives of the parties hereto.
9
<PAGE>
NISSHO IWAI AMERICAN CORP. COLUMBIA SPORTSWEAR COMPANY
By: By:
------------------------------------- -------------------------------
Hiromi Shimooka, General Manager & Gertrude Boyle,
Senior Vice President Chairman of the Board
COLUMBIA SPORTSWEAR COMPANY
By:
-------------------------------
Tim Boyle, President
10
<PAGE>
Amendment No. 1 to Buying Agency Agreement
between
Nissho Iwai American Corporation
and
Columbia Sportswear Company
October 1, 1993
<PAGE>
AMENDMENT NO. 1 TO BUYING AGENCY AGREEMENT
THIS AMENDMENT made and entered into October 1, 1993 by and between NISSHO
IWAI AMERICAN CORPORATION, 1211 S.W. Fifth Avenue, Suite 2200, Portland, Oregon
97204 ("NIAC") and COLUMBIA SPORTSWEAR COMPANY, 6600 North Baltimore Street,
Portland, Oregon 97203 ("COLUMBIA").
WITNESSETH:
WHEREAS, NIAC and COLUMBIA entered into the Buying Agency Agreement
("AGREEMENT") dated as of January 1, 1992, pursuant to which COLUMBIA appointed
NIAC as its buying agent with respect to all clothing goods, materials and
products which COLUMBIA would purchase outside of the United States for resale
by COLUMBIA in the United States (collectively the "Goods");
WHEREAS, COLUMBIA desires to reduce the following:
i) interest on all reimbursable cost which NIAC invoices to
COLUMBIA;
ii) the NIAC commission.
Rate
----
Existing Rate New Rate
------------- --------
i) 1.25% above three 0.5% above three
month LIBOR rate month LIBOR rate
ii) 2% 1.5%
WHEREAS, NIAC desires to increase the share of sales through NIAC to
COLUMBIA in exchange of acceptance by NIAC for reduction of both an interest and
commission rate said above;
1
<PAGE>
WHEREAS, NIAC and COLUMBIA desire to extend the term of AGREEMENT until
September 30, 1998.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1. AGREEMENT TO PURCHASE
- --------------------------------
The Article I of AGREEMENT shall be read as follows:
During each year of this Agreement, COLUMBIA agrees that it shall purchase
through NIAC, as it buying agent, at least ninety-five (95%) of the Goods which
COLUMBIA purchases outside of the United States for resale by COLUMBIA in the
United States.
ARTICLE 2. AGREEMENT TO PROCURE GOODS FOR RESALE
- ------------------------------------------------
The last sentence of Article II of AGREEMENT shall be read as follows:
COLUMBIA shall reimburse NIAC for all such Reimbursable Costs together with
a commission for its services as COLUMBIA's buying agent in the amount of one
and a half percent (1.5%) of the F.O.B. price of the Goods purchased, country of
origin.
ARTICLE 3. REIMBURSEMENT TERMS
- ------------------------------
A. The first sentence of paragraph 3.2 of Article IV of AGREEMENT shall be
read as follows:
3.2 The Reimbursement Starting Date shall be the date of each payment made
by NIAC for the supplier.
B. The first sentence of paragraph 3.3 of Article IV of AGREEMENT shall be
read as follows:
2
<PAGE>
3.3 COLUMBIA shall pay interest to NIAC on all Reimbursable Costs and
NIAC's commission at a rate equal to half percent (0.5%) over the three month
LIBOR printed in the Wall Street Journal in effect on the first day of each
month.
ARTICLE 4. TERM
- ---------------
The Article VIII of AGREEMENT shall be read as follows:
This Agreement shall be in effect as of January 1, 1992 and, unless sooner
terminated pursuant to its provisions, shall remain in full force and effect
until September 30, 1998. This Agreement shall be automatically extended for a
5-year period thereafter unless a party desiring not to renew the Agreement
gives the other party written notice of its election not to renew no later than
March 31, 1998.
ARTICLE 5. OTHER TERMS AND CONDITIONS
- -------------------------------------
Other terms and conditions than those described herein shall remain
unchanged and in full force.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AMENDMENT to be
executed as of the date first set forth above.
NISSHO IWAI AMERICAN CORP.
By:
--------------------------------
Hiromi Shimooka
General Manager &
Senior Vice President
COLUMBIA SPORTSWEAR COMPANY
By:
--------------------------------
Gertrude Boyle
Chairman of the Board
COLUMBIA SPORTSWEAR COMPANY
By:
--------------------------------
Tim Boyle
President
4
CREDIT AGREEMENT
between
COLUMBIA SPORTSWEAR COMPANY
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
TOTAL COMMITMENT -- $70,000,000
July 31, 1997
<PAGE>
CONTENTS
ARTICLE I.................................................................... 1
1.1 DEFINED TERMS .............................................. 1
1.2 HEADINGS ...................................................10
ARTICLE II. THE CREDITS ................................................10
2.1 REVOLVING LOANS ............................................10
2.2 INTEREST ...................................................11
2.3 INTEREST OPTIONS ...........................................12
2.4 OTHER PAYMENT TERMS ........................................13
2.5 CHANGE OF CIRCUMSTANCES ....................................13
2.6 FUNDING LOSS INDEMNIFICATION ...............................15
2.7 AUTHORIZED REPRESENTATIVES .................................16
ARTICLE III. REPRESENTATIONS AND WARRANTIES .............................16
3.1 LEGAL STATUS ...............................................16
3.2 OWNERSHIP; SUBSIDIARIES ....................................17
3.3 AUTHORIZATION AND VALIDITY .................................17
3.4 NO VIOLATION ...............................................17
3.5 NO CLAIMS ..................................................17
3.6 CORRECTNESS OF FINANCIAL STATEMENTS ........................17
3.7 INCOME TAX RETURNS .........................................18
3.8 NO SUBORDINATION ...........................................18
3.9 ERISA ......................................................18
3.10 OTHER OBLIGATIONS ..........................................18
3.11 ENVIRONMENTAL MATTERS ......................................18
3.12 LIENS ......................................................19
3.13 NO BURDENSOME RESTRICTIONS; NO
DEFAULTS ...................................................19
3.14 NO OTHER VENTURES ..........................................19
3.15 INVESTMENT COMPANY ACT .....................................19
3.16 INSURANCE ..................................................19
3.17 LABOR MATTERS ..............................................19
3.18 FORCE MAJEURE ..............................................20
PAGE I
<PAGE>
3.19 INTELLECTUAL PROPERTY ......................................21
3.20 CERTAIN INDEBTEDNESS .......................................21
3.21 SENIORITY ..................................................21
3.22 TRUTH, ACCURACY OF INFORMATION .............................21
3.23 USE OF PROCEEDS ............................................22
ARTICLE IV. CONDITIONS .................................................22
4.1 CONDITIONS OF INITIAL EXTENSION OF
CREDIT .....................................................22
4.2 CONDITIONS OF EACH EXTENSION OF CREDIT .....................23
ARTICLE V. AFFIRMATIVE COVENANTS ......................................23
5.1 PUNCTUAL PAYMENTS ..........................................23
5.2 ACCOUNTING RECORDS .........................................24
5.3 FINANCIAL STATEMENTS .......................................24
5.4 INSURANCE ..................................................25
5.5 COMPLIANCE .................................................25
5.6 FACILITIES .................................................25
5.7 TAXES AND OTHER LIABILITIES ................................25
5.8 LITIGATION .................................................25
5.9 NOTICE TO BANK .............................................25
5.10 CONDUCT OF BUSINESS ........................................26
5.11 PRESERVATION OF CORPORATE EXISTENCE,
ETC. .......................................................26
5.12 ACCESS .....................................................26
5.13 PERFORMANCE AND COMPLIANCE WITH
OTHER COVENANTS ............................................27
5.14 APPLICATION OF PROCEEDS ....................................27
5.15 FISCAL YEAR; ACCOUNTING CHANGES ............................27
5.16 ENVIRONMENTAL ..............................................27
5.17 FINANCIAL COVENANTS ........................................28
5.18 FURTHER ASSURANCES .........................................28
ARTICLE VI. NEGATIVE COVENANTS .........................................28
6.1 LIENS ......................................................29
6.2 RESTRICTED PAYMENTS, REDEMPTIONS ...........................31
PAGE II
<PAGE>
6.3 MERGERS, SALE OF ASSETS, ETC. ..............................31
6.4 INVESTMENTS IN OTHER PERSONS ...............................32
6.5 CHANGE IN NATURE OF BUSINESS ...............................33
6.6 GUARANTIES .................................................33
6.7 PLANS ......................................................33
6.8 ACCOUNTING CHANGES .........................................33
6.9 CANCELLATION OF INDEBTEDNESS OWED TO
BORROWER ...................................................34
6.10 NO SPECULATIVE TRANSACTIONS ................................34
6.11 MARGIN REGULATIONS .........................................34
6.12 ENVIRONMENTAL ..............................................34
6.13 TRANSACTIONS WITH AFFILIATES ...............................34
ARTICLE VII. EVENTS OF DEFAULT ..........................................34
7.1 EVENTS OF DEFAULT ..........................................34
7.2 REMEDIES ...................................................36
ARTICLE VIII. MISCELLANEOUS ..............................................37
8.1 NO WAIVER ..................................................37
8.2 NOTICES ....................................................37
8.3 COSTS, EXPENSES AND ATTORNEYS' FEES ........................38
8.4 INDEMNIFICATION ............................................38
8.5 SUCCESSORS, ASSIGNMENT .....................................39
8.6 ENTIRE AGREEMENT; AMENDMENT ................................39
8.7 NO THIRD PARTY BENEFICIARIES ...............................39
8.8 TIME .......................................................40
8.9 SEVERABILITY OF PROVISIONS .................................40
8.10 COUNTERPARTS ...............................................40
8.11 GOVERNING LAW ..............................................40
8.12 ARBITRATION ................................................40
8.13 WAIVER OF JURY TRIAL .......................................42
8.14 OREGON STATUTORY NOTICE ....................................43
PAGE III
<PAGE>
SCHEDULES
Schedule I - Pricing Schedule
Schedule II - Disclosure Schedule
EXHIBITS
Exhibit A -- Note, Section 1.1
Exhibit B -- Notice of Borrowing, Section 2.1(d)
Exhibit C -- Notice of Authorized Representatives, Section 2.7
PAGE IV
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of July 31, 1997, by and between COLUMBIA
SPORTSWEAR COMPANY, an Oregon corporation ("Borrower"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has requested the credit facility described herein, and Bank has
agreed to provide such credit facility to Borrower on the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties contained herein, Borrower and Bank hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINED TERMS
All terms defined above shall have the meanings set forth above. Any
accounting term used in this Agreement which is not specifically defined herein
shall have the meaning customarily given to it under GAAP, and all other terms
contained in this Agreement which are not defined herein shall, unless the
context indicates otherwise, have the meanings provided for by the Uniform
Commercial Code in effect in the state of Oregon as of the Closing Date to the
extent such terms are defined therein. The following terms shall have the
meanings set forth below (with all such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"AAA Notes" means promissory notes payable by Borrower to one or more of
Borrower's shareholders in accordance with the provisions of Section 6.2(c) to
evidence the distribution to Borrower's shareholders in respect of Borrower's
accumulated adjustment account, provided that either (a) such notes shall
payable solely from proceeds of a public offering of Borrower's Stock or (b) if
the distribution in respect of Borrower's accumulated adjustment account is in
cash, the notes evidencing the loan to Borrower by such shareholders of the
amount of such distribution shall be fully subordinated to the Obligations as to
principal, interest and all other charges on terms approved by Bank in writing
prior to the execution of such notes by Borrower.
"Advance Basis" means (a) for the months of January through April, an
amount equal to 60 percent of the sum of Borrower's balance sheet (i) net
accounts
CREDIT AGREEMENT PAGE 1
<PAGE>
receivable and (ii) inventory, minus (without duplication) (iii) accounts
payable, notes payable and import trade payables, and (b) for the months of May
through December, an amount equal to 70 percent of the sum of Borrower's balance
sheet (i) net accounts receivable and (ii) inventory, minus (without
duplication) (iii) accounts payable, notes payable and import trade payables.
"Agreement" means this Credit Agreement as amended, modified, restated or
supplemented from time to time.
"Authorized Representative" means a person designated by Borrower on the
most current Notice of Authorized Representatives delivered by Borrower to Bank
as being authorized to request any borrowing or make any interest rate selection
on behalf of Borrower hereunder, or to give Bank any other notice hereunder
which is required by the terms hereof to be made through an Authorized
Representative.
"Available Credit" means, at any time, the amount by which the aggregate of
the outstanding principal amount of the Loans at such time is less than (a)
$70,000,000 during the period of August 1, 1997, through December 15, 1997, and
(b) $50,000,000 at all other times from the date of this Agreement through the
Maturity Date.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time, including (unless the
context otherwise requires) any rules or regulations promulgated thereunder.
"Base Rate" means, for any day, an interest rate per annum equal to the
rate of interest most recently announced by Bank at its principal office in San
Francisco, California, as its prime rate, with any change in the prime rate to
be effective as of the day such change is announced by Bank and with the
understanding that the prime rate is one of Bank's base rates used to price some
loans and may not be the lowest rate at which Bank makes any loan, and is
evidenced by the recording thereof in such internal publication or publications
as Bank may designate.
"Base Rate Loan" means the outstanding principal amount of any Loan that
bears interest with reference to the Base Rate.
"Base Rate Margin" means the number of basis points determined in
accordance with Schedule I.
"Business Day" means (a) for all purposes other than as covered by clause
(b) below, any day other than a Saturday, Sunday or other day on which
commercial banks in San Francisco, California are authorized or required by law
to be closed, and (b) with respect to all notices, determinations, fundings and
payments in connection
CREDIT AGREEMENT PAGE 2
<PAGE>
with any LIBOR interest selection or LIBOR Loan, any day that is a Business Day
described in clause (a) above and that also is a day for trading by and between
banks in U.S. dollar deposits in the London interbank eurocurrency market.
"Capitalized Lease Obligations" means lease obligations of a Person that
are or should be capitalized under GAAP.
"CD Loan" means the outstanding principal amount of any Loan that bears
interest with reference to the CD Rate.
"CD Margin" means the number of basis points determined in accordance with
Schedule I.
"CD Rate" means, for each Fixed Rate Term, the rate per annum (rounded
upward if necessary to the nearest whole 1/8 of 1%) and determined pursuant to
the following formula:
CD Rate = Base CD Rate + Assessment Rate
----------------------------
100% - CD Reserve Percentage
As used herein, (a) "Base CD Rate" means the rate per annum quoted by Bank
as the secondary-market bid rate, with the understanding that such rate is
quoted by Bank for the purpose of calculating effective rates of interest for
loans making reference thereto, at approximately 10:00 A.M. (San Francisco
time), or as soon thereafter as practicable on a Business Day, for the purchase
of certificates of deposit for a term comparable to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term shall apply, (b) "CD Reserve Percentage" means the
maximum percentage (expressed as a decimal, rounded upward if necessary to the
nearest 1/8 of 1%) determined by Bank (which determination shall be conclusive
absent manifest error) as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal or emergency reserve
requirements) with respect to new nonpersonal time deposits in U.S. dollars
having a maturity comparable to the applicable Fixed Rate Term, adjusted by Bank
for changes in such reserve percentage during the applicable Fixed Rate Term,
and (c) "Assessment Rate" means the rate per annum (rounded upward, if
necessary, to the nearest 1/8 of 1%) determined by Bank (which determination
shall be conclusive absent manifest error) to be the maximum effective
assessment rate per annum payable by Bank to the Federal Deposit Insurance
Corporation (or any successor) for such date for insurance on U.S. dollars time
deposits.
CREDIT AGREEMENT PAGE 3
<PAGE>
"Change of Law" means the adoption of any Governmental Rule, any change in
any Governmental Rule or the application or requirements thereof (whether such
change occurs in accordance with the terms of such Governmental Rule as enacted,
as a result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority, or
compliance by Bank (or any entity controlling Bank) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority.
"Closing Date" means the date of this Agreement.
"Contaminant" means any pollutant, hazardous substance, toxic substance,
hazardous waste or other substance regulated or forming the basis of liability
under any Environmental Law.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement entered into by such other Person relating to such Indebtedness or
Contingent Obligation will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected against loss in respect
thereof. Contingent Obligations of a Person include, without limitation, (a) the
direct or indirect guarantee, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of an obligation of another Person, and (b)
any liability of such Person for an obligation of another Person through any
agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another Person, (iii) to make take-or-pay or similar payments, if required,
regardless of non-performance by any other party or parties to an agreement,
(iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such obligation or to assure the holder of such obligation against
loss, or (v) to supply funds to or in any other manner invest in such other
Person (including, without limitation, to pay for property or services
irrespective of whether such property is received or such services are
rendered), if in the case of any agreement or liability described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the lesser of
CREDIT AGREEMENT PAGE 4
<PAGE>
(x) the amount payable under such Contingent Obligation (if quantifiable), or
(y) the portion of the obligation so guaranteed or otherwise supported.
"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or
other instrument to which such Person is a party or by which it or any of its
property is bound or to which any of its property is subject.
"Default" means an Event of Default or an event or condition which with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
"Disclosure Schedule" means Schedule II attached hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Environmental Law" means all applicable federal, state and local laws,
statutes, ordinances and regulations, and any applicable judicial or
administrative interpretation, order, consent decree or judgment, relating to
the regulation and protection of the environment. Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.); the Hazardous
Material Transportation Act, as amended (49 U.S.C. ss. 180 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. ss. 136 et
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.
6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. ss. 7401
et seq.); the Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and their
state and local counterparts or equivalents and any applicable transfer of
ownership notification or approval statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or
CREDIT AGREEMENT PAGE 5
<PAGE>
other Person, in each case which relate to any violation or alleged violation of
an Environmental Law or a Permit, or a Release or threatened Release.
"Event of Default" has the meaning set forth in Section 7.1 hereof.
"Federal Funds Rate" means, for any day, the weighted average of the per
annum rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers as published by the
Federal Reserve Bank of New York for such day (or, if such rate is not so
published for any day, the average rate quoted to Bank on such day by three
Federal funds brokers of recognized standing selected by Bank).
"Fixed Rate Term" means, with respect to a LIBOR Loan, a period of one,
two, three or six months, as designated by Borrower and, with respect to a CD
Loan, a period of 30, 60, 90 or 180 days, as designated by Borrower; provided
however, that no Fixed Rate Term may extend beyond the date that is 180 days
after the Maturity Date, and if the last day of a Fixed Rate Term is not a
Business Day, such term shall be extended to the next succeeding Business Day,
or if the next succeeding Business Day falls in another calendar month, such
term shall end on the next preceding Business Day. Loans with a Fixed Rate Term
that extends beyond the Maturity Date shall be subject to the provisions of
Section 2.4(a).
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time, consistently applied.
"Governmental Authority" means any domestic or foreign national, state or
local government, any political subdivision thereof, any department, agency,
authority or bureau of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including the Federal Deposit Insurance Corporation,
the Federal Reserve Board, the Comptroller of the Currency, any central bank or
any comparable authority.
"Governmental Rule" means any applicable law, rule, regulation, ordinance,
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured) or for the deferred
purchase price of property or services, (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by
CREDIT AGREEMENT PAGE 6
<PAGE>
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (d) all Capitalized Lease Obligations of such Person, (e) all
Contingent Obligations of such Person, (f) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any Stock or
Stock Equivalents of such Person with a mandatory repurchase or redemption date
of less than ten years from the date of issuance thereof, (g) all obligations of
such Person under Interest Rate Contracts and commodity contracts, (h) all
Indebtedness referred to in clause (a), (b), (c), (d), (e), (f) or (g) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and general intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (i) in the case of Borrower, its obligations under the
Loan Documents, (j) all liabilities of such Person which would be shown on a
balance sheet of such Person prepared in accordance with GAAP, and (k) all
liabilities of such Person in connection with the failure to make when due any
contribution or payment pursuant to or under any Plan.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Indemnitees" has the meaning set forth in Section 8.4 hereof.
"LIBOR" means, for each Fixed Rate Term, the rate per annum (rounded upward
if necessary to the nearest whole 1/16 of 1%) and determined pursuant to the
following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
As used herein, (a) "Base LIBOR" means the average of the rates per annum
at which U.S. dollar deposits are offered to Bank in the London interbank
eurocurrency market on the second Business Day prior to the commencement of a
Fixed Rate Term at or about 11:00 A.M. (London time), for delivery on the first
day of such Fixed Rate Term, for a term comparable to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term shall apply, and (b) "LIBOR Reserve Percentage" means
the reserve percentage prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in
Regulation D of the Federal
CREDIT AGREEMENT PAGE 7
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Reserve Board, as amended), adjusted by Bank for changes in such reserve
percentage during the applicable Fixed Rate Term.
"LIBOR Loan" means the outstanding principal amount of any Loan that bears
interest with reference to LIBOR.
"LIBOR Margin" means the number of basis points determined in accordance
with Schedule I.
"Lien" means any (a) mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, priority or other security agreement or (b) preferential
arrangement of any kind or nature whatsoever that has the same practical effect
as a security interest, including, without limitation, any conditional sale or
other title retention agreement or the interest of a lessor under a Capitalized
Lease Obligation or any other lease.
"Loan" means a Loan made to Borrower pursuant to Section 2.1(a).
"Loan Documents" means this Agreement and all notes, guarantees, security
agreements, subordination agreements, and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
"Material Adverse Effect" means (a) a materially adverse effect on the
condition (financial or otherwise), business, performance, prospects, operations
or properties of Borrower, (b) material impairment of the ability of Borrower to
perform the Obligations, or (c) material impairment of the rights and remedies
of Bank under the Loan Documents.
"Maturity Date" means June 30, 1998.
"Note" means a promissory note executed by Borrower in favor of Bank
evidencing the Loans, substantially in the form attached as Exhibit A hereto.
"Notice of Authorized Representatives" has the meaning set forth in Section
2.7 hereof.
"Notice of Borrowing" has the meaning set forth in Section 2.1(d) hereof.
"Obligations" means all of Borrower's obligations under the Loan Documents,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
CREDIT AGREEMENT PAGE 8
<PAGE>
"Permit" means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Governmental Rule.
"Permitted Liens" means (a) Liens arising by operation of law for taxes,
fees, assessments or governmental charges not yet delinquent or remain payable
without penalty or which are being contested in good faith by appropriate
proceedings and with adequate reserves in accordance with GAAP being maintained
by Borrower, (b) statutory or common law Liens of mechanics, materialmen,
shippers, warehousemen, carriers, landlords and other similar persons for
services or materials arising in the ordinary course of business for which
payment is not yet delinquent or which remain payable without penalty or are
being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto,
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, (d) Liens listed on Schedule II or otherwise permitted by
Section 6.1 and (e) Liens in favor of Bank.
"Permitted Transferees" means any Person that is a shareholder of Borrower
on the date of this Agreement (an "Existing Shareholder"), any relative (whether
by affinity or consanguinity) of an Existing Shareholder (a "Relative") or any
trust of which Existing Shareholders or Relatives are the only beneficiaries.
"Person" means an individual, partnership, corporation (including, without
limitation, a business trust), joint stock company, limited liability company,
limited liability partnership, trust, unincorporated association, joint venture
or other entity, or a Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA,
which Borrower maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Release" means, as to any Person, any unpermitted spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of a Contaminant into the environment.
"Remedial Action" means all actions required to clean up, remove, prevent
or minimize a Release or threat of Release or to perform pre-remedial studies
and investigations and post-remedial monitoring and care.
"Stock" means shares of capital stock, beneficial or partnership interests,
participations or other equivalents (regardless of how designated) of or in a
CREDIT AGREEMENT PAGE 9
<PAGE>
corporation or other entity, whether voting or non-voting, and includes, without
limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or exchangeable
for Stock and all warrants, options or other rights to purchase or subscribe for
any Stock, whether or not presently convertible, exchangeable or exercisable.
"Tangible Net Worth" means stockholders' equity less: (a) all intangible
assets (net of amortization); (b) all treasury stock; and (c) all obligations
due from stockholders, employees and/or affiliates. For purposes of determining
stockholders' equity, there shall be excluded from Borrower's Indebtedness and
added to stockholders' equity the outstanding balance of principal and accrued
interest on the AAA Notes.
"Tranche" means a collective reference to LIBOR Loans or CD Loans, the
then-current Fixed Rate Term with respect to all of which begin on the same date
and end on the same later date (whether or not such LIBOR Loans or CD Loans
shall have originally been made on the same day).
1.2 HEADINGS
Headings in the Loan Documents are for convenience of reference only and
are not part of the substance hereof or thereof.
ARTICLE II. THE CREDITS
2.1 REVOLVING LOANS
(a) On the terms and subject to the conditions contained in this Agreement,
Bank agrees to make loans (each a "Loan") to Borrower from time to time until
the Maturity Date in an aggregate amount not to exceed at any time outstanding
(i) $70,000,000 during the period of August 1, 1997, through December 15, 1997,
and (ii) $50,000,000 at all other times from the date of this Agreement through
the Maturity Date. Borrower may, from time to time, borrow, partially or wholly
repay the outstanding Loans, and reborrow, subject to all the limitations, terms
and conditions contained herein.
(b) If at any time the Available Credit is negative, Borrower, without
demand or notice, shall immediately repay that portion of the Loans necessary to
cause the Available Credit to be no less than zero. Borrower shall repay the
outstanding principal balance of the Loans, together with all accrued and unpaid
interest and related fees, on the earlier of the Maturity Date or the due date
determined pursuant to Section 7.2.
CREDIT AGREEMENT PAGE 10
<PAGE>
(c) The Loans shall be evidenced by a Note payable to the order of Bank.
(d) Borrower, through one of the Authorized Representatives, shall request
each advance under Section 2.1(a) by giving Bank irrevocable written notice or
telephonic notice (confirmed promptly in writing), in the form of Exhibit B
attached hereto (each, a "Notice of Borrowing"), which specifies, among other
things:
(i) the principal amount of the requested advance;
(ii) the proposed date of borrowing, which shall be a Business Day;
(iii) whether such advance is to be a Base Rate Loan , a LIBOR Loan or
a CD Loan; and
(iv) if such advance is to be a LIBOR Loan or CD Loan, the length of
the Fixed Rate Term applicable thereto.
Each such Notice of Borrowing must be received by Bank not later than (i)
10:00 a.m. (San Francisco time) on the date of borrowing if a Base Rate Loan, or
(ii) at least three Business Days prior to the date of borrowing if a LIBOR Loan
or a CD Loan. In addition to advances requested by Borrower, advances of Loans
may be made automatically pursuant to certain cash management arrangements made
by Borrower with Bank and each such advance shall be a Base Rate Loan.
2.2 INTEREST
(a) The outstanding principal balance of each Loan which is a Base Rate
Loan shall bear interest at a fluctuating rate per annum equal to the aggregate
of the Base Rate in effect from time to time plus the applicable Base Rate
Margin. The outstanding principal balance of each Loan which is a LIBOR Loan
shall bear interest at a fixed rate per annum determined by Bank to be equal to
the aggregate of LIBOR in effect on the first day of the applicable Fixed Rate
Term plus the applicable LIBOR Margin in effect on the first day of the
applicable Fixed Rate Term. The outstanding principal balance of each CD Loan
shall bear interest at a fixed rate per annum determined by Bank to be equal to
the aggregate of the CD Rate in effect on the first day of the applicable Fixed
Rate Term plus the applicable CD Margin in effect on the first day of the
applicable Fixed Rate Term. The foregoing notwithstanding, the rate of interest
applicable at all times during the continuation of an Event of Default shall be
the applicable rate set forth above plus an additional 200 basis points. All
fees, expenses and other amounts not paid when due shall bear interest (from the
date due until paid) at a fluctuating rate per annum equal to the Base Rate in
effect from time to time plus 200 basis points.
CREDIT AGREEMENT PAGE 11
<PAGE>
(b) All interest and per annum fees shall be computed on the basis of a
360-day year for the actual days elapsed. Interest on Base Rate Loans shall be
payable monthly, in arrears, on the first day of each month. Interest on LIBOR
Loans shall be paid on the last day of each Fixed Rate Term and at the end of
the third month with respect to each Fixed Rate Term in excess of three months.
Interest on CD Loans shall be paid by Borrowers on the last day of each Fixed
Rate Term and at the end of the 90th day with respect to each Fixed Rate Term in
excess of 90 days.
2.3 INTEREST OPTIONS
(a) Subject to the requirement that each LIBOR Loan or CD Loan be in a
minimum amount of $500,000 and in integral multiples of $100,000 and the
limitation in Section 2.3(b) regarding the number of Tranches outstanding at any
time, (i) except as otherwise provided herein, at any time when an Event of
Default is not continuing Borrower may convert all or any portion of a Base Rate
Loan to a LIBOR Loan or CD Loan for a Fixed Rate Term designated by Borrower,
and (ii) at any time Borrower may convert all or a portion of a LIBOR Loan or CD
Loan at the end of the Fixed Rate Term applicable thereto to a Base Rate Loan
or, if no Event of Default is continuing, to a LIBOR Loan or CD Loan for a new
Fixed Rate Term designated by Borrower. If Borrower has not made the required
interest rate conversion or continuation election prior to the last day of any
Fixed Rate Term, Borrower shall be deemed to have elected to convert such LIBOR
Loan or CD Loan to a Base Rate Loan.
(b) At no time shall there be more than 12 Tranches outstanding at any
time.
(c) Borrower, through one of the Authorized Representatives, shall request
each interest rate conversion or continuation by giving Bank irrevocable written
notice or telephonic Notice of Borrowing, which specifies, among other things:
(i) the Loan to which such Notice of Borrowing applies;
(ii) the principal amount that is the subject of such conversion or
continuation;
(iii) the proposed date of such conversion or continuation, which
shall be a Business Day;
(iv) and if such Notice pertains to a LIBOR or CD Rate selection, the
length of the applicable Fixed Rate Term.
CREDIT AGREEMENT PAGE 12
<PAGE>
Any such Notice of Borrowing must be received by Bank not later than (i)
10:00 a.m. (San Francisco time) on the effective date of any Base Rate interest
selection, and (ii) at least three Business Days prior to the effective date of
any LIBOR or CD Rate selection.
2.4 OTHER PAYMENT TERMS
(a) Borrower shall pay Bank all outstanding principal, accrued interest and
other charges with respect to the Loans on the Maturity Date. Notwithstanding
that the last day of a Fixed Rate Term may extend beyond the Maturity Date by up
to 180 days, all outstanding principal and interest on the Loans shall be paid
in full on the Maturity Date.
(b) Bank may, and Borrower hereby authorizes Bank to, debit any deposit
account of Borrower with Bank for all payments of principal, interest and fees
as they become due, provided that Bank shall first debit account no. 4159601087
of Borrower with Bank before debiting any other account.
(c) Borrower shall make all payments due to Bank by payment to Bank at
Bank's office as designated in Section 8.2, in lawful money of the United States
and in same day or immediately available funds, not later than 12:00 noon
(Portland time) on the date due.
(d) Whenever any payment due hereunder shall fall due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees, as the case may be.
(e) All payments under the Loan Documents (including prepayments) shall be
applied first to unpaid fees, costs and expenses then due and payable under the
Loan Documents, second to accrued interest then due and payable under the Loan
Documents, third to all principal then due and payable under the Loan Documents
and fourth to reduce the outstanding principal of the Loans. If an Event of
Default has occurred and is continuing, Bank shall apply all payments as
determined by it in its discretion.
2.5 CHANGE OF CIRCUMSTANCES
(a) If Bank at any time shall determine that adequate and reasonable means
do not exist for ascertaining LIBOR or CD Rate or that LIBOR or CD Rate does not
accurately reflect the cost to Bank of making or maintaining LIBOR interest
rates or CD Rates hereunder, then Bank shall give written or telephonic notice
(promptly confirmed in writing) to Borrower of such determination. If such
notice is given and
CREDIT AGREEMENT PAGE 13
<PAGE>
until such notice has been withdrawn in writing by Bank, then no LIBOR interest
option or CD based interest option, as the case may be, may be selected by
Borrower.
(b) Notwithstanding any other provisions herein, if any Change of Law shall
make it unlawful for Bank (i) to make a LIBOR or CD based interest rate
available, or (ii) to maintain LIBOR or CD based interest rates hereunder, then,
in the former event, any obligation of Bank hereunder to make available such
unlawful LIBOR or CD based interest rate shall forthwith be canceled, and in the
latter event, any such unlawful LIBOR Loan or CD based Loan then outstanding
shall, at the option of Bank, be converted so that interest is determined in
relation to the Base Rate pursuant to the terms of this Agreement; provided
however, if any such Change in Law shall permit a LIBOR or CD based interest
rate until the expiration of the Fixed Rate Term relating thereto, then such
permitted LIBOR Loan or CD Loan shall continue as such until the end of such
Fixed Rate Term. If as a result of this Section a LIBOR Loan or CD Loan is
converted to a Loan with a lower interest rate, Borrower shall pay to Bank
immediately upon demand such amount or amounts as may be necessary to compensate
Bank for any loss in connection therewith.
(c) Upon the occurrence of any event described in Section 2.5(b), Borrower
shall pay to Bank, immediately upon demand, such amount or amounts as may be
necessary to compensate Bank for any fines, fees, charges, penalties or other
amounts payable by Bank as a result thereof and which are attributable to LIBOR
or CD (as may be the case) based interest rates made available to Borrower
hereunder, except for any such fines, fees, charges, penalties or other amounts
resulting from a violation of law knowingly engaged in by Bank. In determining
which amounts payable by Bank and/or losses incurred by Bank are attributable to
LIBOR or CD interest rates made available to Borrower hereunder, any reasonable
allocation made by Bank among its operations shall, in the absence of manifest
error, be conclusive and binding upon Borrower.
(d) If any Change of Law
(i) shall subject Bank to any tax, duty or other charge with respect
to any LIBOR or CD based interest rate, or shall change the basis of
taxation of payments by Borrower to Bank of principal, interest, fees or
any other amount payable hereunder (except for changes in the rate of
taxation on the overall net income of Bank imposed by the jurisdiction of
Bank's incorporation or by any jurisdiction in which its applicable lending
office is located); or
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or loans
by, or any other acquisition of funds by Bank; or
CREDIT AGREEMENT PAGE 14
<PAGE>
(iii) shall impose on Bank any other condition;
and the effect of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR Loan or CD Loan hereunder or to reduce
any amount or return receivable by Bank in connection therewith, then Borrower
shall, immediately upon demand, pay to Bank such amount or amounts as may be
necessary to reimburse Bank for such increased costs or to compensate Bank for
such reduced amounts. A certificate as to the amount of such increased costs or
reduced amounts, delivered by Bank to Borrower shall, in the absence of manifest
error, be conclusive and binding on Borrower for all purposes.
(e) If Bank shall have determined that any Change of Law regarding capital
adequacy has or shall have the effect of reducing the rate of return on the
capital of Bank (or any entity controlling Bank) as a consequence of Bank's
obligations hereunder to a level below that which Bank or such entity would have
achieved but for such Change of Law (taking into consideration Bank's or such
entity's policies with respect to capital adequacy), by an amount deemed by Bank
to be material, then from time to time, within fifteen days after demand by
Bank, Borrower shall pay to Bank or such entity such additional amounts as shall
compensate Bank or such entity for such reduction. Any such request by Bank
under this Section shall set forth the basis of the calculation of such
additional amounts and shall, in the absence of manifest error, be conclusive
and binding on Borrower for all purposes.
(f) Failure or delay by Bank to demand compensation under this Section 2.5
shall not constitute a waiver of Bank's rights to demand such compensation;
provided, however, that Bank shall not be entitled to compensation under this
Section 2.5 for any increased costs or reductions incurred or suffered with
respect to any date unless the Bank shall have notified Borrower of such demand
for compensation not more than 90 days after the later of (i) such date and (ii)
the date on which Bank became aware of such costs or reductions.
2.6 FUNDING LOSS INDEMNIFICATION
If Borrower shall (a) repay or prepay any portion of a LIBOR Loan or CD
Loan on any day other than the last day of the Fixed Rate Term therefor (whether
an optional prepayment, a mandatory prepayment, a payment upon acceleration or
otherwise), (b) fail to borrow the full amount of a LIBOR Loan or CD Loan set
forth in any Notice of Borrowing which has been delivered to Bank (whether as a
result of the failure to satisfy any applicable conditions or otherwise), or (c)
fail to convert or continue at the LIBOR or CD Rate interest based option any
portion of a Loan in accordance with a Notice of Borrowing delivered to Bank
(whether as a result of the failure to satisfy any applicable conditions or
otherwise), Borrower shall, upon demand by Bank, reimburse Bank and hold Bank
harmless for all costs and losses
CREDIT AGREEMENT PAGE 15
<PAGE>
incurred by Bank as a result of such repayment, prepayment or failure. Borrower
understands that such costs and losses may include, without limitation, losses
incurred by Bank as a result of funding and other contracts entered into by Bank
to fund any LIBOR Loan or CD Loan. Bank shall deliver to Borrower a certificate
setting forth the amount of costs and losses for which demand is made. Such a
certificate so delivered to Borrower shall, in the absence of manifest error, be
conclusive and binding on Borrower as to the amount of such loss for all
purposes. The agreements in this Section shall survive the termination of this
Agreement.
2.7 AUTHORIZED REPRESENTATIVES
On the Closing Date, and from time to time subsequent thereto at Borrower's
option, Borrower shall deliver to Bank a written notice in the form of Exhibit C
attached hereto, which designates by name each Authorized Representative and
includes each of their respective specimen signatures (each, a "Notice of
Authorized Representatives"). Bank shall be entitled to rely conclusively on the
authority of each officer or employee designated as an Authorized Representative
in the most current Notice of Authorized Representatives delivered by Borrower
to Bank, to request borrowings and select interest rate options hereunder, and
to give to Bank such other notices as are specified in this Agreement as being
made through one of Borrower's Authorized Representatives, until such time as
Borrower has delivered to Bank, and Bank has actual receipt of, a new written
Notice of Authorized Representatives. Bank shall have no duty or obligation to
Borrower to verify the authenticity of any signature appearing on any Notice of
Borrowing or any other written notice from an Authorized Representative or to
verify the authenticity of any person purporting to be an Authorized
Representative giving any telephonic notice permitted hereby.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
subject to the exceptions set forth on the Disclosure Schedule, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment in cash
and satisfaction and discharge of all Obligations:
3.1 LEGAL STATUS
Borrower is a corporation, duly organized and existing under the laws of
the jurisdiction of its incorporation, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could reasonably be
expected to have a Material Adverse Effect.
CREDIT AGREEMENT PAGE 16
<PAGE>
3.2 OWNERSHIP; SUBSIDIARIES
(a) All of Borrower's outstanding capital stock has been validly issued and
is fully paid and nonassessable. On the date hereof (i) no authorized but
unissued shares, no treasury shares and no other outstanding shares of its
capital stock are subject to any option, warrant, right of conversion or
purchase or any similar right granted by Borrower, and (ii) it is not a party to
any agreement or understanding with respect to the voting, sale or transfer of
any shares of its capital stock.
(b) As of the Closing Date, Borrower has no subsidiaries and does not own
or hold, directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person.
3.3 AUTHORIZATION AND VALIDITY
The Loan Documents have been duly authorized and the performance by
Borrower of its obligations under the Loan Documents constitute a proper
corporate purpose under applicable law. The Loan Documents, upon their execution
and delivery in accordance with the provisions hereof, will constitute legal,
valid and binding agreements and obligations of it enforceable against Borrower
in accordance with their respective terms.
3.4 NO VIOLATION
The execution, delivery and performance by Borrower of each of the Loan
Documents do not violate or contravene any provision of its articles of
incorporation or by-laws and do not violate any Governmental Rule or result in a
breach of or constitute a default under any contract, obligation, indenture or
other instrument to which it or any subsidiary of it is a party or by which it
may be bound, which violation, breach or default would have a Material Adverse
Effect.
3.5 NO CLAIMS
There are no pending, or to the best of Borrower's knowledge threatened,
actions, claims, investigations, suits or proceedings before any Governmental
Authority or arbitrator which could reasonably be expected to have a Material
Adverse Effect.
3.6 CORRECTNESS OF FINANCIAL STATEMENTS
Borrower's financial statements dated as of and for the period ended March
31, 1997, heretofore delivered by Borrower to Bank, (a) present fairly its
financial condition; (b) disclose all of its liabilities required to be
reflected or reserved against in such financial statements under GAAP, whether
liquidated or unliquidated, fixed or
CREDIT AGREEMENT PAGE 17
<PAGE>
contingent; and (c) have been prepared in accordance with GAAP (except for the
absence of footnote disclosure and subject to year-end audit adjustments).
Except as disclosed to Bank pursuant to Section 5.3, since the date of such
financial statements there has been no change or changes which have resulted in
a Material Adverse Effect.
3.7 INCOME TAX RETURNS
Borrower does not have any knowledge of any pending assessments or
adjustments of any income tax payable by it with respect to any year the payment
of which would have a Material Adverse Effect.
3.8 NO SUBORDINATION
There is no agreement, indenture, contract or instrument to which Borrower
or any subsidiary is a party or by which it or any subsidiary may be bound that
requires the subordination in right of payment of any of Borrower's Obligations
subject to this Agreement to any other obligation of Borrower or such
subsidiary.
3.9 ERISA
Borrower is in compliance in all material respects with the applicable
provisions of ERISA. Borrower has not violated any provision of any Plan
maintained or contributed to by Borrower in a manner that could reasonably be
expected to result in a Material Adverse Effect. No "reportable event" (as
defined in Title IV of ERISA) has occurred and is continuing with respect to any
Plan initiated by Borrower which could reasonably be expected to have a Material
Adverse Effect.
3.10 OTHER OBLIGATIONS
Borrower is not in default with respect to any Indebtedness that, in the
aggregate, is material, or any of its material Contractual Obligations.
3.11 ENVIRONMENTAL MATTERS
Borrower and each subsidiary of it is in compliance in all material
respects with all Environmental Laws applicable to it, other than such
noncompliance as in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Neither Borrower nor any subsidiary of it has received
notice that it is the subject of any federal or state investigation evaluating
whether any Remedial Action is needed, except for such notices received which in
the aggregate do not refer to Remedial Actions that could reasonably be expected
to result in a Material Adverse Effect. There have been no Releases by Borrower
or a subsidiary of Borrower which could reasonably be expected to result in a
Material Adverse Effect.
CREDIT AGREEMENT PAGE 18
<PAGE>
3.12 LIENS
There are no Liens of any nature whatsoever on any of its properties other
than Permitted Liens.
3.13 NO BURDENSOME RESTRICTIONS; NO DEFAULTS
(a) Borrower is not is a party to any Contractual Obligation the compliance
with which could reasonably be expected to have a Material Adverse Effect or the
performance of which, either unconditionally or upon the happening of an event,
will result in the creation of a Lien (other than Permitted Liens) on the
property or assets of Borrower.
(b) No Default has occurred and is continuing.
(c) There is no Governmental Rule applicable to Borrower or its business,
the compliance with which by Borrower could reasonably be expected to have a
Material Adverse Effect.
3.14 NO OTHER VENTURES
Borrower is not engaged in any joint venture, partnership or other similar
business association with any other Person.
3.15 INVESTMENT COMPANY ACT
Borrower is not an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended.
3.16 INSURANCE
All current policies of insurance of any kind or nature owned by or issued
to Borrower, including, without limitation, policies of fire, theft, product
liability, public liability, property damage, other casualty, employee fidelity,
workers' compensation and employee health and welfare insurance, are in full
force and effect and are of a nature and provide such coverage as is customarily
carried by companies of its size and character. Borrower has no reason to
believe that it will be unable to comply with Section 5.4.
3.17 LABOR MATTERS
(a) There are no strikes, work stoppages, slowdowns or lockouts pending or,
to Borrower's knowledge, threatened against or involving Borrower, other than
CREDIT AGREEMENT PAGE 19
<PAGE>
those which in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(b) As of the date hereof Borrower is not a party to, and has no
obligations under, any collective bargaining agreement.
(c) There is no organizing activity involving Borrower pending or, to its
knowledge, threatened, by any labor union or group of employees, other than
those which in the aggregate could not reasonably be expected to have a Material
Adverse Effect. There are no representation proceedings pending against Borrower
or, to its knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of its employees has made a pending demand on it for
recognition, other than those which in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(d) There are no unfair labor practice charges, arbitrations, grievances or
complaints pending or in process or, to its knowledge, threatened, by or on
behalf of any employee or group of employees of Borrower, other than those which
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
(e) There are no complaints or charges against Borrower pending or, to its
knowledge, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment by it of any individual, other than those which in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
(f) Borrower is in material compliance with all laws, and all orders of all
Governmental Authorities and arbitrators, relating to the employment of labor
including all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, and the payment of withholding and/or social
security and similar taxes, other than those the non-compliance with which in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
3.18 FORCE MAJEURE
Neither Borrower's business nor its properties are currently suffering from
the effects of any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance), other than those the consequences of which in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
CREDIT AGREEMENT PAGE 20
<PAGE>
3.19 INTELLECTUAL PROPERTY
Borrower owns or licenses or otherwise has the right to use all material
licenses, Permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operation of its businesses, without infringement upon or
conflict with the rights of any other Person with respect thereto, including,
without limitation, all trade names. No slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower infringes upon or conflicts with any
rights owned by any other Person, which infringement or conflict is reasonably
likely to have a Material Adverse Effect, and no claim or litigation regarding
any of the foregoing is pending or, to its knowledge, threatened, the existence
of which could reasonably be expected to have a Material Adverse Effect.
3.20 CERTAIN INDEBTEDNESS
The Disclosure Schedule identifies as of the Closing Date all Indebtedness
of Borrower which is either (a) for borrowed money or (b) incurred outside of
the ordinary course of the business.
3.21 SENIORITY
Borrower's obligations hereunder rank at least pari passu to all of its
other Indebtedness, except Indebtedness secured by Permitted Liens.
3.22 TRUTH, ACCURACY OF INFORMATION
All financial and other information furnished to Bank in connection with
this Agreement is accurate in all material respects as of the date furnished and
does not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the information furnished, in light of
the circumstances under which furnished, not misleading; provided, however, that
with respect to any such information which is a forecast or projection, Borrower
represents only that it acted in good faith and utilized reasonable assumptions
based on due and careful consideration and on the information known to it at the
time of the preparation of such forecast or projection.
CREDIT AGREEMENT PAGE 21
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3.23 USE OF PROCEEDS
The proceeds of the Loans are being used by Borrower only (a) to finance
acquisitions permitted by the terms of this Agreement, (b) for working capital,
and (c) for general corporate purposes.
ARTICLE IV. CONDITIONS
4.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT
The obligation of Bank to make the initial Loans contemplated by this
Agreement is subject to the fulfillment to Bank's satisfaction of all of the
following conditions:
(a) All legal matters incidental to the extension of credit hereunder shall
be reasonably satisfactory to counsel for Bank.
(b) Bank shall have received, in form and substance reasonably satisfactory
to Bank, each of the following, duly executed:
(i) this Agreement and the Note;
(ii) corporate borrowing resolution from Borrower;
(iii) status certificate for Borrower from its state of incorporation
and a copy of Borrower's articles of incorporation and all amendments
thereto, certified by Borrower's secretary to be correct and complete;
(iv) a copy of Borrower's bylaws and all amendments thereto, certified
by its secretary as correct and complete;
(v) certificate of incumbency;
(vi) Notice of Authorized Representatives; and
(vii) such other documents as Bank may reasonably require.
(c) There is no event or circumstance which can reasonably be expected to
have a Material Adverse Effect.
(d) Borrower shall have paid all fees and costs and expenses then due
pursuant to the terms of this Agreement.
CREDIT AGREEMENT PAGE 22
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4.2 CONDITIONS OF EACH EXTENSION OF CREDIT
The obligation of Bank to make any Loan (including any Loan being made by
Bank on the Closing Date), other than a continuation or conversion of a Loan as
provided in Section 2.3(a), shall be subject to the further conditions precedent
that:
(a) The following statements shall be true on the date of such Loan, both
before and after giving effect thereto and to the application of the proceeds
therefrom (and the acceptance by Borrower of the proceeds of such Loan shall
constitute a representation and warranty by Borrower that on the date of such
Loan or such issuance such statements are true):
(i) the representations and warranties of Borrower contained in the
Loan Documents are correct in all material respects on and as of such date
as though made on and as of such date or, as to those representations and
warranties limited by their terms to a specified date, were correct in all
material respects on and as of such date; and
(ii) no Default is continuing or would result from the Loans being
made on such date;
(b) The making of the Loans on such date does not violate any Governmental
Rule and is not enjoined, temporarily, preliminarily or permanently;
(c) Bank shall have received such additional documents, information and
materials as Bank may reasonably request; and
(d) No event or circumstance exists which can reasonably be expected to
have a Material Adverse Effect.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain outstanding, and until payment in full, in cash, of all
Obligations, Borrower shall, unless Bank otherwise consents in writing:
5.1 PUNCTUAL PAYMENTS
Punctually pay all principal, interest, fees and other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.
CREDIT AGREEMENT PAGE 23
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5.2 ACCOUNTING RECORDS
Keep accurate books and records of its and its subsidiaries' financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with GAAP.
5.3 FINANCIAL STATEMENTS
Provide Bank all of the following, in form and detail reasonably
satisfactory to Bank:
(a) Not later than 120 days after and as of the end of each fiscal year of
Borrower, the following audited financial statements of Borrower (on a
consolidated basis), prepared in accordance with GAAP and certified by an
independent certified public accountant reasonably acceptable to Bank and such
accountant's opinion with respect thereto (which shall not be qualified in any
material respect): balance sheet and statements of earnings, shareholders'
equity and cash flows;
(b) Not later than 45 days after and as of the end of each of the first
three fiscal quarters of Borrower, the following financial statements of
Borrower (on a consolidated basis), prepared in accordance with GAAP (except for
the absence of footnote disclosures and subject to year-end audit adjustments),
including a comparison of Borrower's financial condition for said fiscal quarter
and year to date with respect to the same fiscal quarter and period of the
immediately preceding fiscal year, together with a certificate by a senior
financial officer of Borrower certifying that such financial statements fairly
present in all material respects Borrower's financial condition as of the end of
such fiscal quarter: balance sheet and statements of earnings, shareholders'
equity and cash flows;
(c) Contemporaneously with the delivery of the financial statements
required hereby, a certificate of Borrower's chief financial officer (i) stating
that no Event of Default has occurred and that no Default has occurred and is
continuing or, if an Event of Default has occurred or a Default has occurred and
is continuing, specifying the nature and extent thereof in reasonable detail
together with a statement of any action taken or proposed to be taken with
respect thereto and (ii) setting forth the calculations required to establish
compliance by Borrower with the covenants set forth in Section 5.17, as well as
the Capital Ratio described in Schedule I; and
(d) From time to time such other information as Bank may reasonably
request, which may include, without limitation, budgets, forecasts, projections
and other information respecting the business of Borrower.
CREDIT AGREEMENT PAGE 24
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5.4 INSURANCE
Maintain and keep in force such insurance (including self-insurance)
covering such risks customarily insured against by corporations similarly
situated, with reputable companies or with the United States government or any
agency or instrumentality thereof, in such amounts and by such methods as shall
be reasonably adequate.
5.5 COMPLIANCE
Preserve and maintain all licenses, Permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of its business and
comply in all material respects, with all Governmental Rules, Contractual
Obligations, commitments, instruments, licenses, Permits and franchises, other
than such failure to preserve or maintain or non-compliance the consequences of
which in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
5.6 FACILITIES
Keep all material properties useful or necessary to Borrower's business in
good repair and condition, and from time to time make necessary repairs,
renewals and replacements thereto so that such property shall be efficiently
preserved and maintained, provided, that nothing in this covenant shall preclude
Borrower from disposing of properties in the ordinary course of business.
5.7 TAXES AND OTHER LIABILITIES
Pay and discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including, without limitation,
Federal and state income taxes and state and local property taxes and
assessments, except such as Borrower may in good faith contest or as to which a
bona fide dispute may exist and for which Borrower has made provision for
adequate reserves in accordance with GAAP.
5.8 LITIGATION
Promptly give notice in writing to Bank of any litigation, arbitration or
other legal proceeding pending or threatened against Borrower or any subsidiary
with a claim in excess of $1,000,000 for Borrower and its subsidiaries.
5.9 NOTICE TO BANK
(a) Promptly (but in no event more than five Business Days after the
occurrence of each such event or matter) give written notice to Bank in
reasonable
CREDIT AGREEMENT PAGE 25
<PAGE>
detail of: (i) the occurrence of any Default which has not been cured before the
giving of such notice; (ii) any termination or cancellation of any material
insurance policy which Borrower is required to maintain, unless such policy is
replaced without any break in coverage with an equivalent or better policy;
(iii) any uninsured or partially uninsured loss or losses through liability or
property damage, or through fire, theft or any other cause affecting the
property of Borrower in excess of an aggregate of $1,000,000 during any
twelve-month period; or (iv) any change in the name or the organizational
structure of Borrower or any subsidiary.
(b) As soon as possible and in any event within thirty days after Borrower
knows or has reason to know that any "reportable event" (as defined in Title IV
of ERISA) that triggers an obligation to file a notice with the Pension Benefit
Guaranty Corporation with respect to any Plan has occurred that alone or
together with any other "reportable event" is reasonably likely to result in an
increase in the present value of future liabilities under all Plans of Borrower
of more than $1,000,000, deliver to Bank a statement of the president or chief
financial officer of Borrower setting forth details as to such reportable event
and the action that Borrower proposes to take with respect thereto, together
with a copy of the notice of such reportable event to the Pension Benefit
Guaranty Corporation.
5.10 CONDUCT OF BUSINESS
Except as otherwise permitted by this Agreement, (a) conduct its business
in the ordinary course and (b) use its reasonable efforts, consistent with past
practice, to (i) preserve its business and the goodwill and business of the
customers, advertisers, suppliers and others with whom it has business
relations, (ii) keep available the services and goodwill of its present
employees, and (iii) preserve all material rights, Permits, licenses, approvals,
privileges, registered patents, trademarks, trade names, copyrights and service
marks and other intellectual property with respect to its business.
5.11 PRESERVATION OF CORPORATE EXISTENCE, ETC.
Preserve and maintain its corporate existence, rights (charter and
statutory) and material franchises, unless the failure to so preserve and
maintain could not reasonably be expected to have a Material Adverse Effect.
5.12 ACCESS
At any reasonable time and from time to time upon at least two Business
Days' prior notice from Bank (unless a Default shall have occurred and be
continuing, in which case no prior notice is necessary), permit Bank, or any
agents or representatives thereof, to (i) examine and make copies of and
abstracts from the records and books of
CREDIT AGREEMENT PAGE 26
<PAGE>
account of Borrower, (ii) visit the properties of Borrower, and (iii) discuss
the affairs, finances and accounts of Borrower with any of its officers or
directors who may then be reasonably available and with Borrower's independent
certified public accountants in the presence of an officer or director of
Borrower. Borrower shall authorize its independent certified public accountants
to disclose to Bank any and all financial statements and other written
information of any kind, including, without limitation, copies of any management
letter, with respect to the business, financial condition or results of
operations of Borrower and each of its subsidiaries.
5.13 PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS
Perform and observe all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do all things
necessary to preserve and to keep unimpaired its rights under such Contractual
Obligations, other than such failures the consequences of which in the aggregate
are not reasonably likely to have a Material Adverse Effect.
5.14 APPLICATION OF PROCEEDS
Use the entire amount of the proceeds of each Loan as provided in Section
3.23.
5.15 FISCAL YEAR; ACCOUNTING CHANGES
Notify Bank at least 60 days in advance of any action Borrower intends to
take to change (i) its fiscal year, (ii) its method of accounting, or any
accounting practice used by it, or the application of GAAP in a manner
inconsistent with the financial statements previously delivered by Borrower to
Bank, or (iii) its tax status as a subchapter S corporation.
5.16 ENVIRONMENTAL
(a) Promptly give notice to Bank upon obtaining knowledge of (i) any claim,
injury, proceeding, investigation or other action, including a request for
information or a notice of potential environmental liability, by or from any
Governmental Authority or any third-party claimant that could reasonably be
expected to result in Borrower or any subsidiary incurring any material
Environmental Liabilities and Costs or (ii) the discovery of any Release at, on,
under or from any real property, facility or equipment owned or leased by
Borrower or a subsidiary in excess of reportable or allowable standards or
levels under any applicable Environmental
CREDIT AGREEMENT PAGE 27
<PAGE>
Law, or in any manner or amount that could reasonably be expected to result in
Borrower or any subsidiary incurring Environmental Liabilities and Costs.
(b) Upon discovery of the presence on any property owned or leased by
Borrower or a subsidiary of any Contaminant that reasonably could be expected to
result in material Environmental Liabilities and Costs, take all Remedial Action
required by applicable Environmental Law.
5.17 FINANCIAL COVENANTS
(a) As of December 31, 1997, maintain (on a consolidated basis) Tangible
Net Worth in an amount equal to or greater than $91,936,000 plus the greater of
(i) $5,000,000 or (ii) 35 percent of Borrower's net income for the fiscal year
ending December 31, 1997.
(b) As of the last day of each fiscal quarter of Borrower, maintain the
Advance Basis in an amount equal to or greater than the aggregate outstanding
principal balance of the Loans as of each such date.
5.18 FURTHER ASSURANCES
At the request of Bank at any time and from time to time, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be reasonably necessary or proper to effectuate the provisions or purposes of
this Agreement or any of the other Loan Documents, at Borrower's expense. Bank
may at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans
contained herein are satisfied. In the event of such request by Bank, Bank may,
at its option, cease to make any further Loans until Bank has received such
certificate and, in addition, Bank has determined that such conditions are
satisfied.
ARTICLE VI. NEGATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain outstanding, and until payment in full, in cash of all
Obligations, Borrower will not, without the prior written consent of Bank:
CREDIT AGREEMENT PAGE 28
<PAGE>
6.1 LIENS
Create or suffer to exist any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, except for the following:
(a) Liens, if any, created pursuant to the Loan Documents;
(b) The Permitted Liens not otherwise described in this Section 6.1;
(c) Zoning restrictions, easements, rights of way, survey exceptions,
encroachments, covenants, licenses, reservations, leasehold interests,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of the Borrower or any subsidiaries or impair, in any
material manner, the use of such property for the purposes for which such
property is held by the Borrower or any subsidiaries;
(e) Liens existing on the date of this Agreement and disclosed on the
Disclosure Schedule and any related payment and performance obligations in
respect of the Indebtedness secured thereby;
(f) Liens to secure Capitalized Lease Obligations and operating leases and
any related payment and performance obligations; provided, however, that: (i)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including,
without limitation, the cost of construction, capitalized interest and the
reasonable fees and expenses relating to such Indebtedness) of the property
subject thereto, (ii) the principal amount of the Indebtedness secured by such
Lien does not exceed 100 percent of such cost, and (iii) such Lien does not
extend to or cover any other property other than such item of property and any
improvements on such item;
(g) The interests of lessors or lessees of property leased pursuant to
leases permitted hereunder;
(h) Liens in favor of Bank and/or any of its affiliates;
(i) Liens securing (i) the nondelinquent performance of bids, trade
contracts (other than for borrowed money) and statutory obligations, (ii)
Contingent Obligations on surety and appeal bonds, and (iii) other nondelinquent
obligations of a like nature, in each case incurred in the ordinary course of
business, provided that all such Liens in the aggregate would not (even if
enforced) cause any Material Adverse Effect;
CREDIT AGREEMENT PAGE 29
<PAGE>
(j) Purchase money security interests in any property acquired or held by
Borrower and its subsidiaries in the ordinary course of business, securing
Indebtedness not to exceed $5,000,000 in the aggregate incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such property; provided that (i) any such Lien attaches to such
property concurrently with or within 30 days after the acquisition or completion
of construction thereof, (ii) such Lien attaches solely to the property
(including proceeds thereof) so acquired or constructed in such transaction, and
(iii) the principal amount of the Indebtedness secured thereby does not exceed
100 percent of the cost of such property;
(k) Liens arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights and remedies as
to deposit accounts or other funds maintained with a creditor depository
institution; provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by Borrower
in excess of those set forth in regulations promulgated by the Federal Reserve
Board and (ii) such deposit account is not intended by Borrower to provide
collateral to any depository institution;
(l) Any Lien existing on any specific item of real or personal property or
asset prior to the acquisition thereof by Borrower securing Indebtedness not to
exceed $1,000,000 in the aggregate; provided that (i) such Lien is not created
in contemplation of or in connection with such acquisition and (ii) such Lien
does not apply to any other property or assets of Borrower;
(m) Liens created by or relating to any legal proceeding which at the time
is being contested in good faith by appropriate proceedings, provided, that in
the case of a Lien consisting of an attachment or judgment Lien, the judgment it
secures shall, within 60 days thereof, have been discharged or execution thereof
stayed pending appeal, or discharged within 60 days after the expiration of any
such stay and provided further that all such Liens in the aggregate at any time
outstanding do not exceed $1,000,000;
(n) Liens securing Indebtedness, the proceeds of which are used to
refinance the Indebtedness secured by any Lien permitted hereunder, provided
that such Lien does not apply to any additional property or assets of Borrower
(other than the proceeds of the property or assets subject to such Lien); and
(o) Other Liens to secure Indebtedness of Borrower in an aggregate amount
not to exceed $500,000; provided, however that such Liens shall not include
Liens encumbering all or substantially all of Borrower's inventory, accounts
receivable or equipment.
CREDIT AGREEMENT PAGE 30
<PAGE>
6.2 RESTRICTED PAYMENTS, REDEMPTIONS
(a) During the continuation of any Event of Default or if the proposed
transaction would result in the occurrence of a Default or an Event of Default:
(i) declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account or
in respect of any of its Stock or Stock Equivalents; or
(ii) purchase, redeem or otherwise acquire for value any of Borrower's
Stock or Stock Equivalents.
(b) Notwithstanding the foregoing, and provided that Bank has not given
Borrower notice of acceleration or taken any other action to accelerate the
Loans that Borrower has knowledge of, Borrower may make distributions to its
shareholders after the occurrence and during the continuation of an Event of
Default for the following purposes:
(i) the payment by Borrower's shareholders of federal income taxes
attributable to the income of Borrower that is required to be recognized by
Borrower's shareholders pursuant to Subchapter S of the Internal Revenue
Code of 1986, as amended; or
(ii) the payment by Borrower's shareholders of federal gift taxes in
an aggregate amount not to exceed $15,000,000 resulting from the transfer
by gift of Stock of Borrower prior to the date of this Agreement.
(c) Make any distribution in respect of Borrower's accumulated adjustment
account except (i) such distributions evidenced by promissory notes that are
payable solely from proceeds of a public offering of Borrower's Stock or (ii)
distributions in cash, provided that concurrently with such distributions the
shareholders receiving the distributions shall loan to Borrower the amount of
such distributions, repayment of which shall be evidenced by notes that are
fully subordinated to the Obligations as to principal, interest and all other
charges on terms approved by Bank in writing prior to the execution of such
notes by Borrower.
6.3 MERGERS, SALE OF ASSETS, ETC.
(a) Merge or consolidate with any Person, acquire, either directly or
through any affiliate, all or a substantial portion of the Stock, Stock
Equivalents or assets of another Person, or form any subsidiaries without Bank's
prior written consent (which shall not be unreasonably withheld or delayed);
provided that Borrower may, without the prior written consent of Bank, (i) cause
any of its subsidiaries to be
CREDIT AGREEMENT PAGE 31
<PAGE>
merged into Borrower, (ii) acquire, either directly or through any affiliate,
all or a substantial portion of the Stock, Stock Equivalents or assets of any
Person so long as the total consideration to be paid in any fiscal year of
Borrower for such acquisitions in the aggregate does not exceed $3,000,000 or
(iii) form one or more subsidiaries so long as the aggregate value of assets
transferred by Borrower to its subsidiaries in any fiscal year does not exceed
$3,000,000.
(b) Sell, convey, transfer, lease or otherwise dispose of any of its assets
(including, without limitation, the Stock of a subsidiary) or any interest
therein to any Person, or permit or suffer any other Person to acquire any
interest in any of the assets of Borrower, except (i) Permitted Liens and (ii)
the sale or disposition of inventory in the ordinary course of business and/or
assets which have become obsolete or are replaced in the ordinary course of
business.
6.4 INVESTMENTS IN OTHER PERSONS
Except as otherwise permitted by Section 6.2 or 6.3, directly or
indirectly, make or maintain any loan or advance to any other Person or own,
purchase or otherwise acquire any Stock, Stock Equivalents, other equity
interest, obligations or other securities of, or otherwise invest in, any other
Person (any such transaction being an "Investment"), except:
(a) Investments in accounts, contract rights and chattel paper, notes
receivable and similar items arising or acquired in the ordinary course of
business consistent with Borrower's past practice;
(b) Incidental advances to employees of Borrower in the ordinary course of
business;
(c) Investments in existence on the Closing Date;
(d) Loans and capital contributions to Borrower's subsidiaries in the
ordinary course of business consistent with Borrower's past practice;
(e) Foreign exchange contracts entered into by Borrower in the ordinary
course of business; and
(f) Short-term investments made for cash management purposes and investment
vehicles approved by Bank in writing, which approval shall not be unreasonably
withheld or delayed.
CREDIT AGREEMENT PAGE 32
<PAGE>
6.5 CHANGE IN NATURE OF BUSINESS
Directly or indirectly engage in any business activity other than its
current business activity and business activities reasonably related thereto.
6.6 GUARANTIES
Guarantee or become liable in any way as surety, endorser (other than as
endorser of negotiable instruments for deposit or collection in the ordinary
course of business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower or any subsidiary as security for, any
liabilities or obligations of any other Person except:
(a) Any of the foregoing required by this Agreement;
(b) Guaranties by Borrower of the indebtedness of Columbia Sportswear
Canada in an aggregate amount not to exceed $20,000,000 in U.S. dollars;
(c) Guaranties by Borrower of the indebtedness of Columbia Sportswear Japan
KK in an aggregate amount not to exceed $10,000,000 in U.S. dollars; and
(d) Guaranties existing on the Closing Date that are described in the
Disclosure Schedule.
6.7 PLANS
(a) Adopt or become obligated to contribute to any Title IV Plan or any
multiemployer Plan or any other Plan subject to Section 412 of the Internal
Revenue Code (except for any such Plan listed on the Disclosure Schedule on the
Closing Date), (b) establish or become obligated with respect to any new welfare
benefit Plan, or modify any existing welfare benefit Plan, which is reasonably
likely to result in an increase of the present value of future liabilities for
post-retirement life insurance and medical benefits, or (c) establish or become
obligated to contribute to any new unfunded pension Plan, or modify any existing
unfunded pension Plan, which is reasonably likely to result in an increase in
the present value of future unfunded liabilities under all such plans.
6.8 ACCOUNTING CHANGES
Make any change in accounting practices, except such changes as are in
conformity with GAAP and disclosed to Bank pursuant to Section 5.15.
CREDIT AGREEMENT PAGE 33
<PAGE>
6.9 CANCELLATION OF INDEBTEDNESS OWED TO BORROWER
Cancel any material claim of or Indebtedness owed to Borrower other than
for legitimate business purposes in the reasonable judgment of Borrower and in
the ordinary course of business.
6.10 NO SPECULATIVE TRANSACTIONS
Engage in any commodity contract or Interest Rate Contract other than
foreign exchange contracts in the ordinary course of business.
6.11 MARGIN REGULATIONS
Use the proceeds of any Loans to purchase or carry any margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
6.12 ENVIRONMENTAL
Permit any lessee or any other Person to, dispose of any Contaminant by
placing it in or on the ground or waters of any property owned or leased by
Borrower or any of its subsidiaries, except in material compliance with
Environmental Law or the terms of any Permit or other than those which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect.
6.13 TRANSACTIONS WITH AFFILIATES
Except as otherwise permitted by Section 6.2 , 6.3 or 6.4, enter into any
transaction directly or indirectly with or for any affiliate except in the
ordinary course of business on a basis no less favorable to such affiliate than
would be obtained in a comparable arm's length transaction with a Person not an
affiliate involving assets that are not material to the business and operations
of Borrower.
ARTICLE VII. EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
(a) Borrower shall fail to pay (i) any principal of any Loan when due; (ii)
any other Obligation (including payment of interest on any Loan) within five
days after any such amount becomes due in accordance with the terms of the Loan
CREDIT AGREEMENT PAGE 34
<PAGE>
Documents; or (iii) any Indebtedness of Borrower to Bank not evidenced by the
Loan Documents when due or within any applicable cure period provided for in the
documents evidencing such Indebtedness;
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower under any of the Loan
Documents shall prove to be false or misleading in any material respect when
furnished or made;
(c) Borrower shall fail to provide any certificate, report or other
information which it is required to provide pursuant to Section 5.3 on the date
specified in Section 5.3; provided that unless Borrower has previously failed to
provide any required certificate, report or other information by the required
date on two prior occasions within the preceding 12 months, such failure shall
be considered an Event of Default only if Borrower fails to provide such
certificate, report or other information within five Business Days of the
earlier of (i) the date an executive officer of Borrower has knowledge of its
failure to so provide such certificate, report or other information, or (ii) the
date Bank notifies Borrower of such failure;
(d) Any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained in Sections 5.4, 5.11, 5.12,
5.14, 5.15 5.17, 6.3, 6.4, 6.6, 6.9, 6.10 or 6.11;
(e) Any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) through (d) above) for
30 days after written notice thereof has been given to the Borrower by Bank;
(f) Any default by Borrower in the payment or performance of any
obligation, or the occurrence and continuation of any defined event of default,
under the terms of any contract or instrument (other than any of the Loan
Documents) evidencing Indebtedness (other than trade payables incurred in the
ordinary course of business) in excess of $1,000,000 to any Person where the
effect of such default or event of default is the acceleration of such
obligation or Indebtedness;
(g) Any judgment, order or writ in excess of $1,000,000 is rendered or
entered against Borrower and/or one or more subsidiaries of Borrower, except any
judgment for which Borrower is fully insured or indemnified against (by an
indemnitor that, in Bank's reasonable judgment, is financially able to satisfy
its indemnification obligation) and with respect to which the insurer or
indemnitor (as the case may be) has admitted in writing its liability for the
full amount thereof or except if the enforcement of such judgment, order or writ
has been stayed or the liability thereon bonded in a manner and on terms
reasonably satisfactory to Bank; or the
CREDIT AGREEMENT PAGE 35
<PAGE>
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against any of the assets of Borrower and/or one or more
subsidiaries with respect to obligations in excess of $1,000,000;
(h) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its property, or shall generally be unable to or fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or seek to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or other Federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
other Federal law relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower and is not dismissed, stayed or
vacated within 60 days thereafter; Borrower shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors; as used herein;
(i) There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents;
(j) The dissolution or liquidation of Borrower, or Borrower or its
directors or stockholders shall take action seeking to effect the dissolution or
liquidation of Borrower; or
(k) Any change in ownership during the term of this Agreement of an
aggregate of 35 percent or more of the Stock of Borrower other than changes
resulting from transfers to Permitted Transferees.
7.2 REMEDIES
Upon the occurrence or existence of any Event of Default (other than an
Event of Default referred to in Section 7.1(h) hereof) and at any time
thereafter during the continuance of such Event of Default, Bank may, by written
notice to Borrower, (a) terminate Bank's obligation to extend any further credit
under any of the Loan Documents, and /or (b) declare all indebtedness of
Borrower under the Loan Documents to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower. Upon the occurrence or existence of any
Event of Default and at any time
CREDIT AGREEMENT PAGE 36
<PAGE>
thereafter during the continuance of such Event of Default, Bank shall also be
entitles to the appointment of a receiver to take over the affairs of Borrower
Upon the occurrence or existence of any Event of Default described in Section
7.1(h) hereof, immediately and without notice, (i) the obligations, if any, of
Bank to extend any further credit under any of the Loan Documents shall
automatically cease and terminate, and (ii) all indebtedness of Borrower under
the Loan Documents shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by Borrower. In addition to the foregoing
remedies, upon the occurrence and during the continuance of any Event of
Default, Bank may exercise any other right, power or remedy granted to it under
any Loan Document or permitted to it by law, either by suit in equity or by
action at law, or both.
ARTICLE VIII. MISCELLANEOUS
8.1 NO WAIVER
No delay, failure or discontinuance of Bank in exercising any right, power
or remedy under any of the Loan Documents shall affect or operate as a waiver of
such right, power or remedy; nor shall any single or partial exercise of any
such right, power or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
8.2 NOTICES
All notices, requests and demands which any party is required or may desire
to give to any other party under any provision of this Agreement must be in
writing delivered to each party at the following address:
BORROWER: Columbia Sportswear Company
6600 N. Baltimore
Portland, OR 97203
Attn: Patrick D. Anderson
Telecopy No.: (503) 285-9626
CREDIT AGREEMENT PAGE 37
<PAGE>
BANK: Wells Fargo Bank, National Association
Commercial Banking Office
1300 S.W. Fifth Avenue, T-19
MAC: 6101-192
Portland, OR 97201
Attn: Stan Vinson
Telecopy No.: (503) 225-2039
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three days after deposit in the
U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt, with transmission confirmed, and the sender will endeavor to send a
hard copy of such telecopied notice to the recipient by mail.
8.3 COSTS, EXPENSES AND ATTORNEYS' FEES
Borrower shall pay to Bank immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys'
fees (whether incurred at the trial or appellate level, in an arbitration
proceeding, in bankruptcy, including, without limitation, any adversary
proceeding, contested matter or motion), incurred by Bank in connection with (a)
the negotiation and preparation of the Loan Documents (provided that the amount
of attorneys' fees and related disbursements incurred in connection with the
negotiation and preparation of the Loan Documents shall not exceed $10,000), (b)
the enforcement, preservation or protection (or attempted enforcement,
preservation or protection) of Bank's rights, including, without limitation,
periodic collateral examinations and/or the collection of any amounts which
become due to Bank, under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
8.4 INDEMNIFICATION
To the fullest extent permitted by law, Borrower hereby agrees to protect,
indemnify, defend and hold harmless Bank and its officers, directors,
shareholders, employees, agents, attorneys and affiliates, together with their
respective heirs, beneficiaries, executors, administrators, trustees,
predecessors, successors and assigns (collectively, "Indemnitees") from and
against any liability, loss, damage or expense of any kind or nature (including
in respect of or for reasonable attorneys' fees (whether incurred at the trial
or appellate level, in an arbitration proceeding, in
CREDIT AGREEMENT PAGE 38
<PAGE>
bankruptcy (including, without limitation, any adversary proceeding, contested
matter or motion) or otherwise) and other expenses) arising from any suit, claim
or demand on account of or in connection with any matter or thing or action or
failure to act by Indemnitees, or any of them, arising out of relating to any
Loan Document, except to the extent such liability arises from the willful
misconduct or gross negligence of the Indemnitees. Upon receiving knowledge of
any suit, claim or demand asserted by a third party that Bank believes is
covered by this indemnity, Bank shall give Borrower notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to Bank. Bank may also require Borrower to defend the
matter. Any failure or delay of Bank to notify Borrower of any suit, claim or
demand shall not relieve Borrower of its obligations of this Section, but shall
reduce such obligations to the extent of any increase in those obligations
caused solely by an unreasonable failure or delay in providing such notice. The
obligations of Borrower under this Section shall survive the payment in full and
performance of the other Obligations.
8.5 SUCCESSORS, ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder. Bank reserves the right, subject
(unless an Event of Default has occurred and is continuing) to the prior written
consent of Borrower (which consent shall not be unreasonably withheld or
delayed), to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in, Bank's rights and benefits under each of the
Loan Documents.
8.6 ENTIRE AGREEMENT; AMENDMENT
This Agreement and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to the extension of credit by Bank
contemplated by this Agreement and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only by a written instrument
executed by each party hereto.
8.7 NO THIRD PARTY BENEFICIARIES
This Agreement is made and entered into for the sole protection and benefit
of the parties hereto and their respective permitted successors and assigns, and
no other person or entity shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any other of the Loan Documents to which it is not a party.
CREDIT AGREEMENT PAGE 39
<PAGE>
8.8 TIME
Time is of the essence of each and every provision of this Agreement and
each other of the Loan Documents.
8.9 SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or any remaining provisions of this Agreement.
8.10 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
when executed and delivered shall be deemed to be an original, and all of which
when taken together shall constitute one and the same Agreement.
8.11 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the state of Oregon.
8.12 ARBITRATION
(a) Upon the demand of any party, any Dispute shall be resolved by binding
arbitration (except as set forth in (e) below) in accordance with the terms of
this Agreement. A "Dispute" shall mean any action, dispute, claim or controversy
of any kind, whether in contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in connection with, or in
any way pertaining to, any of the Loan Documents, or any past, present or future
extensions of credit and other activities, transactions or obligations of any
kind related directly or indirectly to any of the Loan Documents, including
without limitation, any of the foregoing arising in connection with the exercise
of any self help, ancillary or other remedies pursuant to any of the Loan
Documents. Any party may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) Arbitration proceedings shall be administered by the American
Arbitration Association ("AAA") or such other administrator as the parties shall
mutually agree upon, in accordance with the AAA Commercial Arbitration Rules.
All Disputes shall submitted to arbitration shall be resolved in accordance with
the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding
any
CREDIT AGREEMENT PAGE 40
<PAGE>
conflicting choice of law provision in any of the Loan Documents. The
arbitration shall be conducted at a location in Oregon selected by the AAA or
other administrator. If there is any inconsistency between the terms hereof and
any such rules, the terms and procedures set forth herein shall control. All
statutes of limitation applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated. Judgment upon any award
rendered in an arbitration may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
ss.91 or any similar applicable state law.
(c) No provision hereof shall limit the right of any party to exercise
self-help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or to obtain any otherwise available
provisional or ancillary remedies, including without limitation injunctive
relief, sequestration, attachment, garnishment or the appointment of a receiver,
from a court of competent jurisdiction before, after or during the pendency of
any arbitration or other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration hereunder.
(d) Arbitrators must be active members of the Oregon State Bar or retired
judges of the state or federal judiciary of Oregon, with expertise in the
substantive laws applicable to the subject matter of the Dispute. Arbitrators
are empowered to resolve Disputes by summary rulings in response to motions
filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the state of Oregon, (ii) may
grant any remedy or relief that a court of the state of Oregon could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the Oregon Rules of Civil Procedure or other applicable law.
Any Dispute in which the amount in controversy is $5,000,000 or less shall be
decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators.
(e) Notwithstanding anything herein to the contrary, in any arbitration in
which the amount in controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and conclusions of law. In
such arbitrations (i) the arbitrators shall not have the power to make any award
which is not
CREDIT AGREEMENT PAGE 41
<PAGE>
supported by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings of fact are
supported by substantial evidence and the conclusions of law are not erroneous
under the substantive law of the state of Oregon, and (iii) the parties shall
have in addition to the grounds referred to in the Federal Arbitration Act for
vacating, modifying or correcting an award the right to judicial review of (A)
whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions of law are erroneous under
the substantive law of the state of Oregon. Judgment confirming an award in such
a proceeding may be entered only if a court determines the award is supported by
substantial evidence and not based on legal error under the substantive law of
the state of Oregon.
(f) To the maximum extent practicable, the AAA, the arbitrators and the
parties shall take all action required to conclude any arbitration proceeding
within 180 days of the filing of the Dispute with the AAA. No arbitrator or
other party to an arbitration proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business, by applicable law or regulation, or to the
extent necessary to exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the parties potentially
applies to a Dispute, the arbitration provision most directly related to the
Loan Documents or the subject matter of the Dispute shall control. This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.
8.13 WAIVER OF JURY TRIAL
EACH OF BORROWER, AND BANK, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR CONTEMPLATED HEREBY OR
THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS. A COPY
OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF
THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.
CREDIT AGREEMENT PAGE 42
<PAGE>
8.14 OREGON STATUTORY NOTICE
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
Title: President
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:
-----------------------------------------
Title: Vice President
<PAGE>
Exhibit A
to Credit Agreement
REVOLVING LOANS PROMISSORY NOTE
$70,000,000 July 31, 1997
FOR VALUE RECEIVED, the undersigned, COLUMBIA SPORTSWEAR COMPANY, an
Oregon corporation ("Borrower"), hereby promises to pay to the order of Wells
Fargo Bank, National Association ("Bank") on the Maturity Date the principal
sum of Seventy Million Dollars ($70,000,000), or such lesser amount as shall
equal the aggregate outstanding principal balance of all Loans made by Bank to
Borrower pursuant to the Credit Agreement referred to below.
This promissory note is the Note referred to in, and subject to the terms
of, that certain Credit Agreement between Borrower and Bank dated as of July 31,
1997, (as amended, modified, restated or supplemented from time to time, the
"Credit Agreement"). Capitalized terms used herein shall have the respective
meanings assigned to them in the Credit Agreement.
Borrower further promises to pay interest on the outstanding principal
hereof at the interest rates, and payable on the dates, set forth in the Credit
Agreement. All payments of principal and interest hereunder shall be made to
Bank at Bank's office in lawful money of the United States and in same day or
immediately available funds.
Bank is authorized but not required to record the date and amount of each
advance made hereunder, the date and amount of each payment of principal and
interest hereunder, and the resulting unpaid principal balance hereof, in Bank's
internal records, and any such recordation shall be prima facie evidence of the
accuracy of the information so recorded; provided however, that Bank's failure
to so record shall not limit or otherwise affect Borrower's obligations
hereunder and under the Credit Agreement to repay the principal hereof and
interest hereon.
The Credit Agreement provides, among other things, for acceleration (which
in certain cases shall be automatic) of the maturity hereof upon the occurrence
of certain stated events, in each case without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrower.
PAGE 1
<PAGE>
In the event of any conflict between the terms of this promissory note and
the terms of the Credit Agreement, the terms of the Credit Agreement shall
control.
This promissory note shall be governed by and construed in accordance with
the laws of the State of Oregon.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY BANK
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE
NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY BANK TO BE ENFORCEABLE.
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
Title: President
<PAGE>
SCHEDULE I
Pricing Schedule
The term "LIBOR Margin" means, for any day, the number of basis points set
forth below in the row opposite such term and in the column corresponding to the
Pricing Level that applies on such day. The term "Base Rate Margin" means, for
any day, the number of basis points set forth below (which are expressed as
negative numbers) in the row opposite such term and in the column corresponding
to the Pricing Level that applies on such day. The term "CD Margin" means, for
any day, the number of basis points set forth below in the row opposite such
term and in the column corresponding to the Pricing Level that applies on such
day.
Pricing Level Level I Level II Level III
LIBOR Margin 35 45 75
Base Rate Margin -210 -200 -190
CD Margin 35 45 75
For purposes of this Pricing Schedule, the following terms have the
following meanings:
"Pricing Level" refers to the determination of whether Level I, Level II or
Level III applies on any day.
"Level I" applies on any day if, on such day, the Capital Ratio is less
than or equal to .5:1.0.
"Level II" applies on any day if, on such day, the Capital Ratio is greater
than .5:1 and less than 1.5:1.0.
"Level III" applies on any day if, on such day, the Capital Ratio is equal
to or greater than 1.5:1.0.
The term "Capital Ratio" means the ratio of Borrower's Indebtedness to
Borrower's Tangible Net Worth as of the date of the most recent fiscal year end
financial statements of Borrower delivered to Bank in accordance with Section
5.3 of the Agreement; provided, however, that if the most recent fiscal year end
financial statements required pursuant to Section 5.3 have not been delivered in
a timely manner, or if Bank reasonably objects to the accuracy of such financial
statements
PAGE 1
<PAGE>
within ten days after the receipt thereof, the next higher Level from the Level
then in effect shall apply until such time as the delinquent report is delivered
or Bank's objections are resolved to Bank's reasonable satisfaction.
PAGE 2
<PAGE>
SCHEDULE II
(DISCLOSURE SCHEDULE)
TO THE
CREDIT AGREEMENT
between
COLUMBIA SPORTSWEAR COMPANY
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
Any disclosure made in any section of this Schedule II shall be deemed
disclosed for all purposes of the Credit Agreement and this Schedule II,
notwithstanding that any such disclosure may have been or should have been made
in another section of this Schedule. The disclosure of any information herein
shall not be construed as an admission that any such information is material.
None of the disclosures contained herein shall be construed as constituting
representations and warranties except as specifically provided in the Credit
Agreement.
<PAGE>
DEFINITIONS:
"Permitted Liens" shall include the mortgage [trust deed] held by Wells
Fargo Bank with respect to Borrower's Rivergate facility.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 LEGAL STATUS
Borrower is qualified to do business in the following states:
Oregon (state of incorporation)
Washington
Pennsylvania
Wisconsin
Minnesota
California
New York
Missouri
Texas
3.2 OWNERSHIP; SUBSIDIARIES
a. (1) Borrower has granted options to purchase 1,017,000 shares of
nonvoting common stock to employees and non-employee directors
pursuant to its 1997 Stock Incentive Plan.
(2) Shares of stock held by Don Santorufo vest over time pursuant to
the Columbia Sportswear Company Deferred Compensation Conversion
Agreement.
(3) Outstanding shares of Borrower's capital stock are subject to a
Restrictive Agreement, which contains limitations on transfer.
b. (1) Borrower owns 79% of the capital stock of Columbia Sportswear
Canada Limited.
(2) Borrower owns 100% of Columbia Sportswear Japan.
(3) Borrower owns 99% of Columbia Sportswear Korea LLC.
(4) Borrower owns 79% of Columbia Sportswear France SNC.
(5) Borrower owns 79% of Columbia Sportswear Germany GMBH.
<PAGE>
3.3 AUTHORIZATION AND VALIDITY
No exceptions.
3.4 NO VIOLATION
There is a mortgage in favor of Wells Fargo on Borrower's Rivergate
distribution facility.
3.5 NO CLAIMS
a. There is a gift tax audit pending in connection with returns filed by
Gert Boyle. Any taxes and penalties will likely be funded through a
distribution by Borrower to its shareholders.
b. A complaint (No. 970705080) has been filed in the Circuit Court of the
State of Oregon in Multnomah County. The claim, Christie L. Taylor and
Academy One, Inc. v. Walsh Construction Co. and Columbia Sportswear
Company, alleges negligence and constructive eviction in connection with
the building of Borrower's store at SW Taylor Street in Portland, Oregon.
c. A complaint (SC016561) has been filed in the Ventura County Superior
Court of the State of California. The claim, Magnuson v. Oshman's Sporting
Goods, cross- defendants Columbia Sportswear Company and Does 1 through
100, inclusive, alleges injury due to product defect.
3.6 CORRECTNESS OF FINANCIAL STATEMENTS
No exceptions.
3.7 INCOME TAX RETURNS
No exceptions.
3.8 NO SUBORDINATION
No exceptions.
3.9 ERISA
No exceptions.
3.10 OTHER OBLIGATIONS
<PAGE>
No exceptions.
3.11 ENVIRONMENTAL MATTERS
See 3.5(b), above.
3.12 LIENS
No exceptions.
3.13 NO BURDENSOME RESTRICTIONS; NO DEFAULTS
No exceptions.
3.14 NO OTHER VENTURES
GTS, Inc. is an affiliated corporation that is wholly owned by the
shareholders of Borrower. GTS, Inc. holds a 21% interest in Columbia Sportswear
Canada Limited, a 21% interest in Columbia Sportswear France SNC, a 21% interest
in Columbia Sportswear Germany GMBH, and less than a 1% interest in Columbia
Sportswear Korea LLC.
3.15 INVESTMENT COMPANY ACT
No exceptions.
3.16 INSURANCE
No exceptions.
3.17 LABOR MATTERS
No exceptions.
3.18 FORCE MAJEURE
No exceptions.
3.19 INTELLECTUAL PROPERTY
No exceptions.
<PAGE>
3.20 CERTAIN INDEBTEDNESS
Borrower has entered into the following agreements:
The Hong Kong and Shanghai Banking Corporation Limited Credit Agreement,
dated September 1, 1991.
Buying Agency Agreement between Nissho Iwai American Corporation and
Borrower, dated October 1, 1993.
Wells Fargo Assumption Agreement for the Rivergate mortgage.
3.21 SENIORITY
No exceptions.
3.22 TRUTH, ACCURACY OF INFORMATION
No exceptions.
3.23 USE OF PROCEEDS
No exceptions.
<PAGE>
Exhibit B
to Credit Agreement
NOTICE OF BORROWING
Wells Fargo Bank, National Association
Commercial Banking Office
1300 S.W. Fifth Avenue, T-19
MAC: 6101-192
Portland, OR 97201
Attn: Stan Vinson
Reference is made to that certain Credit Agreement dated as of July 31,
1997, (as amended, modified or supplemented from time to time, the "Credit
Agreement") Columbia Sportswear Company ("Borrower") and Wells Fargo Bank,
National Association ("Bank"). Capitalized terms used herein shall have the
respective meanings assigned to them in the Credit Agreement.
1. Pursuant to Section 2. 1 (a) of the Credit Agreement, Borrower hereby
requests Revolving Loans upon the following terms:
(a) The principal amount is to be $_________________.
(b) The date of borrowing is to be _________________.
(c)[The Loan is to be a Base Rate Loan.] or [The Loan is to be a LIBOR
Loan with a Fixed Rate Term of [insert 1,2,3 or 6 monthsl .] or [The Loan is to
be a CD Loan with a Fixed Rate Term of [insert 30, 60, 90 or 180 days.]
2. Pursuant to Section 2.3 of the Credit Agreement, Borrower hereby
requests [the continuation of all or part of its outstanding LIBOR Loans with
Fixed Rate Terms ending on ___________________] or [the continuation of all or
part of its outstanding CD Loans with Fixed Rate Terms ending on or [the
conversion of all or part of its outstanding Base Rate Loans], as follows:
(a) The Loans to which this Notice applies are _________________.
PAGE 1
<PAGE>
(b) The effective date of continuation and/or conversion is to be
- ---------------.
(c) The aggregate amount of [said outstanding [LIBOR Loans] or [CD
Loans] to be continued as] [said outstanding Base Rate Loan to be converted to]
[LEBOR Loans] or [CD Loans], and each requested Fixed Rate Tenn, are:
Amount Fixed Rate Term
$----------- --------------
$----------- --------------
(d) The aggregate amount of said outstanding [LIBOR Loans] or [CD
Loans] to be continued as Base Rate Loans is $___________________.
3. Borrower hereby certifies to Bank that, on the date of this Notice of
Borrowing and after giving effect to the requested disbursement (including the
use of the proceeds thereof):
(a) The representations and warranties of Borrower in the Loan
Documents are correct in all material respects as if made on the date hereof,
except for those representations and warranties limited by their terms to a
specific date, which representations and warranties were correct in all material
respects on and as of such date; and
(b) No Default is continuing or would result from the requested
Revolving Loan being made.
The party signing below on behalf of Borrower is an Authorized
Representafive and has caused this Notice of Borrowing to be duly executed on
behalf of Borrower as of [insert date].
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
PAGE 2
<PAGE>
Exhibit C
to Credit Agreement
NOTICE OF AUTHORIZED REPRESENTATIVES
Wells Fargo Bank, National Association
Commercial Banking Office
1300 S.W. Fifth Avenue, T-19
MAC: 6101-192
Portland, OR 97201
Attn: Stan Vinson
Reference is made to that certain Credit Agreement dated as of July 31,
1997, (as amended, modified or supplemented from time to time, the "Credit
Agreement") Columbia Sportswear Company ("Borrower") and Wells Fargo Bank,
National Association ("Bank"). Capitalized terms used herein shall have the
respective meanings assigned to them in the Credit Agreement.
Borrower hereby represents to Bank that the following persons are the
Authorized Representatives, as defmed in the Credit Agreement, and that the
signatures opposite their names are their true signatures:
Name and Office Signature
----------------------------------- --------------------------------------
----------------------------------- --------------------------------------
----------------------------------- --------------------------------------
----------------------------------- --------------------------------------
----------------------------------- --------------------------------------
Borrower hereby represents to Bank that Bank is authorized to rely on this
Notice of Authorized Representatives until such time, if any, as Borrower has
delivered to Bank, and Bank has received, a duly executed Notice of Authorized
Representatives in substitution hereof. This Notice of Authorized
Representatives
PAGE 1
<PAGE>
cancels and supersedes any Notice of Authorized Representatives at any time
prior to the date hereof delivered by Borrower to Bank.
IN WITNESS WHEREOF, Borrower hereby confirms that it has caused this Notice
of Authorized Representatives to be duly executed as of [insert date].
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (the "Agreement") is made this ___ day of
February, 1996 by and between COLUMBIA SPORTSWEAR COMPANY ("Columbia
Sportswear"), TIMOTHY P. BOYLE and DON SANTORUFO (together, the "Borrower"), and
FIRST INTERSTATE BANK OF OREGON, N.A. (the "Bank").
RECITALS:
A. Bank loaned Columbia Sportswear the principal sum of Three Million
Four Hundred Sixteen Thousand and no/100 Dollars ($3,416,000.00) (the "Loan")
pursuant to that certain loan agreement dated May 19, 1994 between Bank and
Columbia Sportswear (with any amendments, the "Loan Agreement"). The Loan was
further evidenced by that certain promissory note dated May 19, 1994 in the
original principal sum of $3,416,000.00 made by Columbia Sportswear in favor of
Bank and with an original maturity date of June 1, 2009 (with any amendments,
extensions or renewals, the "Note").
B. The Loan is secured by a commercial deed of trust dated May 19,
1994 granted by Columbia Sportswear, naming Chicago Title Insurance Company as
trustee in favor of Bank as beneficiary (with any amendments, the "Trust Deed").
The Trust Deed encumbers, among other things, the real property described in
Exhibit A attached to this Agreement and by this reference made a part of it
(the "Real Property"). The Trust Deed was recorded May 19, 1994, Recorder's Fee
No. 94-079047, Multnomah County, Oregon, records.
C. Borrower acquired the Real Property and assumed the obligations of
Columbia Sportswear under the Loan Documents (as defined below) pursuant to that
certain Assumption Agreement dated June 8, 1994 between Columbia Sportswear,
Bank and Borrower.
D. In connection with Columbia Sportswear's re-acquisition of the Real
Property, Borrower and Columbia Sportswear desire for Columbia Sportswear to
assume the obligations of Borrower to Bank under the Loan Documents (as defined
below). Bank is willing to permit such an assumption under the terms of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
expressly incorporated in and made a part of this Agreement, and of the mutual
covenants, conditions and promises specified in this Agreement, and for other
good and valuable consideration, Columbia Sportswear, Borrower, and Bank agree
as follows:
1. Definitions. The term "Loan Documents" shall mean all documents
executed in connection with or contemplated by the Loan, together with all
amendments to such documents. Loan Documents include, without limitation, the
Note, the Loan Agreement, and the Trust Deed.
Page 1 - ASSUMPTION AGREEMENT
<PAGE>
Capitalized terms which are defined in the foregoing recitals or other
provisions of this Agreement shall have the meaning given those terms in such
recitals or other provisions. Capitalized terms which are not defined in this
Agreement and are defined in the Loan Documents shall have the meaning given
those terms in the applicable Loan Documents.
2. Agreement Fee. As part of the consideration to induce Bank to enter
into this Agreement, Columbia Sportswear, upon execution of this Agreement,
shall pay to Bank a fee of One Thousand and No/100 Dollars ($1,000.00).
3. Amounts Due on Loan Documents. As of the date hereof, there remains
due and owing on the Note and other Loan Documents an unpaid principal balance
of Three Million Two Hundred Thirty Thousand Sixty-Nine and 22/100 Dollars
($3,230,069.22).
4. Assumption of Liability. Columbia Sportswear assumes and agrees to
pay and perform all the liabilities and obligations of borrower as evidenced in
the Loan Agreement, Note, Trust Deed, and other Loan Documents and to abide by
all the warranties and terms thereof. Columbia Sportswear agrees that payments
due Bank under the Note and other Loan Documents shall be paid directly to Bank
or through an escrow satisfactory to Bank. Notwithstanding anything contained in
the Loan Agreement, Note, Trust Deed and other Loan Documents to the contrary,
Bank shall now have full recourse to Columbia Sportswear and its assets to
recover all amounts due and owing under the Loan Agreement, Note, Trust Deed and
other Loan Documents. Bank hereby consents to the transfer of the Real Property
by Borrower to Columbia Sportswear.
5. Borrower Released. Bank agrees that the Borrower is hereby
discharged and released from liability accruing after the date hereof under the
Loan Agreement, Note and other Loan Documents.
6. Financial Information. Within one hundred twenty (120) days of
fiscal year-end, Columbia Sportswear shall provide to Bank annually CPA-audited
financial statements. All financial statements shall be prepared in accordance
with generally accepted accounting principles in form and substance acceptable
to Bank and certified to be complete and accurate in all respects.
7. Debt Service Coverage Ratio. During the term of the Loan, the debt
service coverage ratio ("DSCR") shall not be less than 1.5:1.0. If the DSCR
falls below the 1.5:1.0 ratio, the Bank may, upon thirty (30) days' written
notice specifying the amount of the required reduction, require Columbia
Sportswear to reduce the then outstanding principal balance of the Note by such
amount that the minimum 1.5:1.0 ratio will be achieved.
The DSCR shall mean the ratio of (a) the sum of net profit after
Subchapter-S tax distributions plus noncash charges (such as depreciation) plus
interest expense divided by (b) the sum of scheduled maturities of long term
debt and capitalized lease payments plus interest expense plus nontax
Subchapter-S distributions.
Page 2 - ASSUMPTION AGREEMENT
<PAGE>
8. Default. Upon any default by Columbia Sportswear under the terms of
this Agreement, the Loan Agreement, the Note, the Trust Deed or Loan Documents
or upon any default by Columbia Sportswear of any of its obligations to Bank,
Bank shall have all rights and remedies available to it under this Agreement,
the Loan Agreement, the Note, Trust Deed and other Loan Documents, and at law or
in equity, and all rights and remedies shall be cumulative and not alternative.
The rights and remedies include, without limitation, declaring the entire
outstanding balance of the Loan due and payable.
9. Attorneys Fees. In consideration of this Agreement, Columbia
Sportswear agrees to pay the indebtedness evidenced by the Note, to perform each
and all of the conditions and covenants required to be performed by Columbia
Sportswear under this Agreement, the Loan Agreement, the Note, Trust Deed and
all other Loan Documents, and to pay all costs of Bank in connection with
preparation and recording or breach of this Agreement, including, but not
limited to, title insurance premiums, attorney fees, recording fees, escrow fees
and taxes.
As used in this Agreement or any other Loan Document, "attorney
fees" shall include attorneys fees, if any, which shall be incurred whether or
not legal action is commenced and any such fees incurred at trial, arbitration,
interpleader, bankruptcy, hearing, or any judicial proceeding, and on appeal.
10. Arbitration Program.
(a) Binding Arbitration. Upon the demand of any party
("Party/Parties"), to a Document (as defined below), whether made before the
institution of any judicial proceeding or not more than sixty (60) days after
service of a complaint, third party complaint, cross-claim or counterclaim or
any answer thereto or any amendment to any of the above, any Dispute (as defined
below) shall be resolved by binding arbitration in accordance with the terms of
this Arbitration Program. A "Dispute" shall include any action, dispute, claim
or controversy of any kind, whether founded in contract, tort, statutory or
common law, equity, or otherwise now existing or hereafter arising between any
of the Parties arising out of, pertaining to or in connection with any
agreement, document or instrument to which this Arbitration Program is attached
or in which it appears or is referenced or any related agreements, documents, or
instruments ("Documents"). Any Party who fails to submit to binding arbitration
following a lawful demand by another Party shall bear all costs and expenses,
including reasonable attorneys' fees, incurred by the other Party in obtaining a
stay of any pending judicial proceeding or compelling arbitration of any
Dispute. The parties agree that any agreement, document or instrument which
includes, attaches to or incorporates this Arbitration Program represents a
transaction involving commerce as that term is used in Federal Arbitration Act,
("FAA") Title 9 United States Code.
(b) Governing Rules. Arbitrations conducted pursuant to this
Arbitration Program shall be administered by the American Arbitration
Association ("AAA"), or other mutually agreeable administrator ("Administrator")
in accordance with the Commercial Arbitration
Page 3 - ASSUMPTION AGREEMENT
<PAGE>
Rules of the AAA. The FAA shall govern any judicial proceedings, resolve any
issue of arbitrability, and procedurally govern any arbitration related to this
Arbitration Program. The arbitrator(s) shall resolved all Disputes in accordance
with the applicable substantive law designated in the Documents. The Parties
agree not to assert any claim for punitive damages or prejudgment interest
except to the extent such awards are specifically authorized by statute.
Judgment upon any award rendered hereunder may be entered in any court having
jurisdiction.
(c) Preservation of Remedies. No provision of, nor the exercise
of any rights under, this arbitration clause shall limit the right of any Party
to: (1) foreclose against any real or personal property collateral or other
security, or obtain a personal or deficiency award; (2) exercise self-help
remedies (including repossession and setoff rights); or (3) obtain provisional
or ancillary remedies such as injunctive relief, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent such
action is contrary to a final award or decision in any arbitration proceeding.
The institution and maintenance of an action as described above shall not
constitute a waiver of the right of any Party to submit the Dispute to
arbitration, nor render inapplicable the compulsory arbitration provisions
hereof. Any claim or Dispute related to exercise of any self-help, auxiliary or
other rights under this paragraph shall be a Dispute hereunder.
(d) Arbitrator Powers and Qualifications: Awards. The Parties
agree to select a neutral "qualified" arbitrator or a panel of three "qualified"
arbitrators to resolve any Dispute hereunder. "Qualified" means a practicing
attorney, with not less than ten (10) years practice in commercial law, licensed
to practice in the state of the applicable substantive law designated in the
Documents. A Dispute in which the claims or amounts in controversy do not exceed
One Million and No/100 Dollars ($1,000,000.00), shall be decided by a single
arbitrator. A single arbitrator shall have authority to render an award up to
but not to exceed One Million and No/100 Dollars ($1,000,000.00) including all
damages of any kind whatsoever, costs, fees, attorneys' fees and expenses.
Submission to a single arbitrator shall be a waiver of all Parties' claims to
recover more than One Million and no/100 Dollars ($1,000,000.00). A Dispute
involving claims or amounts in controversy exceeding One Million and No/100
Dollars ($1,000,000.00) shall be decided by a majority vote of a panel of three
qualified arbitrators. The Arbitrator(s) shall not have the power to award
punitive or exemplary damages except where such damages are specifically
provided for by statute upon which the award is based. The arbitrator(s) shall
be empowered to, at the written request of any Party in any Dispute, (1) to
consolidate in a single proceeding any multiple party claims that are
substantially identical; (2) to consolidate any claims and Disputes between
other Parties which arise out of or relate to the subject matter hereof; and (3)
to administer multiple arbitration claims as class actions in accordance with
Rule 23 of the Federal Rules of Civil Procedure. The arbitrator(s) shall be
empowered to resolve any dispute regarding the terms of this arbitration clause
but shall have no power to change or alter the terms of this Arbitration
Program. The Arbitrator(s) shall have the discretion to award reasonable
attorneys' fees to the prevailing Party in any Dispute hereunder.
Page 4 - ASSUMPTION AGREEMENT
<PAGE>
(e) Miscellaneous. All statutes of limitation applicable to any
Dispute shall apply to any proceeding in accordance with this arbitration
clause. The Parties agree, to the maximum extent practicable, to take any action
necessary to conclude an arbitration hereunder within 180 days of the filing of
a Dispute with the Administrator. The arbitrator(s) shall be empowered to impose
sanctions for any Party's failure to proceed within the times established
herein. Arbitrations shall be conducted in the state of the applicable
substantive law designated in the Documents. The provisions of this Arbitration
Program shall survive any termination, amendment, or expiration hereof or of the
Documents unless the Parties otherwise expressly agree in writing. Each Party
agrees to keep all Disputes and arbitration proceedings strictly confidential,
except for disclosures of information required in the ordinary course of
business of the Parties or as required by applicable law or regulation. If any
provision of this Arbitration Program is declared invalid by any court, the
remaining provisions shall not be affected thereby and shall remain fully
enforceable. The Parties understand they have decided that upon demand of any of
them, their Disputes may be resolved by arbitration rather than in a court and
once so decided cannot later be brought, filed or pursued in court.
11. Release of All Claims and Waiver of All Defenses. In order to
induce Bank to enter into this Agreement, Borrower and Columbia Sportswear
hereby unconditionally waive and release Bank from all claims, defenses,
demands, damages, costs and causes of action of any kind or nature, known or
unknown, existing or contingent to date relating to or arising out of the Loan,
excepting therefrom, however, Bank's compliance with all of the terms and
conditions of this Agreement and future compliance by Bank with all the terms
and conditions of the Loan Agreement, Note, Trust Deed and Loan Documents.
12. Additional Documents. Columbia Sportswear agrees to execute any
additional documents requested by Bank to accomplish the assumption of the Loan
by Columbia Sportswear.
13. All Other Terms Unmodified. Except as specifically provided
herein, the Loan Agreement, the Note, Trust Deed, and all other Loan Documents
shall remain in full force and effect in accordance with their respective terms
and conditions. This Agreement is subject to all of the conditions and covenants
expressed in the Loan Agreement, Note, the Trust Deed or in any other Loan
Documents.
14. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
BANK TO BE ENFORCEABLE. BORROWER AND COLUMBIA SPORTSWEAR ACKNOWLEDGE RECEIPT OF
A COPY OF THIS AGREEMENT.
Page 5 - ASSUMPTION AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement on the date first above written.
COLUMBIA SPORTSWEAR COMPANY FIRST INTERSTATE BANK OF
OREGON, N.A.
By By
--------------------------------- -------------------------------------
Title Title VICE PRESIDENT
------------------------------ ----------------------------------
"Columbia Sportswear" "Bank"
- -----------------------------------
TIMOTHY P. BOYLE
- -----------------------------------
DON SANTORUFO
"Borrower"
STATE OF OREGON )
: ss.
County of ___________ )
The foregoing instrument was acknowledged before me this __ day of
February, 1996 by Timothy P. Boyle.
---------------------------------------
Notary Public for Oregon
STATE OF OREGON )
: ss.
County of ____________ )
The foregoing instrument was acknowledged before me this ____ day of
February, 1996 by Don Santorufo.
---------------------------------------
Notary Public for Oregon
Page 6 - ASSUMPTION AGREEMENT
<PAGE>
STATE OF OREGON )
: ss.
County of ____________ )
The foregoing instrument was acknowledged before me this ____ day of
February, 1996 by __________________, the _______________________ of COLUMBIA
SPORTSWEAR COMPANY, on behalf of the corporation.
---------------------------------------
Notary Public for Oregon
STATE OF OREGON )
: ss.
County of ____________ )
The foregoing instrument was acknowledged before me this ____ day of
February, 1996 by _____________________, who is a _______________________ of
FIRST INTERSTATE BANK OF OREGON, N.A., on behalf of the association.
---------------------------------------
Notary Public for Oregon
Page 7 - ASSUMPTION AGREEMENT
<PAGE>
This space reserved for County Filing Officer use only
State of Oregon Uniform Commercial Code Financing Statement
Real Property - Form UCC-1A
THIS FORM FOR COUNTY FILING OFFICER USE ONLY
This FINANCING STATEMENT is presented to the county filing officer pursuant to
the Uniform Commercial Code.
A. Debtor Names(s) 2A. Secured Party Name(s): 4A. Assignee of
COLUMBIA SPORTSWEAR FIRST INTERSTATE BANK OF Secured Party (if any):
COMPANY, an Oregon OREGON, N.A.
corporation
2B. Address of Secured Party from
which security information is
obtainable:
Oregon Corporate Division
1300 SW 5th Ave.
PO Box 3131
Portland, OR 97208
This financing statement covers the following types (or items) of property
(check if applicable):
|X| The goods are to become fixtures on: ** |_| The above timber is
--------- standing on:
-------------
|_| The above minerals or the like (including gas and oil) or accounts will be
financed at the wellhead or minehead of the well or mine located on:
(describe real estate)
**All real and personal property as described in Exhibit A and Exhibit
B attached hereto and by this reference incorporated herein
and the financing statement is to be filed for record in the real estate
records. (If the debtor does not have an interest of record) The name of a
record owner is:
|X| Check box if products of collateral Number of attached additional
are also covered sheets: 2
Debtor hereby authorizes the Secured Party to record a carbon, photographic or
other reproduction of this form, financing statement or securities agreement as
a __________ statement under ORS Chapter 79.
_________ of the debtor required in most
cases. _________ of Secured Party in By: COLUMBIA SPORTSWEAR COMPANY,
cases covered ORS 79.4020 an Oregon corporation
-----------------------------
-----------------------------
Required signatures(s)
INSTRUCTIONS
PLEASE TYPE THIS FORM.
If the space provided for any item(s) on this form is inadequate, the item(s)
should be continued on additional sheets. Only one copy of such additional
sheets need to be presented to the county filing officer. DO NOT STAPLE OR TAPE
ANYTHING TO THIS FORM.
This form (UCC-1A) should be recorded with the county filing officers who record
real estate mortgages. This form cannot be filed with the Secretary of State.
Send the Original to the county filing officer.
After the recording process is completed the county officer will return the
document to the party indicated. The printed termination statement below may be
used to terminate this document.
The RECORDING FEE must accompany the document. The fee is $5 per page.
Be sure that the financing statement has been properly signed. Do not sign the
termination statement (below) until this document is to be terminated.
Recording Party contact name: Jim Kennedy Termination Statement
Recording Party telephone number: (503) 225-2634 This statement of termination
of financing is presented for
Return to: (name and address) filing pursuant to the Uniform
First Interstate Bank of Oregon, N.A. Commercial code. The Secured
Oregon Corporation Division Party no longer claims a
PO Box 3131 security interest in the
Portland, OR 97208 financing statement bearing
the recording number shown
above. Please do not type
outside of bracketed area.
By:
---------------------------
Signature of Secured
Party(ies) or Assignee(s)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
That portion of Lot 8, Block 26, RIVERGATE INDUSTRIAL DISTRICT, in the City of
Portland, County of Multnomah, and State of Oregon, described as follows:
Commencing at the Northwest corner of said Lot 8, Block 26; thence North 90
degrees 00'00" East along the North line of said Lot 8, Block 26, 553.06 feet to
the true point of beginning; thence continuing North 90 degrees 00'00" East,
508.00 feet; thence South 00 degrees 00'00" East, 570.00 feet; thence South 90
degrees 00'00" West, 508.00 feet; thence North 00 degrees 00'00" West 570.00
feet to the true point of beginning.
EXCEPTING THEREFROM mineral rights as reserved by the State of Oregon by Deed
recorded June 28, 1967, in Book 568, Page 1121, Multnomah County Records.
- ----
| |
- ----
Initial
- ----
| |
- ----
Initial
<PAGE>
EXHIBIT B
All buildings, improvements, and tenements now or in the future erected on the
property, described in the attached Exhibit A and all previously or in the
future vacated alleys and streets abutting the property, and all easements,
rights, appurtenances, leases, including, without limitation, the leases or
agreements now or hereafter existing, however evidenced, covering all or any
portion of the property, together with all rents or monies due or to become due
thereunder; and together with all now existing or in the future arising or
acquired: (a) revenues, royalties, mineral, oil, and gas rights and profits,
water, water rights, and water stock appurtenant to the property; (b) fixtures,
machinery, equipment located or to be located on the property, including,
without limitation, personal property required for the maintenance and operation
of the property (including, but not limited to, engines, boilers, incinerators,
building materials, and all appliances, escalators and elevators, and related
machinery and equipment, fire prevention and extinguishing apparatus, security
and access control apparatus, communications apparatus, plumbing, plumbing
fixtures, water heaters, paneling, attached floor and wall coverings); ** (c)
estate, interest, claims or demands, and other general intangibles now or in the
further relating to the property, including, but not limited to, all insurance
which the Debtor now has or may in the future acquire in and to the property,
and all present or future refunds or rebates of taxes or assessments on the
property described above; (d) present or future plans, specifications, contracts
and agreements for construction of improvements on the property; (e) Debtor's
rights under any payment, performance or other bond in connection with the
construction of any improvements on the property; (f) deposits, cash or other
property now owned or hereafter acquired by Debtor and which are now or may in
the future be delivered to or otherwise be in the possession of the Secured
Party; (g) replacements, substitutions and additions to the foregoing; (h)
proceeds and products of all the foregoing. The specific enumerations herein
shall not exclude the general.
** other than Debtor's trade fixtures
- ----
| |
- ----
Initial
- ----
| |
- ----
Initial
<PAGE>
Submit this form and fee STATE OF OREGON THIS SPACE FOR OFFICE USE ONLY
$10.00 per form Corporation Division - UCC
Public Service Building
225 Capital Street NE, Suite 151
Salem, OR 97310-1327
(503) 986-2200 Facsimile (503) 373-1166
UCC-1 STATE FINANCING STATEMENT STANDARD FORM
PLEASE TYPE OR WRITE LEGIBLY. READ INSTRUCTIONS BEFORE FILLING OUT FORM.
A. DEBTOR NAME(S) (if individual list last name first) F. LIST THE TYPES (OR
ITEMS) OF COLLATER-
1. COLUMBIA SPORTSWEAR COMPANY, an Oregon corporation AL (ORS 79.4020).
-------------------------------------------------- Use a separate sheet
of paper if necessary.
2.
--------------------------------------------------- |X| PRODUCTS of
collateral are also
3. covered.
--------------------------------------------------
All real and personal
property as described
in Exhibit A and
Exhibit B attached
hereto and by this
reference incorporated
herein
DEBTOR MAILING ADDRESS:
6600 N. Baltimore
Portland, OR 97203
B. SECURED PARTY(IES) NAME AND ADDRESS
FIRST INTERSTATE BANK OF OREGON, N.A.
Oregon Corporation Division
1300 SW 5th Ave., P.O. Box 3131
Portland, OR 97208
Contact Name: Jim Kennedy Phone No.: (503) 225-2634
------------------------------------ ----------------
C. ASSIGNEE(S) NAME AND ADDRESS (if any)
Contact Name Phone No.:
------------------------------------- ----------------
D. DEBTOR SIGNATURE(S) REQUIRED:
By: By:
--------------------------------------- -------------------------------
By: By:
--------------------------------------- -------------------------------
E. DEBTOR SIGNATURE(S) NOT REQUIRED. If applicable, check the appropriate box
below to file without debtor signature(s). This statement is filed without the
debtor signatures(s) to perfect a security interest in collateral. Secured Party
must sign, when Debtor signature(s) is not required. See instructions for
further information.
|_| Collateral already subject to a security interest in another jurisdiction.
|_| Which is proceeds of the described original collateral which was perfected.
|_| Collateral as to which the filing has lapsed.
|_| Collateral acquired after a change of name, identity or corporate
structure of debtor.
By: By:
-------------------------------- ------------------------------------
Secured Party signature Secured Party signature
RETURN COPY TO: (name and address). Please do not type or print outside of
bracketed area. OR, FAX COPY TO: (name and fax number).
Name: _________________________________
Fax Number: ___________________________
<PAGE>
WHEN RECORDED, RETURN TO:
First Interstate Bank of Oregon, N.A.
Oregon Corpora Division, T-19
P.O. Box 3131
Portland, Oregon 97208
Attention: Jim Kennedy
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Modification") is made this 8 day of
March , 1996 between COLUMBIA SPORTSWEAR COMPANY, an Oregon corporation
("Borrower"), and FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank").
RECITALS:
A. Bank loaned Borrower the principal sum of Three Million Four
Hundred Sixteen Thousand and no/100 Dollars ($3,426,000.00) (the "Loan")
pursuant to that certain loan agreement dated May 19, 1994 between Bank and
Borrower (with any amendments, the "Loan Agreement"). The Loan was further
evidenced by that certain promissory note dated May 19, 1994 in the original
principal sum of $3,416,000.00 made by Borrower in favor of Bank and with an
original maturity date of June 1, 2009 (with any amendments, extensions or
renewals, the "Note").
B. The Loan is secured by a commercial deed of trust dated May 19,
1994 granted by Borrower, naming Chicago Title Insurance Company as trustee in
favor of Bank as beneficiary (with any amendments, the "Trust Deed"). The Trust
Deed encumbers, among other things, the real property described in Exhibit A
attached to this Agreement and by this reference made a part of it (the "Real
Property"). The Trust Deed was recorded May 19, 1994, Recorder's Fee No.
94-079047, Multnomah county, Oregon, records.
C. Timothy P. Boyle and Don Santorufo (together, "Boyle & Santorufo")
acquired the Real Property and assumed the obligations of Borrower to Bank under
the Loan Documents (as defined below) pursuant to the terms of that certain
assumption agreement dated June 8, 1994 among Boyle & Santorufo, Borrower and
Bank ("Assumption Agreement 1").
D. The Loan is also secured by an assignment dated December 2, 1994
executed by Borrower, Boyle & Santorufo, collectively as Assignor, in favor of
Bank (with any amendments, the "Assignment"). The Assignment was recorded June
1, 1995 as Recorder's Fee No. 95 64429 in the Multnomah County, Oregon, real
estate records.
E. Borrower re-assumed the obligations of Boyle & Santorufo to Bank
under the Loan Documents pursuant to the terms of that certain assumption
agreement dated the same dated hereof among Borrower, Boyle & Santorufo and Bank
("Assumption Agreement 2")
F. Borrower and Bank desire that the Trust Deed encumber the
Additional Real Property on the terms and conditions set forth below and not
otherwise.
Page 14 - MODIFICATION AGREEMENT
<PAGE>
NOW, THEREFORE, in consideration of the foregoing recitals, which are
expressly incorporated in and made a part of this Modification, and of the
mutual covenants, conditions and promises specified in this Modification, and
for other good and valuable consideration, Bank and Borrower agree as follows:
1. Recitals. The Recitals are true and correct.
2. Definitions. The terms "Loan Documents" shall mean all documents
executed in connection with or contemplated by the Loan, together with all
amendments to such documents. The term "Loan Documents' includes, without
limitation, the Loan Agreement, Note, Trust Deed, Assignment, and this
Modification. Capitalized terms which are defined in the foregoing recitals or
other provisions of this Modification shall have the meaning given those terms
in such recitals or other provisions. Capitalized terms which are not defined in
this Modification and are defined in the Loan Agreement, Note, Trust Deed or
Assignment shall have the meaning given those terms in the Loan Agreement, Note,
Trust Deed or Assignment.
3. Trust Deed Encumbers Additional Real Property. The Trust Deed shall
encumber, among other collateral, the following real property, which is included
in the definition of "Property":
Lot 2, LEADBETTER INDUSTRIAL PARK, in the City of Portland, County of
Multnomah and State of Oregon.
4. Insurance. Section 6.1 of the Trust Deed is hereby amended by
inserting the following warning pursuant to Oregon law:
WARNING:
Unless Borrower provides Bank with evidence of the
insurance coverage, Bank may purchase insurance at
Borrower's expense to protect Bank's interest.
This insurance may, but need not, also protect
Borrower's interest. If the Property becomes
damaged, the coverage Bank purchases may not pay
any claim Borrower makes or any claim made against
Borrower. Borrower may later cancel this coverage
by providing evidence that Borrower has obtained
property coverage elsewhere.
Borrower is responsible for the cost of any
insurance purchased by Bank. The cost of this
insurance may be added to Borrower's contract or
loan balance. If the cost is added to Borrower's
contract or loan balance, the interest rate on the
underlying contract or loan will apply to this
added amount. The effective date of coverage may
be the date Borrower's prior coverage lapsed or
the date Borrower failed to provide proof of
coverage.
The coverage Bank purchases may be considerably
more expensive than insurance Borrower can obtain
on Borrower's own and not satisfy any need for
property damage coverage or any mandatory
liability insurance requirements imposed by
applicable law.
5. Rights and Remedies on Default. Upon any default by Borrower under
the
Page 15 - MODIFICATION AGREEMENT
<PAGE>
terms of this Modification, the Note, the Loan Agreement, the Trust Deed, the
assignment, or other Loan Documents, Bank shall have all rights and remedies
available to it under the Note, Loan Agreement, Trust Deed, Assignment and other
Loan Documents, and at law or in equity, and all rights and remedies shall be
cumulative and not alternative. The rights and remedies, include, without
limitation, declaring the entire outstanding balance of the Loan due and
payable.
6. Effect of Agreement and Priority of Trust Deed Not Affected. This
Modification is an amendment of the Trust Deed, and the priority of the Trust
Deed shall not be affected by this Modification or by renegotiation or
adjustment of the interest rate in the Note upward or downward, which may
increase or decrease the amount of periodic payments and may extend the term of
the Loan. The priority of the Trust Deed also shall not be affected by the
execution of new notes or agreements for modification and extension of the Loan
which reflect changes made pursuant to any of the adjustments. Unless otherwise
provided by law, the priority of the Trust Deed shall not be affected by any
change in terms whether or not it adversely affects subordinate or prior
interest holders.
7. All Other Terms Unmodified. Except as specifically modified by this
Modification, the Note, Loan Agreement, Trust Deed, Assignment, and all other
Loan Documents shall be and remain in full force and effect in accordance with
their respective terms and conditions.
8. Notice. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY THE BANK AFTER OCTOBER 3, 199 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY THE BANK TO BE ENFORCEABLE. BORROWER ACKNOWLEDGES RECEIPT OF A COPY
OF THIS MODIFICATION.
IN WITNESS WHEREOF, Borrower and Bank have caused this Modification to
be signed by their duly authorized officers as of the date first written above.
COLUMBIA SPORTSWEAR COMPANY FIRST INTERSTATE BANK OF OREGON, N.A.
By By
--------------------------------- -------------------------------------
Title Title
------------------------------ ----------------------------------
STATE OF OREGON )
: ss.
County of Multnomah )
The foregoing instrument was acknowledged before this 11 day of March,
1996 by J. Kennedy , who is a Vice President of First Interstate Bank of
Oregon, N.A., on behalf of the association.
/s/ Cheryle Stahel Eastman
---------------------------------------
Notary Public of Oregon
Page 16 - MODIFICATION AGREEMENT
<PAGE>
STATE OF OREGON )
: ss.
County of Multnomah )
The foregoing instrument was acknowledged before this 8th day of March
, 1996 by Timothy P. Boyle , who is a President of Columbia Sportswear Company,
on behalf of the corporation.
/s/ Mary F. Gordon
---------------------------------------
Notary Public of Oregon
Page 17 - MODIFICATION AGREEMENT
<PAGE>
EXHIBIT A
Legal Description
Parcel 1 of PARTITION PLAT 1993-131, in the City of Portland, County of
Multnomah and State of Oregon.
Metes and Bounds: Commencing at the Northwest corner of said Lot 8, Block 26;
thence North 90(degree)00'00" East along the North line of said Lot 8, Block 26,
533.06 feet to the true point of beginning; thence continuing North
90(degree)00'00" Est 508.00 fee; thence South 00(degree)00'00" East, 570.00
feet; thence South 90(degree)00'00" West, 508.00 fee; thence North
00(degree)00'00" West 570.00 feet to the true point of beginning.
EXCEPTING THEREFROM mineral rights as reserved by the State of Oregon by deeded
recorded June 28, 1967, in Book 568, Page 1121, Multnomah County Records.
Page 18 - MODIFICATION AGREEMENT
PENZEL AND COMPANY INCORPORATED
P.O. BOX 330
JACKSON, MISSOURI 63755
INDUSTRIAL BUILDING LEASE AGREEMENT
AMENDMENT NUMBER ONE (1) DATED JULY 25, 1989
Amend Industrial Building Lease Agreement dated February 23, 1988, between
Penzel and Company, Inc., a corporation of Jackson, Missouri as lessor, and
Columbia Sportswear Company, a corporation of Portland, Oregon as lessee, and
Gertrude Boyle, as Guarantor.
Whereas Penzel and Company, Inc. proposes to construct a 25,000 s.f.
addition to the existing 50,000 s.f. building per Exhibit A, plans and
specifications. The cost of this addition will be five hundred twenty thousand
dollars ($520,000.00).
Amend page two (2), paragraph two (2) as follows: change the ninety
thousand dollars ($90,000.00) stop-lease payment . . . one hundred fifty
thousand dollars ($150,000.00) stop-lease payment.
Amend page two (2), paragraph three (3) as follows: change the annual rent
from one hundred twenty-five thousand ($125,000.00) per year to . . . one
hundred ninety-five thousand dollars ($195,000.00) per year, payable monthly in
advance in installments of sixteen thousand two hundred fifty dollars
($16,250.00).
Also change the rental for the successive five (5) year period of the
initial ten (10) year term from one hundred thirty thousand dollars
($130,000.00) to two hundred two thousand five hundred dollars ($202,500.00) per
year payable monthly in advance in installments of sixteen thousand eight
hundred seventy-five dollars ($16,875.00).
Amend page ten (10), paragraph twenty-six (26) as follows: change the
purchase price of the building from nine hundred seventy-nine thousand dollars
($979,000.00) to . . . one million four hundred ninety-nine thousand dollars
($1,499,000.00). Change the basic lease rate from two dollars and fifty cents
($2.50) to two dollars and sixty cents ($2.60) per square foot.
All other conditions of the lease agreement to remain in full effect.
These prices are subject to change but are guaranteed for thirty (30) days
from the above date.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first written above.
LESSOR:
PENZEL AND COMPANY, INCORPORATED
By:
-----------------------------------------
ATTEST:
- ------------------------------
LESSEE:
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
ATTEST:
- ------------------------------
2
<PAGE>
LEASE OF INDUSTRIAL BUILDING
THIS LEASE, made and entered this ____ day of ____________, 19__, by and
between PENZEL AND COMPANY, INC., a corporation of Jackson, Missouri, as Lessor,
and COLUMBIA SPORTSWEAR COMPANY, a corporation, of Portland, Oregon, hereinafter
referred to as Lessee, and GERTRUDE BOYLE, hereinafter referred to as
"Guarantor" WITNESSETH:
WHEREAS, Lessor is the owner or has the right to occupy and lease and
option to others, those certain premises (hereinafter "the premises") in the
Chaffee Industrial Park, located in Scott County, Missouri, adjacent to the City
of Chaffee, Missouri, more particularly described as follows, to-wit:
All of that part of the North One-Half of the Southeast Quarter of Section 12,
Township 29 North, Range 12 East of the Fifth Principal Meridian, Scott County,
Missouri, described as follows: From the Northeast corner of the Northeast
Quarter of the Southeast Quarter, measure S. 89 deg. 04' W. along and with the
North line of the Northeast Quarter of the southeast Quarter, a distance of
115.0 feet to the West right-of-way line of Little River Drainage Ditch Number
10; thence S. 00 deg. 22' E. parallel with the East line of the Southeast
Quarter, a distance of 130.0 feet; thence S. 89 deg. 04' W. a distance of 684.9
feet to the point of beginning; thence S. 89 deg. 04' W. a distance of 695.2
feet; thence S. 00 deg. 56' E. a distance of 600.0 feet; thence N. 89 deg. 04'
E. a distance of 695.2 feet; thence N. 00' 56' W. a distance of 600.0 feet to
the point of beginning and containing 9.6 acres.
Subject to all rights of way and easements, if any, affecting the same.
and,
WHEREAS, Lessor proposes to build on the premises a 50,000 square foot
metal building, being a Varco Pruden metal building, 200 feet by 250 feet in
size for industrial purposes (hereinafter "the building"), and more particularly
described in Exhibit A attached hereto and made a part hereof, and,
WHEREAS, Lessee desires to lease from Lessor the aforementioned premises
and the building to be constructed in Chaffee, Missouri, and the parties have
agreed to the terms of such a lease and wish to reduce their agreement to
writing, and,
WHEREAS, Gertrude Boyle joins herein as guarantor to personally assume and
guarantee the obligations of the Lessee, which guarantee shall run for five (5)
years at a time, and,
3
<PAGE>
NOW THEREFORE, In consideration of the mutual covenants and agreements
contained herein, the sufficiency of which is hereby acknowledged by the
parties' execution hereof, the parties agree as follows:
1. DEMISE: Lessor leases to Lessee and Lessee takes the premises and
building described hereinabove upon the terms and conditions of this Agreement,
and subject to the Lessee's faithful performance thereof.
2. TERM: The term of this lease shall be for ten (10) years commencing on
the 1st day of the month after the building to be constructed by Lessor is
completed, and ending on the next preceding date at midnight ten (10) years
hence, provided, however, Lessee shall have the right to terminate this lease
and the obligations hereunder at the end of the initial five (5) years of the
initial ten (10) year term of this lease by giving Lessor written notice six (6)
months prior to the end of said fifth (5th) year, and upon the payment of a
Ninety Thousand Dollars ($90,000.00) stop-lease payment. Lessee shall be
entitled to at least fifteen (15) days notice of the commencement of the term
and the fitness of the premises for its occupancy. The right to occupy the
premises shall date from the commencement of the term. Completion of the
improvements to be leased pursuant to this Agreement shall be evidenced by
notice to Lessee of such completion given in the manner as provided for other
notice as hereinafter set forth. This rental term is, however, subject to the
Lessee's right to extend this Agreement for three 93) successive five (5) year
terms, beginning with the end of the initial ten (10) year lease term according
to the provisions of paragraph 23 hereinafter. In order to exercise the right to
extend so provided, the Lessee must provide Lessor six (6) months notice of its
election prior to the end of the ten current term, provided, however, that such
notice of renewal by Lessee may be given at any time before said six (6) month
period.
3. RENT: Rental for the initial five (5) years of the ten (10) year term
provided hereby shall be paid by Lessee to Lessor at the rate of One Hundred
Twenty Five Thousand Dollars ($125,000.00) per year payable monthly in advance
installments of Ten Thousand Four Hundred Sixteen Dollars and Sixty-Seven Cents
($10,416.67) due on the 1st day of the month and being delinquent by the 20th
day of the month of which it is due. The first monthly rental payment shall be
due on the 1st day of the first month of the term as defined in paragraph 2
above. Rental for the successive five (5) year period of the initial ten (10)
year term shall be One Hundred Thirty Thousand Dollars ($130,000.00) per year
payable monthly in advance in installments of Ten Thousand Eight Hundred Thirty
Three Dollars and Thirty-Three Cents ($10,833.33) due on the 1st day of the
month and being delinquent by the 20th day of the month of which it is due,
provided, however, that this rate of rental for the second five-year period is
predicated upon the underlying financing remaining in place with the same
interest rate as initially placed, and with the remaining amortization no more
and no less than the initial monthly amortization schedule (initial amortization
to be over twenty-five (25) years thus the five (5) years remaining to be on a
twenty (20) year basis). In the event that the interest rate is changed, then
the rental figure for the second five (5) years of the initial ten (10) year
term shall be increased or decreased to adjust the rental payment equal to
4
<PAGE>
the increase or decrease in the monthly amortization. Lessor shall give Lessee
thirty (30) days notice of the increased rental price.
4. SECURITY DEPOSIT: Upon the execution of this lease, Lessee shall pay to
Lessor a security deposit of Fifteen Thousand Dollars ($15,000.00) which Lessee
may apply to the 11th and 12th monthly rental payments of the 1st year of the
initial ten (10) year term, provided it shall have kept and performed all other
conditions of this lease.
5. USE OF THE PREMISES: The premises leased hereby shall be used primarily
for industrial use and lessee's office space. Lessee's occupancy of the premises
and use thereof for industrial purposes and the storage of goods kept and stored
therein shall at all times be in strict compliance with all laws, statutes,
regulations, ordinances, codes, licenses, permits or other requirements imposed
by authorities of competent jurisdiction governing such matters.
6. CONDITION OF PREMISES: Acceptance of the premises pursuant to this lease
and occupancy thereof shall not be deemed a waiver of any legal duty or
statutory warranty owed to Lessee by Lessor or by any other party as to the
condition of the premises or improvements thereon. Lessor shall assign or
otherwise transfer to Lessee the benefits of all written warranties on new
machinery, equipment or portions of new construction which are afforded by
manufacturers and Lessor's original suppliers. Lessee shall have the full right
to pursue those rights and remedies provided by such written warranties in its
name and/or on behalf of Lessor for the benefit of the Lessee.
7. MAINTENANCE AND REPAIRS: Lessor agrees to maintain and repair the
foundations, exterior walls and roof, except with respect to any damage caused
thereto by the actions or occupancy of the premises by Lessee. Lessee agrees to
make such other repairs to the premises as are required to keep the premises
liabitable and in a fit condition and in a condition in which the premises are
let and leased, ordinary wear and tear and acts of God excepted. Such other
repairs which are obligations of the Lessee when not made by the Lessee may be
made by the Lessor and charged to the Lessee for which prompt payment shall be
made by Lessee together with the next monthly rental payment due.
8. TAXES: All real and personal property taxes accruing to the leased
premises or property located thereon shall be borne by Lessee. Any failure on
behalf of the Lessee to timely pay any taxes assessed prior to December 25th of
each year shall entitle the Lessor to pay and defray the same and charge the
same to the Lessee, which said amount shall be paid by Lessee together with the
next regular rental payment.
9. UTILITIES: Lessee shall arrange and pay for all utilities furnished to
the premises leased hereunder, including gas, water, sewer, heat, telephone,
electricity, and any other utility required by it.
5
<PAGE>
10. INSURANCE:
A. Lessee shall during the term of this Agreement at its sole expense
provide and keep in force the following insurance coverage:
(1) General public liability insurance protecting the
indemnifying Lessee and Lessor against all claims for damages to person or
property or for loss of life or of property occurring upon, in or about the
leased premises, the streets, gutters, sidewalks, curbs or walks adjacent
thereto, with minimum limits of $500,000.00 in respect to injuries to any one
person, $1,000,000.00 with respect to any one accident or disaster or incident
of negligence, and $250,000.00 in respect to property damage.
(2) Insurance on the building and improvements leased hereunder
covering loss or damage by fire or extended coverage perils, including
earthquake, in the amount of one hundred (100) per cent of the full insurable
value. The term "full insurable value" shall mean actual replacement value of
the building and improvements (exclusive of the cost of excavation, foundations
and footings), less physical depreciation. Full insurable value shall be
determined from time to time but not more frequently than every twelve (12)
calendar months. Adequate insurance will be kept at all times to avoid Lessor
becoming a co-insurer under any circumstance. Such insurance shall carry a
mortgage rider or endorsement if available.
B. All insurance provided for herein shall be effective under standard
form policies issued by insurers of recognized responsibility, which are well
rated by national rating organizations, and which are acceptable to Lessor.
C. Lessee shall be responsible for and pay its own premium relative to
any contents insurance which it desires to procure.
D. The policies of insurance provided for under subparagraph A above
shall not contain an agreement by the insurer that such policies shall not be
cancelled without at least thirty (30) days written notice to the Lessor.
Likewise, Lessee shall provide to Lessor proof of such insurance required under
paragraph A by supplying Lessor on a timely basis with either certificate of
insurance issued by the insurer, or its agent, or a duplicate copy of the policy
complying with the terms hereof and clearly showing Lessor as an additional
named insured or co-insured.
11. DESTRUCTION OF PREMISES:
A. Total Destruction: In the event that, prior to the termination of
this lease, the building leased hereunder, including the equipment situated in
the building, is totally destroyed by fire or any other cause, or is so damaged
as to be wholly unusuable, this lease may be terminated by either party. Rental
for the period up to the time of such total destruction shall be prorated, and
any unused portion of prepaid rental refunded to Lessee.
6
<PAGE>
B. Partial Destruction: In the event that the building being leased
hereunder is only partially destroyed, Lessor shall have one hundred twenty
(120) days to repair the damage thereto at Lessor's cost and expense if such
repair can be reasonable done. Insurance proceeds under the insurance provided
hereunder is available to the Lessor for this purpose. This lease shall not be
terminated by reason of partial destruction except in the event that the Lessee
would be prevented from reasonable operation of its business. Rent in the event
of partial destruction shall be equitably apportioned according to the portion
of the building premises which is used by Lessee during the period of repair.
C. Any dispute as to the existence of total destruction, partial
destruction, or any other terms of this article relative to destruction of the
premises upon which the parties do not agree shall be settled by arbitration
according to the provisions provided for arbitration hereinafter.
12. RISK OF LOSS: All property of Lessee or others located or stored in
building shall be held at the risk of Lessee, and Lessor shall not be liable for
any damage to such property from any cause. Lessee shall hold Lessor harmless
and indemnify it against any such claims or expenses in connection therewith.
13. ALTERATIONS, ADDITIONS AND IMPROVEMENTS:
A. Subject to the limitation that no substantial portion of the
building on the demised premises shall be demolished or removed by Lessee
without prior consent of Lessor, and, if necessary, of any mortgagee, Lessee may
at any time during the lease term, subject to the conditions set forth below and
at its own expense, make any alterations, additions, or improvements in and to
the demised premises. Alterations shall be performed in a workmanlike manner and
shall not weaken or impair the structural strength, or lessen the value of the
building on the premises, or change the purpose for which the building, or any
part thereof may be used.
B. As a condition precedent to alterations, addition, or repair, and
before commencement of any work, all plans and specifications shall be filed
with and approved by all governmental departments or authorities having
jurisdiction, and any public utility having any interest therein, and said work
shall be done in accordance with the requirements of local regulations. The
plans and specifications for any alterations estimated to cost $1000.00 or more
shall be submitted to lessor for written approval prior to commencing work.
Lessor's approval shall not be unreasonably withheld.
C. All alterations, additions, and improvements on or in the demised
premises at the commencement of the term and that may be erected or installed
during the term shall become part of the demised premises and the sole property
of the Lessor except that all movable trade fixtures installed by Lessee shall
be and remain the property of Lessee.
7
<PAGE>
14. INDEMNITY: Lessee shall hold harmless and indemnify Lessor, as well as
those under whom Lessor holds, as against all damages, claims or presentments
arising from personal injury, death, accidents or other damage or occurrence
arising out of or in connection with the use or occupancy of the leased premises
by Lessee, whether the same be to any person whether employed in or customers or
visitors to the warehouse or to items stored in the warehouse or present thereon
through any other circumstances in relation to such occupation of the leased
premises by Lessee. Such indemnity and hold harmless agreement shall likewise
extend to the attorney fees or court costs or other costs of defense reasonably
incurred in the defense of such claims or presentments.
15. ENTRY ON PREMISES BY LESSOR: Subject to reasonable advance notice
Lessor reserves the right to enter on the premises at reasonable time to inspect
them, perform required maintenance and repairs, or make additions, alterations,
or modifications to any part of the building in which the premises are located,
and Lessee shall permit Lessor to do so. Lessor may erect scaffolding, fences,
and similar structures, post relevant notices, and place moveable equipment in
connection with making alterations, additions, or repairs, all without incurring
liability to Lessee for disturbance of quiet enjoyment of the premises, or loss
of occupation thereof.
16. SIGNS AND MARQUEES OF LESSEE: Lessee shall not construct or place signs
or marquees on the premises, except with the express written consent of the
Lessor, which consent shall not unreasonably be withheld.
17. NOTICES: Any notices required hereunder shall be sufficient only if in
writing and either (a) personally delivered to the president of Lessor or
Lessee, as the case may be, or (b) mailed to the respective party at the address
indicated herein under certified mail, return receipt requested, with sufficient
postage thereon for delivery. Mail notice shall be deemed delivered if so posted
on the date postmarked thereon.
18. ASSIGNMENT, SUBLEASE, OR LICENSE: Lessee shall not assign or sublease
the premises or any right or privilege connected therewith, or allow any other
person except agents and employees of Lessee to occupy the premises or any part
thereof without first obtaining the written consent of Lessor. A consent by
Lessor shall not be a consent to a subsequent assignment, sublease, or
occupation by other persons. An unauthorized assignment, sublease or license to
occupy by Lessee shall be void and shall terminate the lease at the option of
Lessor. The interest of Lessee in this lease at the option of Lessor. The
interest of Lessee in this lease is not assignable by operation of law without
the written consent of Lessor. Lessor's approval shall not be unreasonably
withheld.
19. BREACH: The appointment of a receiver to take possession of the assets
of Lessee, a general assignment for the benefit of the creditors of Lessee, any
action taken or allowed to be taken by Lessee under any bankruptcy act, the
adjudication of the Lessee as bankrupt, the insolvency of Lessee, any action or
proceeding for debtor relief commenced by or on behalf of Lessee or other
general debtor relief sought by extra-judicial means, or the
8
<PAGE>
failure of Lessee to comply with each and every term and condition of this lease
shall constitute a breach of this lease. Further, the failure of the Lessee to
promptly pay to Lessor any sums of money due and owing Lessor, whether under
this lease or otherwise, shall constitute an immediate breach of this lease.
Lessor shall by virtue of any of the enumerated breaches herein have the right,
by written notice, to take immediate possession of the premises.
20. REMEDIES OF LESSOR FOR BREACH BY LESSEE: Lessor shall have the
following remedies in addition to its other rights and remedies in the event
Lessee breaches this lease agreement.
A. Lessor may re-enter the premises immediately and remove the
property and personnel of Lessee, store the property in a public warehouse or at
a place selected by Lessor, at the expense of Lessee. Any re-entry by the Lessor
or its agents shall constitute a termination of the lease.
B. Lessor may terminate the lease on giving thirty (30) days' written
notice of termination to Lessee. With or without such notice, Lessor's re-entry
will terminate the lease. On termination Lessor may recover from Lessee all
damages proximately resulting from the breach, including the cost of recovering
the premises and worth of the balance of this lease over the reasonable rental
value of the premises for the remainder of the lease term. Lessor shall be
obligated to mitigate damages by immediately taking all steps necessary to relet
the premises for a reasonable rental amount.
C. Lessor may relet the premises or any part thereof for any term,
thereby terminating this lease, at such reasonable rent and on reasonable terms
as it may choose. At its sole expense, the Lessor may make alterations and
repairs to the premises. The duties and liabilities of the parties if the
premises are relet as provided herein shall be as follows:
(1) Lessee's liability to Lessor for breach of the lease shall be
for the difference between the rent agreed upon by Lessor under the new lease
agreement and the rent installments that are due for the same period under this
lease.
(2) Lessor shall apply the rent received from reletting the
premises to reduce Lessee's indebtedness for rent then due to Lessor under the
lease, or to payment of future rent under this lease as it becomes due. If the
agreed rent from the new Lessee are less than the rent payable for the
corresponding installment period under this lease, Lessee shall pay Lessor the
deficiency, separately for each rent installment deficiency period, and before
the end of that period.
21. ATTORNEY FEES: If Lessor files an action to enforce any agreement
contained in this lease or for breach of any covenant or condition, Lessee shall
pay Lessor reasonable attorney fees for the services of Lessor's attorney in
such instance, all fees to be fixed by the court.
9
<PAGE>
22. CONDEMNATION: Eminent domain proceedings resultings in the condemnation
of a part of the premises leased herein, but leaving the remaining premises
usable by Lessee for the purposes of its business, will not terminate this lease
unless Lessor, at its option, terminates the lease by giving written notice of
termination to Lessee. The effect of any condemnation, where the option to
terminate is not exercised, will be to terminate the lease as to the portion of
the premises condemned, and the lease of the remainder of the demised premises
shall remain intact. The rental for the remainder of the lease term shall be
reduced by the amount that the usefulness of the premises has been reduced for
the business purposes of Lessee. Lessee hereby assigns and transfers to Lessor
any claim it may have to compensation for damages as a result of any
condemnation.
23. TERMS AND CONDITIONS OF EXTENSION: Lessee shall have the first
opportunity to lease the building and premises subject to this Agreement at the
end of the initial term for up to three (3) successive and separate five (5)
year terms and upon such other terms and conditions as the parties might agree.
In the event Lessee provides notice of the Lessor of Lessee's intent to extend
the term of this lease pursuant to the notice provisions of Section 2 hereof,
the lease will be extended for each five (5) year renewal term upon the terms
and conditions as the parties shall agree. Should the necessary terms and
conditions of a new lease or the extension of the rental term of this lease not
be agreed upon by the parties within thirty (30) days prior to the end of this
lease or any extended term, the parties will submit the disputed terms and
conditions to arbitration as herein provided. During the pendency of such
arbitration proceedings, Lessee shall be considered a month-to-month tenant, and
as such, Lessee shall be liable for rent on a monthly basis at the same rate per
month as was due at the next preceding month, and Lessee shall further be
required to adhere to the other obligations placed upon it hereunder in
connection with insurance, maintenance, taxes and liabilities.
24. OPTION TO PURCHASE LEASED PROPERTY: At the end of the first five (5)
years of the ten (10) year term provided herein, Lessee shall have the option to
purchase the premises and building for a sum equal to Lessor's equity plus the
unpaid principal balance of the underlying financing based upon the total
construction cost of the building. At the end of the ten (10) year term provided
herein, Lessee shall have the option to purchase the premises and building for a
sum equal to Lessor's financing based upon the total construction cost of the
building. Purchase by Lessee shall immediately terminate all other provisions of
this lease.
25. ARBITRATION: In the event any controversy arises between the parties
hereto with respect to the provisions hereof, and such dispute cannot be
resolved by the parties themselves within fifteen (15) days after either party
hereto notifies the other of its desire to arbitrate the dispute, then the
dispute shall be settled under the arbitration laws of the State of Missouri,
and this paragraph and judgment upon the award rendered by the arbitrators may
be entered in a court of competent jurisdiction. Arbitration shall be by a panel
of three arbitrators, one of whom shall be chosen by each of the parties, and
with those two to choose a third. The parties shall choose their arbitrators
within ten (10) days, and the
10
<PAGE>
two arbitrators so chosen shall within ten (10) days choose a third arbitrator.
Any failure of these time limits to be adhered to shall allow the other party,
in the case of the choice of an original arbitrator, or either arbitrator in the
failure of the two to agree on a third arbitrator, as the case may be, to apply
to the Circuit Court of Cape Girardeau County for the designation of an
arbitrator to fill the appropriate spot. A decision rendered in writing by
majority of the three arbitrators shall be binding upon the parties hereto. The
expense of arbitration shall be borne equally by the parties.
26. ADJUSTMENTS: The parties acknowledge that this Agreement is based upon
a purchase price of the building specified on Exhibit A as agreed upon between
the parties at the time of the signing of this Agreement, being Nine Hundred
Seventy Nine Thousand Dollars ($979,000.00), with a basic annual lease rate of
Two Dollars and Fifty Cents ($2.50) per square foot of the building. The parties
further acknowledge that during construction additions or deletions to the plans
and specifications in the nature of additional equipment or deleted equipment or
other items which would increase or decrease the cost of the building may occur.
In the event such changes do occur the original figure of Nine Hundred Seventy
Nine Thousand Dollars ($979,000.00) will be adjusted upward or downward on the
same cost basis as that figure was arrived at, with the annual rental lease rate
to be adjusted in the same fashion in which the Two Dollars and Fifty Cents
($2.50) per square foot figure was arrived at, and new lease rental amounts,
both as to the annual rental and monthly rental shall be specified by the
parties pursuant to an amendment to this lease. Similarly, should the cost
figures described increase or decrease in the fashion as suggested, the costs of
the options to purchase as provided in paragraph 24 above will be adjusted
upward or downward also. Any items to be constructed that are not covered by
this Agreement or related construction agreements between the Lessor and Lessee,
that is change orders, shall be the subject of a separate written agreement
between the necessary parties before any work is done or additions are
constructed. Change orders shall be in writing and executed by the authorized
representative of Lessor and Lessee. The authorized representatives of the
parties until further notice shall be those individuals executing this Agreement
on behalf of the parties. Such authorized representatives may be changed by
written notice from time to time.
27. ENVIRONMENTAL PROVISIONS: The parties hereto represent that they have
both made diligent inquiry and to the best of their knowledge there is no known
environmental violation or pertaining to the leased premises; that the intended
use of the leased premises hereunder is not prohibited by any governmental
environmental law or regulation, and that there are no known hazardous wastes
in, on or under the real estate constituting the leased premises.
28. GUARANTEE: Gertrude Boyle joins herein to specifically guarantee the
obligations of the Lessee hereunder. Said guarantee shall run for five (5) years
at a time consecutively with the five (5) year terms set forth herein.
Accordingly, in the event Lessee shall not terminate at the end of the initial
five (5) years of the initial ten (10) year term, the
11
<PAGE>
five (5) year guarantee of the undersigned Gertrude Boyle shall be renewed for
an additional five (5) years, and similarly be renewed for each extension
provided hereunder.
29. MISCELLANEOUS:
A. This Agreement constitutes the entire agreement between the
parties, and should not be altered or amended except in writing duly executed by
all pertinent parties. Any prior agreements or representations of the parties
are void unless contained herein.
B. This Agreement shall be binding upon the parties hereto, their
heirs, successors and assigns.
C. This Agreement shall be interpreted under the laws of the State of
Missouri. Any question with respect to the interpretation, enforcement, or
validity of the obligations hereof shall take place in the Circuit Court of Cape
Girardeau County, Missouri, which venue is acknowledged as appropriate by all
parties hereto.
D. Title to articles herein are for convenience only and shall not be
given particular effect, the provisions of each article to govern. The
determination of the invalidity or unenforceability of any particular provision
shall not effect the balance of the clauses of this Agreement.
E. Time is of the essence to this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above written.
LESSOR:
PENZEL AND COMPANY INCORPORATED
(SEAL) a corporation
By:
-----------------------------------------
C. Gene Penzel, President
ATTEST:
- ------------------------------
, Secretary
- ---------------------------
MAILING ADDRESS OF LESSOR:
PO Box 330
Jackson, MO 63755-0330
12
<PAGE>
LESSEE:
(SEAL) COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
Gertrude Boyle, President
ATTEST:
- ------------------------------
, Secretary
- ---------------------------
MAILING ADDRESS OF LESSEE:
GUARANTOR:
--------------------------------------------
Gertrude Boyle
STATE OF MISSOURI )
) ss.
County of Cape Girardeau )
On this _____ day of __________, 1987, before me personally appeared C.
Gene Penzel to me known, who being by me first duly sworn did say that he is
President of Penzel and Company, Inc., a corporation of the State of Missouri,
and the seal affixed to the foregoing instrument is the corporate seal of said
corporation, and said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and the said C. Gene Penzel
acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in said county and state the year and day first above written.
--------------------------------------------
, Notary Public
-----------------------------
State of Missouri
County of Cape Girardeau
My term expires:
----------------------------
13
<PAGE>
STATE OF OREGON )
) ss.
County of Multnomah )
On this _____ day of __________, 1987, before me personally appeared
Gertrude Boyle to me known, who being by me first duly sworn did say that she is
President of Columbia Sportswear Company, a corporation of the State of Oregon,
and the seal affixed to the foregoing instrument is the corporate seal of said
corporation, and said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and the said Gertrude Boyle
acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in said county and state the year and day first above written.
--------------------------------------------
, Notary Public
-----------------------------
State of Oregon
County of Multnomah
My term expires:
----------------------------
STATE OF OREGON )
) ss.
County of Multnomah )
On this _____ day of __________, 19__ before me personally appeared
Gertrude Boyle to me known to be the person described in and who executed the
foregoing instrument and acknowledged to me that she executed the same as her
free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in said county and state the day and year first above written.
--------------------------------------------
, Notary Public
-----------------------------
State of Oregon
County of Multnomah
My term expires:
----------------------------
14
THIS INDENTURE made the 3rd day of January, 1994.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
B E T W E E N:
B.A.R.K. HOLDINGS INC., a corporation incorporated under the laws
of Ontario, having its registered office at 1072 Mahogany Road,
London, Ontario, N6A 2W5,
(hereinafter called the "Landlord")
OF THE FIRST PART
- and -
COLUMBIA SPORTSWEAR CANADA LIMITED, a corporation incorporated
under the laws of Ontario, having its registered office at 412-C
High Street East, Strathroy, Ontario, N7G IH5
(herein called the "Tenant")
OF THE SECOND PART
1.01 DEFINITIONS: In this Lease:
"Additional Rent" means all amounts payable by Tenant hereunder, except
Basic Rent.
"Basic Rent" means the rent payable under section 4.01.
"Commencement Date" means first day of January, 1994.
"Insurance Premiums" has a meaning set out in section 5.04 hereof.
"Lease Year" means that period of twelve months commencing on the
Commencement Date and thereafter each consecutive twelve month period commencing
on each anniversary of the Commencement Date.
"Premises" means the warehouse and office building containing approximately
6,600 square feet of office space and approximately 66,000 square feet of
warehouse space and the lands and premises on which it is situate and all
structures and appurtenances located thereon and appurtenant thereto, located at
456 Albert Street in the Town of Strathroy in the
<PAGE>
County of Middlesex, which land are legally described as Park Lot 1, Plan 234,
Town of Strathroy, County of Middlesex, save and except the westerly 8.25 feet
of the said Lot.
"Prime Rate" means the rate of interest per annum publicly quoted by Royal
Bank of Canada, from time to time, as the reference rate of interest, commonly
known as it's "Prime Rate" used by it to determine interest rates charged by it
on loans in Canadian funds to its commercial customers payable on demand.
"Rent" means Basic Rent and Additional Rent.
"Security Deposit" has the meaning as set out in section 4.02(a) hereof;
"Taxes" has the meaning set out in section 5.02 hereof.
"Term" means the Term of this Lease set out in section 3.01 hereof.
1.02 SEVERABILITY: If any one or more clauses or paragraphs or part or parts
thereof in this Lease is judged illegal a legal or unenforceable it or they
shall be considered separate and severable from the Lease and the remaining
provisions of this Lease shall remain in full force and effect and shall be
binding upon the parties hereto as though the said clause or clauses or part or
parts of clauses had never been included.
1.03 NUMBER, JOINT AND SEVERAL LIABILITY: Whenever a word importing the singular
number only is used in this Lease, such word shall include the plural and the
words importing either gender or firms or corporations shall include the persons
or other gender and firms or corporations where applicable. Any reference to the
Term of this Lease shall, unless the context otherwise requires, be deemed to
include any renewals thereof. If there shall be more than one person, firm,
corporation or other entity named as Tenant herein, they shall each be jointly
and severally liable for the observance and performance of all of Tenants'
covenants and obligations under this Lease.
1.04 CAPTIONS: The headings, article and section numbers in captions appearing
in this Lease have been inserted as a matter or convenience and for reference
only and in no way define, limit or enlarge the scope or meaning of this Lease
or of any provisions thereof.
2.01 DEMISE: Witnesseth that in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of Tenant to be paid,
observed and performed, Landlord demises and leases unto Tenant and Tenant rents
from Landlord, for the term and upon the conditions hereinafter mentioned the
Premises.
2
<PAGE>
3.01 TERM: TO HAVE AND TO HOLD the Premises for and during the term of 10 years
commencing on the Commencement Date and ending on the 31st day of December,
2003.
4.01 RENT: YIELDING AND PAYING THEREFOR to Landlord yearly and every year during
the Term hereby granted as Basic Rent the sum of Eighty Three Thousand, Four
Hundred Dollars ($83,400.00) of lawful money of Canada payable in advance on the
first (1st) day of the month in equal monthly instalments of Six Thousand, Nine
Hundred and Fifty Dollars ($6,950.00) such payments to be made by cheque or
money order made payable to Landlord as it may direct from time to time; the
first payment of Basic Rent being due on the Commencement Date. Provided that
the Basic Rent will increase the sixth Lease Year if after the first five Lease
Years of the Term, Landlord's financing costs exceed twelve percent (12%) of
$695,000.00 per annum, Basic Rent then shall be increased by an amount equal to
the increase in financing costs in excess of twelve percent (12%) per annum. The
purposes of this definition financing costs shall include the cost of placing a
loan facility secured by a mortgage of the Premises at market rates applicable
at the time of the refinancing of the Premises.
4.02 DEPOSIT: (a) Landlord acknowledges receipt of the sum of Thirteen Thousand,
Nine Hundred Dollars ($13,900.00) to be held by Landlord without interest, to be
applied against the Basic Rent due on January 1st, 1994 and the balance to be
held as security for the full and faithful performance by Tenant of all its
covenants and obligations hereunder (the Security Deposit").
(b) If at any time during the Term the Rent or other sums payable by Tenant
to Landlord hereunder are overdue and unpaid, or if Tenant fails to keep and
perform any of the terms, covenants and conditions of this Lease, to be kept,
observed and performed by Tenant, and Landlord at its option may, in addition to
any and all other rights and remedies provided for in this Lease or by law,
appropriate and apply the entire Security Deposit, or so much thereof as is
necessary, to compensate Landlord for loss or damage sustained or suffered by
Landlord due to such breach on the part of Tenant. If the entire Security
Deposit, or any portion thereof is appropriated and applied by Landlord for the
payment of overdue Rent, then Tenant shall, upon written demand of Landlord,
forthwith remit to Landlord, a sufficient amount in cash to restore the Security
Deposit to the original sum deposited, and Tenant's failure to do so in five (5)
days after receipt of such demand constitutes a breach of this Lease. If Tenant
complies with all of the terms, covenants and conditions and promptly pays all
of the Rent and other sums herein provided and payable by Tenant to Landlord,
the Security Deposit shall be applied to the Basic Rent due for the last month
of the Term.
3
<PAGE>
4.03 NO WARRANTEES: Tenant acknowledges that there are no representations,
conditions or warranties, express or implied, statutory or otherwise, with
respect to the Premises or affecting the rights of the parties hereto, other
than as specifically contained herein. Without limiting the generality of the
foregoing, Landlord shall not be deemed to make at the time of execution of this
Lease or any schedule or upon the exercise of an option provided for, if any, or
at any other time, any representation or warranty, express or implied, as to the
quality of the material or workmanship of the Premises or the conformity of the
Premises to the provisions and specifications of any purchase order or orders
relating thereto or to the condition, design, merchantability, durability,
operation or fitness for use for any particular purpose of the Premises or the
freedom thereof from any liens, encumbrances or rights of others, or any other
representation or warranty whatsoever, express or implied, with respect to the
Premises except as provided herein. Landlord does however represent and warrant
that it has taken no action to charge or encumber the Premises and nevertheless
agrees to assign or otherwise make available to Tenant, to the extent permitted
by law, such rights as Landlord may have under any warranties, guarantees or
service contracts with respect to the Premises, including the equipment, made by
any manufacturer, vendor, contractor or supplier thereof.
5.01 TENANT'S COVENANT: Tenant covenants with Landlord to pay Rent in the manner
herein provided without any deduction, statement or set-off whatsoever
conclusively without limitation.
(a) Basic Rent as set out in section 4.01 hereof.
(b) The amount in respect of Taxes and Insurance Premiums referred to in
5.02 and 5.04 hereof.
5.02 TENANT'S TAXES: (a) To pay as and when due each instalment of all municipal
property taxes, rates, including local improvement rates, school rates and
business tax, duty and assessments (hereinafter referred to as the "property
taxes") now or at any time during the term hereof rated, charged, levied or
assessed against the Premises or any part or parts thereof or against any
machinery, equipment or other facilities now or at any time during the Term
brought in or on to the Premises, and to pay any similar tax not now
contemplated but levied at any time during the Tenn hereof by any competent
governmental or municipal body in lieu of, or partially in lieu of, or in
addition to, such property taxes, and if demanded, Tenant shall forthwith after
any such taxes or instalments shall have become due, produce and exhibit to
Landlord's satisfaction evidence of the payment of such taxes or instalment;
provided however, that the responsibility for property taxes in respect of the
calendar years in which this lease commences and ends shall be adjusted between
Landlord and Tenant; Tenant shall have the right to contest the amount or
4
<PAGE>
validity of any property taxes by appropriate legal proceedings, but Landlord
shall not be required to join in any proceedings, nor shall Landlord be
subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Tenant and Tenant covenants to
indemnify and save harmless Landlord from any such costs or expenses;
(b) Goods and Services Taxes, Etc.: to pay to Landlord (acting as agent for
the taxing authority if applicable) or directly to the taxing authority (if
required by applicable legislation), the full amount of all goods and services
taxes, sales taxes, value-added taxes, multi-stage taxes, business transfer
taxes, and any other taxes imposed on Tenant in respect of any rent payable by
Tenant under this lease, or in respect of the rental of premises by Tenant under
this lease (collectively and individually, "Sales Taxes"); Sales Taxes are
payable by Tenant whether they are characterized as a goods and services tax,
sales tax, value-added tax, multi-stage tax, business transfer tax, or
otherwise; Sales Taxes so payable by Tenant will be:
(i) calculated by Landlord in accordance with the applicable
legislation,
(ii) paid by Tenant at the same time as the amounts to which Sales
Taxes apply are payable to Landlord under the terms of this lease (or upon
demand at such other time or times as Landlord from time to time
determines), and
(iii) considered not to be Rent, despite anything else in this lease,
but Landlord will have all of the same remedies for and right of recovery
with respect to such amounts as it has for nonpayment of Rent under this
lease or at law;
5.03 GENERAL: Tenant covenants with Landlord to observe and perform all of the
agreements, obligations, provisions of Tenant herein.
5.04 TENANT'S INSURANCE: At the sole cost and expense, to maintain, and pay all
premiums for the mutual benefit of Landlord and Tenant, general public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about the Premises, in which the limits of the public liability
and/or property damage coverage shall be an amount not less than $2,000,000,
inclusive; at its sole cost and expense to keep all buildings which form a part
of the Premises and the equipment, fixtures and machinery insured on a full
replacement cost basis against loss or damage by fire and against such other
risk as are customarily covered by endorsement commonly known as supplemental or
extended coverage; the insurance shall be with insurers acceptable to Landlord
and with policies in form satisfactory from time to time to Landlord and
certificates of insurance shall be delivered to Landlord forthwith; if Tenant
fails to take out or keep in force any such insurance, Landlord will have the
right to do so and to pay the premium therefor and in such event Tenant shall
repay to Landlord the
5
<PAGE>
amount so paid as premium which repayment shall be deemed to be Additional Rent
and shall be due on the first day of the next month following said payment by
Landlord;
5.05 REPAIRS AND MAINTENANCE:
(a) Tenant at its own expense shall repair, maintain and keep the Premises
and any part thereof in a clean and sanitary condition and in accordance with
all laws, directions, rules and regulations of the governmental agencies having
jurisdiction and shall keep the Premises (including without limitation all
signs) and every part thereof in good order and repair as a careful owner would
do in a good and workmanlike manner, reasonable wear and tear excepted, provided
however that the obligation of Tenant hereunder shall not extend to damage by
fire, lightning, tempest or other perils against which Landlord is insured.
(b) Tenant shall maintain in good order and operating condition the
heating, ventilating and air conditioning, mechanical, electrical, plumbing,
lighting, bathrooms and sprinkler systems, services and equipment installed in
the Premises.
5.06 UTILITIES:
(a) Tenant shall pay as the same become due respectively, all charges for
private and public utilities which, without limiting the generality of the
foregoing shall include water, gas, heat, electrical power or energy, steam or
hot water used upon or in respect of the Premises and for fittings, machines,
apparatus, meters or other things leased in respect thereof and for all work or
services performed by any corporation or a commission in connection with such
public utilities. Tenant shall arrange for a counsel to be opened in its own
name for all such utilities.
(b) in no event shall Landlord be liable for any injury to Tenant, in
servants, agents, employees, customers and invitees or for any injury or damage
to the Premises or to any other property of Tenant or to any property of any
other person, firm or corporation on or about the Premises caused by an
interruption or failure in supplying any such utilities to the Premises.
(c) The Tenant shall replace the heating or air conditioning equipment, or
the electrical or mechanical systems, the roof membrane and make structural
repairs to the Premises during the Term of this Lease.
5.07 USE OF THE PREMISES: To use the Premises for the purpose of operating an
office and warehouse facility only in connection with the business of Tenant. At
no time shall Tenant use the Premises or any part thereof for any other purpose
or business.
6
<PAGE>
5.08 ACCESS BY LANDLORD: Landlord, its employees or its agents shall have the
right to enter the Premises at all reasonable times to examine the same and to
make such repairs, alterations, improvements or additions to the Premises as
Landlord may be required to make under the provisions of this lease without the
same constituting an eviction of Tenant in whole or in part and, subject to the
provisions of section 9.01 hereof the rent reserved shall not abate while said
repairs, alterations, improvements, or additions are being made by reason of
loss or interruption of business of Tenant or otherwise.
5.09 INDEMNIFICATION OF LANDLORD: To indemnify Landlord and save it harmless
from and against any and all claims, actions, damages, liability and expense in
connection with loss of life, personal injury and/or damage to property arising
from or out of any occurrence in, upon or at the Premises, or the occupancy or
use by Tenant of the Premises or any part thereof, or occasioned wholly or in
part by any act or omission of Tenant, its agents, contractors, employees or
servants, or by anyone permitted to be on the Premises by Tenant; in case
Landlord shall, without fault on its part, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold Landlord
harmless and shall pay all costs, expenses and hold Landlord harmless and shall
pay all costs, expenses and reasonable legal fees incurred or paid by Landlord
in connection with such litigation; Tenant shall have no obligation to indemnify
or save harmless Landlord in respect of any matter for which Landlord is
responsible at law as a result of the negligent or wilful act or omission of
Landlord or its employees or agents.
5.10 ASSIGNMENT AND SUBLETTING: That it will not assign or sublet the Premises
without the consent of Landlord, such consent not to be unreasonably withheld or
unduly delayed, provided, however, and it is made a condition of the giving of
such consent that:
(i) the proposed assignee of this lease shall agree in writing to
assume and perform all of the terms, covenants, conditions and agreements
by this Lease imposed upon Tenant herein in the form acceptable to
Landlord's solicitor;
(ii) no assignment or sub-letting shall in any manner release Tenant
from its covenants and obligations hereunder;
(iii) Landlord in its absolute discretion shall be satisfied with the
business and credit worthiness of any assignee;
and further provided that the consent of Landlord shall not be required in
connection with any assignment or subletting of the Premises or any part thereof
to any corporation which
7
<PAGE>
is affiliated or associated with Tenant within the meaning of the Business
Corporations Act, 1990 of Ontario;
5.11 RIGHT TO SHOW PREMISES:
(a) Landlord, its employees or its agents shall have the right within three
months prior to the termination of the Term or any renewal during business hours
of Tenant to enter upon the Premises for purposes of exhibiting same to any
prospective purchaser or mortgagee provided that the exercise of such rights
shall not unreasonable interfere with Tenant's business.
(b) Landlord shall have the right within three months' prior to the
termination of the Term or any renewal thereof to place upon the Premises a
signage of reasonable dimensions and reasonably placed so as not to interfere
with Tenant's business, stating that the Premises are for lease; further,
provided that Tenant will not remove such signage or permit the same to be
removed.
5.12 OBSERVANCE OF LAW: Tenant will comply with all provisions of law including,
without limiting the generality of the foregoing, federal and provincial
legislative enactments, building by-laws, and other governmental or municipal
regulations which relate to the Premises and the operation and use thereof, and
to comply with all police, fire and sanitary regulations imposed by any
governmental, provincial or municipal authorities or made by fire insurance
underwriters, and to observe and obey governmental and municipal regulations and
other requirements governing the conduct of any business conducted in the
Premises; provided that Landlord hereby represents and warrants to Tenant that
the Premises and equipment thereon and use thereof as of the commencement of the
term comply with the foregoing requirements.
5.13 SURRENDER ON TERMINATION: Tenant will, at the expiration or sooner to
determination of the Term, peacefully surrender and yield up unto Landlord the
Premises with the appurtenances together with all buildings or erections which
at any time during the said Term shall be made therein or thereon in the same
condition as required to be maintained hereunder.
5.14 LANDLORD RECOVERY: In the event that Landlord shall perform any repairs or
maintenance or pay any some of money due or payable by Tenant, either at the
request of Tenant, or by reason of any default by Tenant in performance of its
convenance herein contained Tenant shall, forthwith after notice from Landlord
repay to Landlord as Additional Rent hereunder, the cost of performing such
repairs and maintenance or the amount paid by Landlord on Tenant's behalf,
together with Landlord's overhead fee of 15% of such amount.
8
<PAGE>
5.15 WASTE: Tenant shall not do or suffer any waste or damage, disfiguration or
injury to the Premises or the fixtures and equipment thereof or permitted or
suffer any overloading of the floors thereof and shall not use or permit to be
used any part of the Premises or any dangerous, noxious or offensive trade or
business and shall not do anything or permit anything to be done upon or about
the Premises nor anything to be brought thereon which Landlord may reasonable
deem to be a nuisance and Tenant shall take every reasonable precaution to
protect the Premises from danger of fire, water damage or the elements, and
Tenant shall not allow any ashes, refuse, garbage or other loose, objectional
material to accumulate in, on or about the Premises and will at all times keep
them clean and in wholesome condition.
5.16 ELECTRICAL FACILITIES: Tenant shall not install or use any electrical or
other equipment or electrical arrangement which may overload the electrical or
other service facilities except with the expressed written consent of Landlord
and provided Tenant at its own expense makes whatever changes are necessary in
compliance with the reasonable and lawful requirements of Landlord's insurance
underwriters and governmental authorities having jurisdiction and in any event
Tenant shall make no changes until it first submits plans and specifications for
the same to Landlord and obtains Landlord's written approval for such plans and
specifications, which will not be unreasonably withheld or unduly delayed.
5.17 HEAT: Tenant covenants to heat those portions of the Premises to a
reasonable temperature necessary to prevent all pipes, permanent fixtures,
sprinkler system and other equipment contained therein from bursting or becoming
damaged.
5.18 SNOW AND ICE: Tenant shall keep and maintain the sidewalk, parking areas,
ramps for vehicles and pedestrians, loading areas, stairways, driveways and all
asphalt paving areas and catchbasins and trapdoors and covers about the Premises
clear of snow and ice and all other obstructions and required by the by-laws and
regulations of the Town of Strathroy at all times during the Term.
5.19 LANDSCAPING: Tenant shall keep and maintain the landscaped areas situate
around the buildings in a good and proper order and in a condition satisfactory
to Landlord. Tenant shall have the grass cut every two weeks during the months
of April through October in each calendar year. Tenant shall keep the parking
lot and outside storage area in the rear of the building in a condition
satisfactory to Landlord including the weed killing and keep it free of debris
and maintain it so that the water drains from the parking lot area.
6.00 LANDLORD'S COVENANTS:
9
<PAGE>
6.01 QUIET ENJOYMENT: Landlord covenants and agrees with Tenants that provided
Tenant pays all Rent and performs all the covenants herein contained on its part
to be performed that Tenant shall have quiet enjoyment of the Premises.
6.02 LANDLORD'S TITLE: Landlord covenants that it has a good marketable title to
the Premises free and clear of all mortgages, charges and encumbrances other
than (i) the mortgages or charges listed in Schedule "A" hereto and (ii)
easements, servitude, agreements, covenants and restrictions which do not
interfere with or restrict Tenant from carrying on its business in the Premises
or the rights of Tenant under this Lease; Landlord has full power and authority
to enter into this Lease; the use of the Premises for the purposes intended by
Tenant is a permitted use thereof under all applicable by-laws, regulations,
statutes, agreements, covenants, restrictions or rights affecting or running
with the lands of which the Premises form part;
6.03 INDEMNIFICATION OF TENANT: That it will indemnify Tenant and save it
harmless from and against any and all claims, actions, damages, liability and
expense in connection with loss of life, personal injury and/or damage to
property arising from or out of any occurrence in, upon or at the Premises
occasioned wholly or in part by any act or omission of Landlord, its employees
or its agents, in case Tenant shall, without fault on its part, be made a party
to litigation commenced by or against Landlord, then Landlord shall protect and
hold Tenant harmless and shall pay all costs, expenses and reasonable legal fees
incurred or paid by Tenant in connection with such litigation.
6.04 Landlord covenants with Tenant to observe and perform all of the agreement
obligations and provisions of Landlord herein.
7.01 SIGNS, FIXTURES AND ALTERATIONS:
(a) Signs, Fixtures and Alterations: Tenant may make or cause to be made
any alterations, additions or improvements and may install or cause to be
installed any trade fixtures, exterior signs, floor covering, interior or
exterior lighting, mechanical or electrical systems and fixtures, and plumbing
fixtures, shades or awnings as Tenant deems desirable or appropriate without
first obtaining Landlord's written approval and consent unless alterations to
the structure of the building forming part of the Premises are involved, in
which event Tenant shall first obtain Landlord's written consent, which consent
shall not be unreasonably withheld or unduly delayed.
(b) Removal and Restoration by Tenant: Upon termination of this lease, all
changes, alterations or improvements which may be effected in or upon the
Premises and which are attached to the floors, walls or ceilings thereof shall
remain and be surrendered with the Premises as part thereof and become the
property of Landlord without any compensation to Tenant. It is agreed, however,
that all trade fixtures installed in the Premises by Tenant shall be removable
at any time and from time to time by Tenant and
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shall, upon the termination of this lease, remain the property of Tenant
provided Tenant causes no damage to the Premises in such removal or makes good
all damage so caused.
(c) Tenant Shall Discharge Liens: Tenant shall promptly pay all its
contractors and for material and shall do any and all things necessary so as to
minimize the possibility of a lien attaching to the Premises as a result of any
improvements thereto carried out by Tenant and should any such lien be made or
filed, Tenant shall discharge or vacate the same within ten (10) days thereafter
at Tenant's expense.
8.01 HAZARDOUS SUBSTANCES: Tenant shall not use, manufacture or store, or permit
the use, manufacture or storing of any contaminant, toxic or hazardous waste or
substance on the Premises or any part thereof, provided the foregoing shall not
prevent the use on the Premises of substances in common use not inherently
dangerous so long as all applicable laws and regulations are strictly complied
with by Tenant in connection with such use, and Tenant shall indemnify and hold
harmless Landlord of and from all loss, cost and expense attributable to or
arising out of any breach by Tenant of the provisions of this section or the use
by Tenant on the Premises of any hazardous or toxic substance. Landlord shall
indemnify and save harmless Tenant of, from and against all loss, cost and
expense arising out of or attributable to any pollutant, contaminant or toxic or
hazardous waste or substance situate or present upon or under the Premises or
any part thereof due to any cause or reason whatsoever other than due to the
wilful or negligent acts or omissions of Tenant, its employees or agents.
9.01 DAMAGE AND DESTRUCTION: If during the term hereof the Premises shall suffer
any structural failure or collapse or be damaged or destroyed by any cause
whatsoever, whether insured against or not, including, without limitations fire,
lightning, tempest, acts of God or the Queen's enemies, riots, insurrections or
other perils the following provisions shall have effect:
(i) If the Premises are rendered partially unfit for occupancy by
Tenant, the rent hereby reserved shall abate in part only in the proportion
that the part of the Premises so rendered unfit is of the whole of the
Premises until the Premises have been repaired or restored;
(ii) If the Premises are rendered wholly unfit for occupancy by
Tenant, the rent hereby reserved shall abate until the Premises have been
repaired or restored;
(iii) Notwithstanding the provision of clause (i) of this section
9.01, if the Premises are not capable with reasonable diligence of being
repaired or restored within ninety (90) days of the occurrence of the
damage or destruction, then either Landlord or Tenant may terminate this
lease by written notice to the other of them given within thirty (30) days
of the date
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of such occurrence, and if such notice is so given this lease shall cease
and become null and void effective as of and from the date of such
occurrence and Tenant shall immediately surrender the Premises and all its
interest therein to Landlord and the rent shall be apportioned and shall be
payable by Tenant only to the date of such occurrence and Landlord may
re-enter and repossess the Premises discharged of this lease, but if within
the said period of thirty (30) days neither Landlord nor Tenant shall give
notice terminating this lease as aforesaid, then upon the expiration of the
said period of thirty (30) days Landlord shall promptly repair or restore
the premises;
(iv) If the Premises are capable with reasonable diligence of being
repaired or restored within ninety (90) days of the happening of such
damage, then Landlord shall restore or repair the Premises promptly within
the aforesaid ninety (90) days;
10.01 DEFAULT OF TENANT:
(a) Right to Re-Enter: In the event of any failure of Tenant to pay any
rental due hereunder within thirty (30) days after the same shall be due, or any
failure to perform or to observe any other of the terms, conditions or covenants
of this lease to be observed or performed by Tenant, or if Tenant shall become
bankrupt or insolvent, or file any proposal, or if a receiver is appointed of
all or substantially all of Tenant's property, or if Tenant shall abandon the
Premises, or suffer this lease or any of its assets to be taken under any writ
of execution, or if re-entry is permitted under any other terms of this lease,
then Landlord, besides any other rights or remedies it may have, shall have the
immediate right of re-entry and may remove all persons and property from the
Premises and such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned hereby.
(b) Right to Re-Let: Should Landlord elect to re-enter as herein provided,
or should it take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate this lease or it may from
time to time without terminating the lease, re-let the Premises or any part
thereof for such term or terms (which may be for a term extending beyond the
term of this lease) and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable; upon each such
re-letting all rentals received by Landlord from such re-letting shall be
applied to amounts due from Tenant to Landlord hereunder. If such rentals
received from such re-letting during any month be less than that to be paid
during that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry
or taking possession of the Premises by
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Landlord shall be construed as an election on its part to terminate this lease
unless a written notice of such intention be given to Tenant. Notwithstanding
any such re-letting without termination, Landlord may at any time thereafter
elect to terminate this lease for any breach, and, in addition to any other
remedies it may have, it may recover from Tenant all damages it may incur by
reason of such breach, including the cost of recovering the Premises, reasonable
solicitor's fees and including the present value of the unpaid rent, additional
rent and other charges for the unexpired term of the lease less the actual
rental value of the Premises for that period, which amount shall be immediately
due and payable from Tenant to Landlord. In any of the events referred to in
subsection 9(a) above in addition to any and all other rights, including the
rights referred to in this subsection and in subsection 9(a) hereof, the full
amount of the current month's rent, and any other payments required to be made
monthly hereunder and the next three (3) month's fixed minimum rent and such
payments shall immediately become due and payable, and Landlord may immediately
distrain for the same, together with any arrears then unpaid.
(c) Legal Expenses: In case suit shall be brought for recovery of
possession of the Premises for the recovery of rent or any other amount due
under the provisions of this lease or because of the breach of any other
covenants herein contained on the part of Tenant to be kept or performed and a
breach shall be established, Tenant shall pay to Landlord all expenses incurred
therefor including a reasonable solicitor's fee.
(d) Landlord May Perform Covenants: If Tenant shall fail to perform any of
the covenants or obligations of Tenant under or in respect of this lease,
Landlord may from time to time in its discretion perform or cause to be
performed any of such covenants or obligations or any part thereof, and for such
purpose may do such things as may be requisite, including, without limitation,
entering upon the Premises upon reasonable prior notice to Tenant. All expenses
incurred and expenditures made by or on behalf of Landlord under this subsection
shall be collected in the same manner as rent hereunder and shall be paid by
Tenant upon demand.
11.01 TENANT MAY PERFORM COVENANTS: If Landlord shall fail to perform any of the
covenants or obligations of Landlord under and in respect to this lease, Tenant
may from time to time in its discretion perform or cause to be performed any of
such covenants or obligations or any part thereof and for such purpose may do
such things as may be requisite and any amounts expended by Tenant in so doing
shall be reimbursed by Landlord upon demand and Tenant may deduct any such
amounts so paid from the rent next due hereunder.
12.01 STATUS STATEMENT, ATTORNMENT, SUBORDINATION:
(a) Status Statement: Within ten (10) days after request therefor by either
party to the other hereunder, the party so requested shall deliver a certificate
to the requesting party
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certifying (if such be the case) that this lease in is full force and effect and
that there are no defaults or breaches by the requested party of its obligations
hereunder or stating those claimed by the requested party.
(b) Attornment: Tenant shall, in the event any proceedings are brought for
the foreclosure of or in the event of exercise of the power of sale under any
mortgage made by Landlord covering the Premises, attorn to the mortgagee or the
purchaser upon any such foreclosure or sale and recognize such mortgagee or
purchaser as Landlord under this lease.
(c) Subordination: Upon request by Landlord Tenant will subordinate its
rights hereunder to any mortgage or mortgages, or the lien resulting from any
other method of financing or refinancing, now or hereafter in force against the
Premises or part thereof to all advances made or hereafter to be made on the
security thereof. No subordination by Tenant shall have the effect of permitting
the holder of any mortgage or lien or other security to disturb the occupation
and possession by Tenant of the Premises so long as Tenant shall perform all of
the terms, covenants and conditions contained in this Lease.
13.01 RIGHT OF RENEWAL: Provided that Tenant is not in or has ever been in
default under this Lease, Tenant shall have the right to renew this Lease for
two further successive terms of five years upon the same terms and conditions as
contained in this Lease save and except for any further right of renewal and any
allowances or inducements provided to the tenant in the initial term of this
Lease. Tenant shall give Landlord notice in writing of its intention to renew
this Lease no later than six (6) months prior to the expiry of the Term or any
renewal term of the Lease. Failing such notice being by Tenant to Landlord in
writing, Tenant shall have no right to renew this Lease.
14.01 TENANT'S WORK: Tenant shall, at its own risk and expense complete and
install in a good workmanlike manner within the Premises, all Tenant's fixtures
and equipment as outlined in Schedule "B" hereto. Tenant shall be permitted
access to the Premises prior to Commencement Date with the purposes of
completing its improvements. Tenant shall pay all utilities falling due with
respect to the Premises during the period from the time it first gained access
to the Premises for completion of its work and the Commencement Date.
15.01 GENERAL:
(a) No Tacit Renewal: In the event Tenant remains in possession of the
Premises after the end of the term hereof and without the execution and delivery
of a new lease, there shall be no tacit renewal of this lease and the term
hereby granted and Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly rental
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payable in advance on the first day of each month equal to the fixed monthly
rental payable during the last month of the term of the lease and otherwise upon
the same terms and conditions as are set forth in this lease so far as
applicable.
(b) Successors: Subject to the provisions of subsection 5.10, all rights
and liabilities herein given to or imposed upon the respective parties hereto
shall extend to and bind the several respective heirs, executors,
administrators, successors, and assigns of the said parties.
(c) Entire Agreement: This lease and the Schedules attached hereto and
forming part hereof and any Agreement to Lease entered into by Landlord and
Tenant in respect of the Premises set forth all the covenants, promises,
agreements, conditions and understandings between Landlord and Tenant concerning
the Premises and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than as aforesaid.
Except as herein otherwise provided, no subsequent alteration, amendment, change
or addition to this lease shall be binding upon Landlord or Tenant unless
reduced to writing and signed by them.
(d) Force Majeure: In the event that either party hereto shall be delayed
or hindered in or prevented from the performance of any act required hereunder
by reason of strikes, lock-outs, labour troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reasons of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
lease, then performance of such act shall be excused for the period of the delay
and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay. The provisions of this subsection
shall not operate to excuse Tenant from prompt payment of rent, additional rent
or any other payments required by the terms of this lease.
(e) Compliance with the Planning Act: It is an express condition of the
within lease and Landlord and Tenant so agree and declare that the subdivision
control provisions of the Planning Act, be complied with if necessary.
(f) Consents: If and whenever the consent or leave of either party is
required pursuant to the terms hereof for the doing of any thing by the other
party, such consent or leave shall not be unreasonably withheld or unduly
delayed.
16.01 NOTICES: Any demand, notice or other communication be given in connection
with this Lease shall be given in writing and shall be given by personal
delivery by registered mail and by electronic means of communication addressed
to the recipient as follows to Landlord: B.A.R.K. Holdings Inc., 1072 Mahogany
Road, London, Ontario, N6A 2W5, Attention - Douglas Hamilton and to Tenant:
Columbia Sportswear Canada Limited, 412-C High Street East, P. 0. Box 261,
Strathroy, Ontario, N7G lH5, Attention - Chief Financial Officer with a copy to
Columbia Sportswear U.S.
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6600 N Baltimore, Portland, Oregon, USA 97203, Attention - President or to such
other addressed individual or electronic communication number as may be
designated by notice given by either party to the other. Any demand, notice,
communication given by personal delivery shall be conclusively deemed to have
been given on the day of actual delivery thereof, and, if given by registered
mail, on the 5th Business Day following the deposit thereof in the mail, and, if
given by electronic communication, on the day of transmittal thereof if given
during the normal business hours of the recipient and on the business day during
which such normal business hours next occur if not given during such hours on
any day. If the party is given any demand, notice or other communication knows
or ought reasonably to know of any difficulties with the postal system which
might affect the delivery of mail, any such demand, notice or other
communication shall not be mailed but shall be given by personal delivery or via
electronic communication.
IN WITNESS WHEREOF the parties, respective officers hereto have executed
this lease and placed the respective corporate seals on the day of 1994.
B.A.R.K, HOLDINGS, INC.
By: DOUGLAS HAMILTON c/s
---------------------------------------
Douglas Hamilton
COLUMBIA SPORTSWEAR CANADA LIMITED
By: /s/ c/s
---------------------------------------
By: /s/ c/s
---------------------------------------
<PAGE>
SCHEDULE "A"
PERMITTED ENCUMBRANCES
1. The reservations, limitations, provisions and conditions expressed in the
original grant from the Crown;
2. The Easement in favour of Ontario Hydro;
3. The Charge/Mortgage of Land in favour of Hongkong Bank of Canada;
4. The Charge/Mortgage of Land in favour of Hamilton Children's Trust;
<PAGE>
SCHEDULE "B"
TENANT'S WORK
AGREEMENT
This Agreement (the "Agreement") is entered into as of August 24, 1992
by and between Columbia Sportswear Holdings Limited, a corporation organized
under the laws of the Province of Ontario, Canada ("Columbia Holdings"),
Columbia Sportswear Canada Limited, a corporation organized under the laws of
the Province of Ontario, Canada and a wholly owned subsidiary of Columbia
Holdings ("Columbia Canada") and Douglas Hamilton ("Hamilton") and Doug Hamilton
in trust for Elizabeth K. Hamilton (together, the "Hamiltons").
Recitals
1. The Hamiltons own 25 percent of the issued and outstanding common stock
of Canada-Trans Limited, a corporation organized under the laws of the Province
of Ontario, Canada ("Canada-Trans").
2. Pursuant to a stock purchase agreement dated as of August 20, 1992 among
Canada-Trans, Columbia Canada and all of the shareholders of Canada-Trans (the
"Purchase Agreement"), Canada-Trans, Columbia Canada and the shareholders of
Canada-Trans have agreed that (a) Columbia Canada will acquire all of the issued
and outstanding shares of Canada-Trans' capital stock in exchange for cash,
notes and, in the case of the shares of Canada- Trans common stock held by the
Hamiltons, shares of the common stock of Columbia Canada, (b) immediately after
Columbia Canada's acquisition of the stock of Canada-Trans, Columbia Canada and
Canada-Trans will be amalgamated and the Hamiltons will hold 2,500 shares of the
common stock of the amalgamated company ("Successor"), constituting 25 percent
of the outstanding capital stock of Successor, and (c) upon the terms and
conditions provided herein, Columbia Holdings shall purchase from the Hamiltons
all of their shares of Successor's stock (the "Hamilton Shares").
Agreement
In consideration of the mutual covenants and agreements set forth
below and in the Purchase Agreement and other good and valuable consideration,
the parties agree as follows:
1. AGREEMENT TO PURCHASE SHARES OF SUCCESSOR
Subject to the following paragraph, Columbia Holdings agrees to
purchase, and the Hamiltons agree to sell to Columbia Holdings, the Hamilton
Shares on April 30, 1996. The purchase price for the Hamilton Shares shall be
determined as follows:
-- -- -- --
| C$749,750 x x | + |C$250,000 x y |
| ---------- | ----------- |
| C$4,000,00 | | C$4,000,000 |
-- -- -- --
Where x = the lesser of (1) the Cumulative EBT (as defined below) and (2)
C$4,000,000 and y = the lesser of (1) the amount, if any, by which the
Cumulative EBT exceeds C$4,000,000 and (2) $4,000,000.
In the event of Hamilton's death, permanent disability or termination
of employment by Successor without cause, Columbia Holdings agrees to purchase,
and the Hamiltons agree to sell to Columbia Holdings, the Hamilton Shares for a
purchase price of the greater of (a) C$750,000 or (b) the purchase price as
determined in accordance with the formula above. Columbia Holdings shall pay the
Hamiltons C$750,000 in a lump sum within 90 days after the date of death,
permanent disability or termination without
<PAGE>
cause and the remaining portion of the purchase price, if any, shall be paid on
April 30, 1996.
For purposes of this Agreement, "cause" shall mean: (a) Hamilton's
gross dereliction of his duties; (b) theft or misappropriation of any property
of Successor by Hamilton; (c) conviction of Hamilton of a felony or of any crime
involving dishonesty or moral turpitude which might reasonably be expected to
adversely affect the business, reputation or business relationships of
Successor; or (d) violation by Hamilton of any of the provisions of this
Agreement.
For purposes of this Agreement, Cumulative EBT shall mean the sum of
Earnings Before Taxes for each of Canada-Trans' and Successor's calendar years
1992 through 1995. Earnings Before Taxes shall mean Canada- Trans' and
Successor's net income before taxes as shown on audited financial statements
prepared for Canada-Trans and Successor with respect to the calendar year then
ended and in accordance with generally accepted Canadian accounting principles
and subject to the following adjustments:
a. The parties acknowledge that in the past the Gross Margin to
Columbia Sportswear Company, an affiliate of Columbia Holdings and Columbia
Canada ("Columbia"), on merchandise sold to Canada-Trans, Successor's
predecessor, has been consistent with the Gross Margin on merchandise sold to
Columbia's other foreign distributors and that, based on a number of factors
including market conditions, such margins change from time to time. The parties
further acknowledge that Columbia's Gross Margin on products sold to its other
foreign distributors is currently higher than the Gross Margin on merchandise
sold to the Company. Nevertheless, for ease and certainty in determining the
purchase price and notwithstanding the actual Gross Margin on Columbia
merchandise sold to Successor and other foreign distributors, Successor's cost
of goods sold shall be adjusted, for purposes of this calculation, so as to
reflect a pro forma 20 percent Gross Margin to Columbia on all Columbia
merchandise purchased by Successor. For purposes of the adjustment, and as used
in this subparagraph, "Gross Margin" shall mean Columbia's pro forma net revenue
from sales of merchandise to Successor, less Columbia's f.o.b. cost of the
merchandise (determined on a basis consistent with accounting principles applied
in prior years).
b. Notwithstanding financing and service fees actually paid
during the period, financing and service fees will be adjusted for purposes of
this calculation to 6 percent of Successor's cost (as adjusted pursuant to
subparagraph (a) above) for all merchandise purchased from Columbia.
c. For purposes of this calculation, all customs and duty costs
will be adjusted commensurate with adjustments in pricing resulting from the
Gross Margin assumptions in subparagraph (a) above.
d. Amortized goodwill resulting from this transaction shall be
excluded.
e. Notwithstanding Successor's interest expense during the
period, interest on all indebtedness of Successor shall be assumed for purposes
of this calculation to have been equal to the prime interest rate on loans by
the Royal Bank of Canada plus one percent; provided, however, that there shall
be no charge on indebtedness incurred to fund the acquisition of the
Canada-Trans stock and the retirement of loans to Canada-Trans made by
Canada-Trans' shareholders pursuant to the Purchase Agreement.
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<PAGE>
f. There shall be no charge with respect to any management fees
paid by the Successor Company to Columbia.
2. THE CLOSING
At the closing of the purchase of the Hamilton Shares (the "Closing"),
the Hamiltons shall deliver to Columbia Holdings, or its nominee, the
certificates representing the Hamilton Shares, duly endorsed in blank, and
Columbia Holdings shall wire transfer to the account designated in writing by
the Hamiltons the cash consideration described in Section 1.
3. HAMILTON'S EMPLOYMENT
3.01 Title and Duties. After the amalgamation of Columbia Canada and
Canada-Trans, Hamilton shall hold the title of President and Chief Operating
Officer of Successor and shall undertake and render such services as are
customarily performed by the President and Chief Operating Officer of a
corporation engaged in the business of marketing sportswear or prescribed in
Successor's bylaws and such other duties as may from time to time be assigned to
him by Successor's Board of Directors. Hamilton shall devote his full business
time to Successor and to its affairs and safeguard and promote its lawful
interests.
3.02 Compensation. As payment in full for all his services rendered under
this Agreement, Successor shall pay Hamilton a salary and provide benefits as
previously agreed upon by Hamilton and Columbia Canada.
4. CONFIDENTIALITY AND NONCOMPETITION
4.01 Definition of Confidential Information. As used in this Agreement, the
term "Confidential Information" means: (a) proprietary information of Successor;
(b) information marked or designated by Successor as confidential; (c)
information, whether or not in written form and whether or not designated as
confidential, which is known to Hamilton as being treated by Successor as
confidential; and (d) information provided to Successor by third parties which
Successor is obligated to keep confidential. Confidential Information includes
but is not limited to know-how, customer lists, marketing plans, and financial
and technical information.
4.02 Acknowledgment of Receipt of Confidential Information. Hamilton
acknowledges that in the course of performing his duties for Successor he will
have access to Confidential Information, the ownership and confidential status
of which are highly important to Successor, and Hamilton agrees in addition to
the specific covenants contained herein, to comply with all reasonable policies
and procedures of Successor as may be established from time to time for the
protection of such Confidential Information.
4.03 Ownership. Hamilton acknowledges that all Confidential Information is
and shall continue to be the exclusive property of Successor, whether or not
prepared in whole or in part by him and whether or not disclosed to or entrusted
to him in connection with employment by Successor.
4.04 Acknowledgment of Irreparable Harm. Hamilton acknowledges that any
disclosure of Confidential Information will cause irreparable harm to Successor.
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4.05 Covenant of Nondisclosure and Nonuse. Hamilton agrees not to disclose
Confidential Information, directly or indirectly, under any circumstances or by
any means, to any third person. Hamilton agrees that he will not copy, transmit,
reproduce, summarize, quote or make any commercial or other use whatsoever of
Confidential Information, except as may be necessary to perform work done by him
for Successor.
4.06 Safeguard of Confidential Information. Hamilton agrees to exercise the
highest degree of care in safeguarding Confidential Information against loss,
theft, or other inadvertent disclosure and agrees generally to take all steps
necessary or requested by Successor to insure maintenance of confidentiality.
4.07 Exclusions. This Section 4 shall not apply to the following
information: (a) information now and hereafter voluntarily disseminated by
Successor to the public or which otherwise becomes part of the public domain
through lawful means; (b) information subsequently and rightfully received from
third parties and not subject to any obligation of confidentiality; and (c)
information independently developed by Hamilton after termination of his
employment.
4.08 Work Made for Hire. Hamilton agrees that all creative work prepared or
originated by him for Successor or during or within the scope of his employment
by Successor is owned by Successor; and, in any event, Hamilton assigns to
Successor all intellectual property rights in such work whether by right of
copyright, trade secret or otherwise and whether or not subject to protection by
copyright laws.
4.09 Noncompetition. During the term of Hamilton's employment by Successor
and for one year thereafter, Hamilton agrees that he will not, without the prior
written consent of Successor, directly or indirectly, whether as employee,
officer, director, independent contractor, consultant, stockholder, partner, or
otherwise, engage or assist others to engage in or have any interest in any
business which competes with the Company in the Dominion of Canada. Hamilton
further agrees and acknowledges that the time, scope, and geographic area and
other provisions of this paragraph have been specifically negotiated by
sophisticated parties and specifically hereby agrees that such time, scope,
geographic areas, and other provisions are reasonable under the circumstances.
Hamilton further agrees that if, despite the express agreement of the parties
herein, a court should hold any portion of this Section 4.09 to be unenforceable
for any reason, the maximum restrictions of time, scope, and geographic area
reasonable under the circumstances, as determined by the court, will be
substituted for the restrictions held unenforceable.
4.10 Non-Solicitation and Non-Hire. During the term of Hamilton's
employment by Successor and for a period of one year thereafter, Hamilton agrees
that he will not: (a) solicit, induce, or attempt to induce any person who is an
employee of Successor to leave the employ of Successor or to engage in any
business that competes with Successor; or (b) hire or assist in the hiring of
any person who is an employee of Successor to work for any business that
competes with Successor.
4.11 Future Association. For a period of one year after termination of his
employment by Successor, Hamilton agrees to notify Successor of any involvement
with any business that competes with Successor. Hamilton shall disclose the
existence and contents of this Agreement to any business with which Hamilton
becomes associated within such time period.
4.12 Delivery of Materials. Upon termination of his employment status,
Hamilton will deliver to Successor all materials, including without limitation
customer lists, documents, records, drawings, prototypes, models
4
<PAGE>
and schematic diagrams, which describe, depict, contain, constitute, reflect,
record or in any way relate to Confidential Information, which are in Hamilton's
possession or under his control, whether or not the materials were prepared by
Hamilton.
4.13 Subpoenas. If Hamilton is served with any subpoena or other compulsory
judicial or administrative process calling for production of Confidential
Information or if Hamilton is otherwise required by law or regulation to
disclose Confidential Information, Hamilton will immediately, and prior to
production or disclosure, notify Successor and provide it with such information
as may be necessary in order that Successor may take such action as it deems
necessary to protect its interest.
5. REPRESENTATIONS AND WARRANTIES OF THE HAMILTONS
The Hamiltons jointly and severally represent and warrant to Columbia
Holdings and Columbia Canada as follows:
5.01 Title to Stock. At the Closing, the Hamiltons will own of record and
beneficially the shares of stock of Successor set forth opposite on Annex A free
and clear of all rights of joint ownership, pledges, security interests, liens,
charges, encumbrances, equities, claims, options (other than pursuant to this
Agreement) or limitations and upon delivery of the shares as provided in this
Agreement, Columbia Holdings will acquire good and valid title thereto, free and
clear of all rights of joint owner ship, pledges, security interests, liens,
charges, encumbrances, equities, options or limitations.
5.02 Authority Relative to this Agreement. The Hamiltons have full right,
power and authority to enter into this Agreement and carry out the terms hereof
and have duly executed and delivered this Agreement, and this Agreement is a
valid and binding obligation enforceable against each of them in accordance with
its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, moratorium or other similar laws now or hereafter in effect relating
to creditors' rights and (b) general prin ciples of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.03 Consents and Approvals; No Violation. The execution and delivery of
this Agreement by the Hamiltons will not (a) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority or third person, or (b) conflict with, result in a
breach of or constitute a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which either of the Hamiltons is a party or by which either of
them may be bound; or (c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to either of them.
6. REPRESENTATIONS AND WARRANTIES OF COLUMBIA HOLDINGS
Columbia Holdings represents and warrants to the Hamiltons as follows:
6.01 Organization. Columbia Holdings is a corporation duly organized and
validly existing under the laws of the Province of Ontario, Canada.
6.02 Authority Relative to this Agreement. Columbia Holdings has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
5
<PAGE>
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Columbia Holdings. This Agreement has been duly and
validly executed and delivered by Columbia Holdings and constitutes a valid and
binding agreement of Columbia Holdings, enforceable against Columbia Holdings in
accordance with its terms, except that such enforcement may be subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (b) general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
6.03 Consents and Approvals, No Violation. The execution, delivery and
performance of this Agreement by Columbia Holdings and the compliance by
Columbia Holdings with the provisions of this Agreement will not (a) violate the
Articles of Incorporation or Bylaws of Columbia Holdings; (b) require any
consent, approval, authorization or permit of filing with or notification to any
governmental or regulatory authority; (c) conflict with, result in a breach of
or constitute a default under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement or other instrument of
obligation to which Columbia Holdings or any of its assets may be bound; or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Columbia Holdings or any of its assets.
7. REPRESENTATIONS AND WARRANTIES OF COLUMBIA CANADA
Columbia Canada represents and warrants to the Hamiltons as follows:
7.01 Organization. Columbia Canada is a corporation duly organized and
validly existing under the laws of the Province of Ontario, Canada.
7.02 Authority Relative to this Agreement. Columbia Canada has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Columbia Canada.
This Agreement has been duly and validly executed and delivered by Columbia
Canada and constitutes a valid and binding agreement of Columbia Canada,
enforceable against Columbia Canada in accordance with its terms, except that
such enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
7.03 Consents and Approvals, No Violation. The execution, delivery and
performance of this Agreement by Columbia Canada and the compliance by Columbia
Canada with the provisions of this Agreement will not (a) violate the Articles
of Incorporation or Bylaws of Columbia Canada; (b) require any consent,
approval, authorization or permit of filing with or notification to any
governmental or regulatory authority; (c) conflict with, result in a breach of
or constitute a default under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement or other instrument of
obligation to which Columbia Canada or any of its assets may be bound; or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Columbia Canada or any of its assets.
8. COVENANTS OF THE PARTIES
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8.01 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.02 Sales and Transfer Taxes. All transfer taxes (including all stock
transfer taxes, if any) incurred in connection with this Agreement and the
transactions contemplated hereby will be borne by the Hamiltons, and the
Hamiltons will, at their own expense, file all necessary tax returns and other
documentation with respect to all such transfer taxes, and, if required by
applicable law, and Columbia Holdings will join in the execution of any such tax
returns or other documentation.
8.03 No Encumbrances. Each of the Hamiltons agrees not to transfer, pledge
or in any way encumber any of the Hamilton Shares.
8.04 Corporate Actions. Columbia Holdings and Columbia Canada each agrees
that so long as the Hamiltons are the owners of the Hamilton Shares, except as
expressly contemplated hereby, the following corporate actions shall be subject
to the unanimous approval of Successor's shareholders: (a) the entering into of
any agreement, or the making of any offer, or the granting of any right capable
of becoming an agreement, to allot or issue any shares of capital stock of
Successor; (b) any action which may reasonably be expected to lead to or result
in a material change in the nature of Successor's business; (c) the taking of
any steps to wind up or terminate the corporate existence of Successor; (d) the
sale, lease, exchange or disposition of the entire undertaking or property or
assets of Successor or any substantial part thereof other than in the ordinary
course of Successor's business; (e) the entering into of an amalgamation, merger
or consolidation with any other corporation and (f) the appointment of officers
of Successor.
9. CONDITIONS TO PURCHASE AND SALE OF SHARES
9.01 Conditions to Obligations of the Hamiltons. The obligations of the
Hamiltons to sell the Hamilton Shares as contemplated hereunder shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by the Hamiltons:
a. Columbia Holdings shall, in all material respects, have performed
and complied with the covenants and agreements contained in this Agreement
required to be performed and complied with by it at or prior to the Closing
Date;
b. The representations and warranties of Columbia Holdings contained
in this Agreement shall have been correct when made and shall be correct as of
the Closing Date.
9.02 Conditions to Obligations of Columbia Holdings. The obligations of
Columbia Holdings to purchase the Hamilton Shares as contemplated hereunder
shall be further subject to the fulfillment at or prior to the Closing Date of
the following conditions, any one or more of which may be waived by Columbia
Holdings:
a. The Hamiltons shall, in all material respects, have performed and
complied with the covenants and agreements contained in this Agreement required
to be performed and complied with by them at or prior to the Closing Date;
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b. The representations and warranties of the Hamiltons contained in
this Agreement shall have been correct when made and shall be correct as of the
Closing Date.
10. MISCELLANEOUS PROVISIONS
10.01 Severability. In case any provision of this Agreement is held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not upset any other provision hereof and the Agreement
shall in all other respects be valid and enforceable.
10.02 Legends. All certificates representing the Hamilton Shares shall be
endorsed with the following legend, in addition to any legends required by
applicable federal or provincial securities laws or any other agreement:
"The Shares represented by this certificate are subject
to restrictions on transfer contained in an Agreement dated
as of August 24, 1992 among the Company, the holder and
another shareholder of the Company, a copy of which is on
file at the principal office of the Company."
10.03 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of the
Hamiltons, Columbia Canada and Columbia Holdings.
10.04 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
10.05 Survival. The representations, warranties and covenants of the
parties contained in this Agreement shall survive the execution and delivery of
this Agreement and the completion of the purchase of the Hamilton Shares and the
obligations set forth in Section 4 shall continue beyond the termination of this
Agreement.
10.06 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
a. If to the Hamiltons, to:
Douglas Hamilton
c/o Columbia Sportswear Canada Limited
412 High Street East, Unit 6
Strathroy, Ontario
Canada N7G1T1
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with copies to:
McCarthy Tetrault
150 Dufferin Avenue
London Ontario
Canada N6A 5N6
Attention: Peter C. Johnson
b. If to Columbia Holdings, to:
Columbia Sportswear Holdings Limited
c/o Columbia Sportswear Company
6600 N Baltimore
Portland, OR 97203
Attention: Timothy P. Boyle
with copies to:
Stoel Rives Boley Jones & Grey
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204-1268
Attention: Stephen E. Babson
c. If to Columbia Canada or Successor, to:
Columbia Sportswear Canada Limited
c/o Columbia Sportswear Company
6600 N Baltimore
Portland, OR 97203
Attention: Timothy P. Boyle
with copies to:
Stoel Rives Boley Jones & Grey
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204-1268
Attention: Stephen E. Babson
10.07 Assignment. Columbia Holdings' right to purchase the Hamilton Shares
shall be freely transferrable by Columbia Holdings to any affiliate or
shareholder of Columbia. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
10.08 Attorneys' Fees/Governing Law. In any litigation arising out of this
Agreement, the prevailing party will be entitled to recover all reasonable
attorneys' fees on appeal or petition for review. The rights and obligations of
the parties under this Agreement shall in all respects be governed by the laws
of the Province of Ontario, Canada.
10.09 Indemnification. Each party will indemnify, hold harmless and defend
the other from and against and reimburse the others with respect to any and all
losses, costs, expenses, damages or liabilities (including reasonable attorneys'
fees) incurred by the other by reason of, arising out of or in connection with
the breach or inaccuracy of any representation or warranty of the indemnifying
party under this Agreement and the
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nonfulfillment of any covenant or agreement on the part of the indemnifying
party under this Agreement.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
10.12 Entire Agreement. Except for the Purchase Agreement, this Agreement,
including the Annex referred to herein, embodies the entire agreement and,
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. Except for the Purchase Agreement, this Agreement supersedes
all prior agreements and understandings between the parties with respect to such
transactions.
10.13 Specific Performance. The Hamiltons and Columbia Holdings acknowledge
that, in view of the uniqueness of Successor's business, the parties may not
have an adequate remedy at law for money damages in the event that the stock
purchase and sale contemplated hereunder have not been consummated by reason of
breach, and therefore each of the Hamiltons and Columbia Holdings agrees that
the other shall be entitled to specific enforcement of the terms hereof with
respect to the consummation of the purchase and sale of the Hamilton Shares in
addition to any other remedy to which it may be entitled, at law or in equity.
In addition, Hamilton acknowledges that breach of the obligations imposed by
Section 4 of this Agreement will cause irreparable harm to Successor and, in the
event that Hamilton fails to abide by those obligations, Successor will be
entitled to specific performance, including the issuance of a temporary
restraining order or preliminary injunction, in addition to any other remedy to
which it may be entitled, at law or in equity.
10.14 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
10.15 Integrated Agreement. Annex A which is attached hereto is hereby
incorporated into this Agreement by this reference.
IN WITNESS WHEREOF, Columbia Holdings, Columbia Canada and the
Hamiltons have personally signed or caused this Agreement to be signed by their
respective duly authorized officers as of the date first above written.
Columbia Holdings: COLUMBIA SPORTSWEAR HOLDINGS LIMITED
By:TIMOTHY P. BOYLE
-----------------------------------------
Timothy P. Boyle,
Chairman and Chief Executive Officer
By:GERTRUDE BOYLE
-----------------------------------------
Gertrude Boyle, Vice Chairman
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Columbia Canada: COLUMBIA SPORTSWEAR CANADA LIMITED
By:TIMOTHY P. BOYLE
-----------------------------------------
Timothy P. Boyle,
Chairman and Chief Executive Officer
By:GERTRUDE BOYLE
-----------------------------------------
Gertrude Boyle, Vice Chairman
The Hamiltons:
DOUGLAS HAMILTON
--------------------------------------------
Douglas Hamilton
DOUGLAS HAMILTON
------------------------------------
Douglas Hamilton,
in trust for Elizabeth K. Hamilton
GUARANTY
Columbia Sportswear Company, an Oregon corporation and the holder of
79 percent of the capital stock of Columbia Sportswear Holdings Limited, hereby
guarantees punctual payment of all amounts required to be paid for the Hamilton
Shares pursuant to Section 1 of the Agreement above.
COLUMBIA SPORTSWEAR COMPANY
ByGERTRUDE BOYLE
------------------------------------------
Gertrude Boyle, Chairman
ByTIMOTHY P. BOYLE
------------------------------------------
Timothy P. Boyle, President
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ANNEX A
Name of Share
Shareholder Ownership
Douglas Hamilton 1,500
Douglas Hamilton,
in trust for Elizabeth K. Hamilton 1,000
12
COLUMBIA SPORTSWEAR COMPANY
DEFERRED COMPENSATION CONVERSION AGREEMENT
This Deferred Compensation Conversion Agreement (this "Agreement") is made
December 31, 1996 by and between Columbia Sportswear Company, an Oregon
corporation (the "Company"), and Don Santorufo ("Santorufo").
The Company and Santorufo are parties to a Participation Share Agreement
having an effective date of December 31, 1990, as amended by an Amendment to
Participation Share Agreement having an effective date of July 1, 1993
(collectively, the "Participation Agreement"), providing for the award to
Santorufo on a conditional basis of deferred compensation units.
The Participation Agreement provides for the award to Santorufo of up to a
total of 7,581 Participation Shares in three separate awards. Each award is
subject to the requirement that Santorufo be employed by the Company on a
specified date. Two of these dates have occurred, resulting in two awards to
Santorufo of a total of 5,933 Participation Shares. The remaining award of 1,648
Participation Shares is subject to the requirement that Santorufo be a full-time
employee of the Company on January 1, 2000. Each award is subject to a five-year
vesting schedule from the date of the award. The 7,581 Participation Shares that
have been awarded to Santorufo or to which Santorufo may become entitled under
the Participation Agreement will sometimes be referred to herein collectively as
the "Participation Shares."
Pursuant to the Participation Agreement and the terms and conditions of
this Agreement, the Company and Santorufo wish to cause the conversion of the
Participation Shares, whether or not awarded or vested under the Participation
Agreement, into nonvoting Common Stock and voting Common Stock of the Company,
to provide for the vesting, in accordance with the schedule contemplated by the
Participation Agreement, of the shares of nonvoting Common Stock and voting
Common Stock issued to Santorufo with respect to Participation Shares that are
not currently vested, to terminate the Participation Agreement and to enter into
certain other agreements, all as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Conversion of Participation Shares; Termination of Participation
Agreement. On December 31, 1996, each of the Participation Shares will be
converted into .909 shares of nonvoting Common Stock and .091 shares of voting
<PAGE>
Common Stock of the Company (thereafter multiplied in each case by 400 to take
account of the stock split by the Company) by the issuance of 2,756,452 shares
of nonvoting Common Stock and 275,948 shares of voting Common Stock to Santorufo
in full discharge, settlement and termination of all rights and obligations of
Santorufo and the Company under the Participation Agreement, which shall be
superseded and of no further force or effect (the "Conversion"). The Conversion
will be effected by the delivery by the Company to Santorufo of stock
certificates evidencing the nonvoting Common Stock and voting Common Stock
issued to Santorufo in the Conversion (collectively, the "Conversion Shares,"
which shall include, if the outstanding Common Stock of the Company is hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any stock split,
combination of shares or dividend payable in shares, any such shares or other
securities issued with respect to the nonvoting and/or voting Common Stock
issued to Santorufo in the Conversion).
2. Entry into Restrictive Agreement. It shall be a condition precedent to
the obligations of the Company under this Agreement that, prior to the issuance
of stock certificates to Santorufo and the effectiveness of the Conversion, (a)
Santorufo have executed and delivered to the Company a Shareholder Signature
Page to the Restrictive Agreement in the form attached as Exhibit A by which
Santorufo shall become a party to the Restrictive Agreement dated as of May 1,
1993 among Gertrude Boyle, Timothy Boyle and Sarah A. Bany (the "Restrictive
Agreement") so as to cause the Conversion Shares to become subject to the
Restrictive Agreement upon their issuance and have executed and delivered to the
Company an Amendment No. 1 to the Restrictive Agreement in the form attached as
Exhibit B (the "Amendment No. 1") to cause the Restrictive Agreement to be
amended as therein provided upon the execution thereof by the other parties to
the Restrictive Agreement, and (b) Carole Santorufo, Santorufo's spouse, have
executed and delivered to the Company a Spousal Agreement in the form attached
as Exhibit C relating to the Restrictive Agreement and the Amendment No. 1.
Santorufo acknowledges that he has received and reviewed the Restrictive
Agreement and Amendment No. 1 in advance of entering into this Agreement and the
Restrictive Agreement and that the restrictions imposed on him and the
Conversion Shares under the Restrictive Agreement, as amended, will be in
addition to the restrictions and obligations imposed on Santorufo and the
Conversion Shares pursuant to this Agreement. The Company will use its best
efforts to cause each of the other shareholders of the Company and spouses to
execute and deliver Amendment No. 1.
3. Shareholder Rights. Upon the Conversion, Santorufo will be a shareholder
in the Company with respect to all of the Conversion Shares, whether or not
vested in accordance with Section 4. As such, Santorufo will be entitled to all
shareholder rights associated with the Conversion Shares, including without
limitation voting rights (to the extent any such shares have voting rights) and
rights to participate
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<PAGE>
in distributions made by the Company with respect to its outstanding shares,
subject, however, to the provisions of this Agreement and of the Restrictive
Agreement.
4. Vesting Schedule. The Conversion Shares will be subject to the following
vesting schedule, which will be applied separately to the nonvoting Common Stock
and the voting Common Stock within each specified vesting category; provided
that no vesting otherwise provided for under this schedule as of any December 31
shall occur unless Santorufo is a full-time employee of the Company on such
date:
Shares of Common Stock
By Vesting Category Status Vesting Schedule
- ----------------------- ------ ----------------
Category 1:
1,646,308 shares of Vested N/A
nonvoting Common Stock
and 164,812 shares of
voting Common Stock
Category 2:
510,932 shares of Unvested 33.33% on 12/31/97
nonvoting Common Stock 33.33% on 12/31/98
and 51,148 shares of 33.34% on 12/31/99
voting Common Stock
Category 3:
599,212 shares of Unvested 20.00% on 12/31/00
nonvoting Common Stock 20.00% on 12/31/01
and 59,988 shares of 20.00% on 12/31/02
voting Common Stock 20.00% on 12/31/03
20.00% on 12/31/04
Notwithstanding any provision of this Section 4 apparently to the contrary,
however, upon any Triggering Event, any Unvested Shares then held by Santorufo
that are not purchased by the Company pursuant to the "Repurchase Option," as
defined in Section 5, will vest automatically upon the expiration of the 180-day
period provided for in Section 5, without any action by the Company other than
its execution of this Agreement. The Conversion Shares that are unvested under
this Section 4 at any time the matter has relevance shall be referred to herein
as the "Unvested Shares."
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<PAGE>
5. Repurchase Option upon Triggering Event. In the event the full-time
employment of Santorufo is voluntarily or involuntarily terminated for any
reason (including death, disability, voluntary or involuntary retirement or
termination by the Company for any reason, whether with or without cause) (each,
a "Triggering Event"), the Company shall have the right, exercisable by it by
notice given to Santorufo or any successor within 180 days after the occurrence
of the Triggering Event, to purchase any or all of the Unvested Shares. The
purchase price for the Unvested Shares to be purchased under this Section 5
shall be an amount equal to the initial aggregate principal amount of the
"Notes," as defined in Section 9, allocable to the Unvested Shares being
purchased, which amount shall be determined by multiplying such aggregate
principal amount by a fraction, the numerator of which is the number of Unvested
Shares being purchased and the denominator of which is the total number of
Conversion Shares. The purchase price shall be paid by offset (in the manner
provided in Section 13) against, and in discharge of, the balance of principal
then owing on the Notes and, to the extent of any excess of the purchase price
over all principal then outstanding under the Notes, shall be paid by the
Company to Santorufo in cash. The right of the Company to purchase any or all of
the then Unvested Shares in accordance with this Section 5 will be referred to
as the "Repurchase Option." Any payment to Santorufo in purchase of Unvested
Shares pursuant to the Repurchase Option will be subject to the assignment to
the Company provided for in Section 13.
6. Application of IRC Section 83; Section 83(b) Election. Transfer of the
Conversion Shares to Santorufo pursuant to this Agreement will have federal
income tax consequences to Santorufo and the Company pursuant to Section 83 of
the Internal Revenue Code of 1986, as amended ("IRC"). The Company has been
valued by Corporate Valuations of Washington, Inc. at $156,934,882 on a
minority, privately-held basis to aid the Company in determining the required
withholding with respect to the Conversion Shares and to aid the Board of
Directors in relation to the possible granting of stock options (the "1996
Appraisal"). Santorufo will have taxable compensation income upon the transfer
to him of the vested Conversion Shares, and the Company will withhold with
respect to such income. Because the Unvested Shares are nontransferable under
the Restrictive Agreement and are subject to the Repurchase Option, they will be
substantially nonvested for purposes of IRC Section 83 when transferred to
Santorufo pursuant to this Agreement. Accordingly, Santorufo will not have
taxable income with respect to the Unvested Shares now (unless, as Santorufo has
indicated to the Company he intends to do, he so elects pursuant to IRC Section
83(b), with the consequences discussed below), but Santorufo will have ordinary
compensation income for federal income tax purposes when each group of Unvested
Shares vests pursuant to Section 4 (whether according to the vesting schedule or
upon the Company's nonexercise of its Repurchase Option within 180 days after a
Triggering Event) or upon lapse of the prohibition on transfer in the
Restrictive Agreement equal to the fair market value of the Conversion Shares
vesting on that day,
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<PAGE>
and the Company will withhold upon that amount at that time. Santorufo
understands that he may elect pursuant to IRC Section 83(b) to be taxed on the
Unvested Shares when they are transferred to him on December 31, 1996, rather
than when and if the Repurchase Option expires with respect to each group of
Unvested Shares. If desired, this election must be filed with the Internal
Revenue Service within 30 days after the Unvested Shares are transferred to
Santorufo pursuant to this Agreement. The primary effect of election pursuant to
IRC Section 83 is to measure and recognize the ordinary income element in the
Unvested Shares now, rather than later as and if they vest. If the election is
made, subsequent appreciation in the Unvested Shares will be capital gain,
rather than ordinary income, for federal income tax purposes. TO BE EFFECTIVE,
THE ELECTION MUST BE COMPLETED AND FILED WITHIN 30 DAYS AFTER TRANSFER OF THE
UNVESTED SHARES TO SANTORUFO PURSUANT TO THIS AGREEMENT. SANTORUFO UNDERSTANDS
AND ACKNOWLEDGES THAT IT IS HIS SOLE RESPONSIBILITY AND NOT THE RESPONSIBILITY
OF THE COMPANY TO FILE IN A TIMELY MANNER ANY IRC SECTION 83(b) ELECTION, EVEN
IF HE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS
BEHALF. SANTORUFO IS URGED TO CONSULT HIS PERSONAL TAX ADVISOR WITH RESPECT TO
THE EFFECT OF ELECTION PURSUANT TO IRC SECTION 83(b) AND THE ADVISABILITY OF HIS
SO ELECTING WITH RESPECT TO THE UNVESTED SHARES. Based on the understanding that
Santorufo intends to make an election pursuant to IRC Section 83(b) with respect
to the Conversion Shares and that the Conversion Shares will represent 10% of
the outstanding capital stock of the Company on December 31, 1996, the Company
will withhold with respect to $15,693,488 of income to Santorufo in respect of
the Conversion Shares, which amount is 10% of the value of the Company
determined under the 1996 Appraisal.
7. Bonus Compensation. On December 31, 1996, the Company will pay Santorufo
a cash bonus in the amount of $2,750,000 in consideration of the past services
rendered by Santorufo to the Company. On each date on which any interest is due
under any Note, including without limitation by reason of a prepayment by
Santorufo of any principal amount owing thereunder, the Company shall pay
Santorufo, in partial consideration of services rendered by Santorufo to the
Company during the calendar year then elapsed and/or for past services, a cash
bonus in an amount equal to the accrued interest due and owing on such Note on
such date, grossed up to take account of the federal, state or local income tax
that Santorufo will incur on such bonus (each, a "Cash Bonus"). Each Cash Bonus
will be subject to the assignment to the Company provided for in Section 13.
Santorufo acknowledges and agrees that unless the assignment to the Company
provided for under Section 13 continues in full force and effect, Santorufo
shall have no rights to any bonus under this Section 7 and the Company shall
have no obligation under this Agreement to pay or otherwise apply any such bonus
hereunder to or for the benefit of Santorufo.
5
<PAGE>
8. Loan to Santorufo by Company. On December 31, 1996, the Company will
loan Santorufo $3,818,316 upon his execution and delivery to the Company of a
Promissory Note in the form attached as Exhibit D (the "Initial Promissory
Note"), and on April 15, 1997, the Company will loan Santorufo $1,906,466 upon
his execution and delivery to the Company of a Promissory Note in the form
attached as Exhibit E (the "Second Promissory Note") .
9. Additional Bonus and Loan Proceeds. If by reason of any audit of
Santorufo or the Company by the Internal Revenue Service or any other taxing
authority, it is conclusively determined, through settlement, by final
nonappealable order or otherwise, that the value of the Conversion Shares for
compensation purposes exceeded the amount reported as income by Santorufo for
federal, state or local income tax purposes in accordance with this Agreement,
the Company, to assist Santorufo in paying any resulting additional federal,
state and local liability, including interest and penalties, in respect of such
compensation ("Additional Tax Liability"), shall pay to Santorufo, not more than
30 days after his request therefor, a cash bonus in the amount of 50% of the
Additional Tax Liability, which bonus shall be grossed up to take account of any
federal, state or local income tax that Santorufo will incur on such bonus and
shall not be a Cash Bonus for purposes of this Agreement. On the same date or as
soon thereafter as Santorufo shall have executed and delivered a Promissory Note
to the Company in the form of Exhibit F in a principal amount equal to 50% of
the Additional Tax Liability or such lesser amount as may be requested by
Santorufo (an "Additional Promissory Note"), the Company shall also make a loan
to Santorufo in such amount. The Initial Promissory Note, the Second Promissory
Note and any Additional Promissory Note will sometimes be referred to
collectively as the "Notes" or individually as a "Note." Any failure by
Santorufo to make any payment when due on any Note (unless by reason of any
failure by the Company to perform its obligations under this Agreement) shall
constitute a breach by Santorufo of this Agreement.
10. Registration Rights. If (but without any obligation to do so) the
Company proposes to register any of its Common Stock under the Securities Act of
1933, as amended (the "Act"), in connection with an initial firm underwritten
public offering of such securities solely for cash (an "IPO," which shall not
include a registration relating solely to the sale of securities to participants
in a Company stock plan or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Common Stock by holders), the
Company shall, at such time promptly give Santorufo written notice of such
registration and shall not later than the date immediately prior to the closing
of the IPO cause the Conversion Shares that are shares of nonvoting Common Stock
to be converted, on a one-for-one basis, into shares of voting Common Stock
(which voting Common Stock will be Conversion Shares for
6
<PAGE>
purposes of this Agreement). Upon the written request of Santorufo given within
20 days after any such notice by the Company, the Company shall, subject to this
Section 10, cause to be registered under the Act that number of Conversion
Shares equal to the lesser of:
(a) that number of Conversion Shares as would result in after-tax
proceeds to Santorufo sufficient to enable Santorufo to repay in full all
principal on the Notes, plus an additional $8,000,000 in after-tax proceeds,
which number of shares shall be determined on the basis of the midpoint of the
price range reflected in the preliminary prospectus used in the offering,
applying either the long or short-term capital gain rate, whichever is
applicable to the sale of Conversion Shares in the IPO;
(b) 25% of the Conversion Shares; or
(c) Such number of the Conversion Shares as Santorufo has requested to
be registered.
Notwithstanding the foregoing, the Company shall not be required to include any
of the Conversion Shares in any IPO unless Santorufo accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company; provided
that the Company shall use its best efforts to cause to be included not less
than the number of Conversion Shares Santorufo wishes to include under Section
10(a), (b) or (c) (whichever is applicable being the "Minimum Includable
Shares"). If the total amount of securities requested by Santorufo and other
holders to be included in such offering exceeds the amount of securities to be
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities that the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be, first, the Minimum Includable Shares, and, second,
to the extent of any excess, to be apportioned pro rata among the selling
holders according to the total amount of securities then owned by each selling
holder (disregarding in all respects the Minimum Includable Shares for purposes
of determining the proportion owned by Santorufo) or in such other proportions
as shall mutually be agreed to by such selling holders). The Company shall bear
and pay all expenses incurred in connection with registration pursuant to this
Section 10, including printing and accounting fees, but excluding underwriting
discounts and commissions relating to the sale of shares by holders including
Santorufo and the selling holders' pro rata share of the filing fees. In
connection with an IPO and upon request of the Company or the underwriters
managing such offering, Santorufo will not sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Conversion
Shares (other than those included in the registration, if any) without
7
<PAGE>
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested, provided that any other officers or
directors of the Company who also own stock of the Company also agree to such a
restriction. The proceeds to which Santorufo is entitled in connection with any
IPO will be subject to the assignment to the Company provided for in Section 13.
11. Distribution of AAA Account. The Company is currently a Subchapter S
Corporation. Prior to any IPO, the Company may distribute to its shareholders as
much of the Company's accumulated adjustments account, as defined in IRC Section
1368(e) ("AAA Account"), as is deemed practicable by its Board of Directors
after considering any input from Santorufo and the underwriters involved in the
IPO. Each shareholder of the Company will receive the shareholder's
proportionate share of any such distribution based on the shareholder's
percentage ownership of the outstanding stock of the Company on the date such
distribution is authorized by the Board of Directors or such later date as the
Board of Directors may specify in connection with such authorization, treating
the nonvoting Common Stock and the voting Common Stock as entitled to share
equally on a per share basis in such distribution. Any such distribution to
Santorufo will be subject to the assignment to the Company provided for in
Section 13.
12. Option to Sell Stock If IPO Does Not Occur. If an IPO does not close by
December 31, 1998, Santorufo may sell to the Company such number of the
Conversion Shares as will cause Santorufo to receive, on an after-tax basis,
funds sufficient to repay in full all principal on the Notes. Any such sale
shall be, first, of Conversion Shares that are vested and second, to the extent
Santorufo's option to sell is not exhausted thereby, of Unvested Shares. Upon
any notice of exercise of this option given by Santorufo at any time subsequent
to December 31, 1998 and prior to the closing of any IPO, the Company shall, as
requested by Santorufo in his notice of exercise in Santorufo's sole discretion
(or, if no such request is so made by Santorufo, as determined by the Company in
its sole discretion), either cause an appraisal of the Company to be undertaken
for purposes of determining the fair market value of the Conversion Shares, on a
minority, privately-held basis, or cause the factors taken into account in the
1996 Appraisal and any circumstances affecting the 1996 Appraisal, including any
change in value resulting from an audit or settlement with the Internal Revenue
Service or any other taxing authority, to be updated and applied using the same
methodologies, to determine the value of the Conversion Shares on the date of
the notice of exercise. The Company will pay the cost of any such appraisal or
of any such updating and application with respect to the 1996 Appraisal.
Santorufo acknowledges that any such purchase by the Company will be subject to
the restrictions governing the right of a corporation to purchase its own shares
under Oregon law and such other legal restrictions as are now or may hereafter
become effective and, with respect to any voting rights Santorufo may now or
hereafter hold, agrees to vote in
8
<PAGE>
favor of any necessary corporate action to allow the Company to make such
purchase. Any distribution to Santorufo in purchase of Conversion Shares under
this Section 12 will be subject to the assignment to the Company provided for in
Section 13.
13. Assignment of Cash Bonuses and Distributions on Conversion Shares.
Santorufo hereby assigns all of his right, title and interest to each of the
following, less all withholding for federal, state or local income taxes
required to be made by the Company with respect thereto (in each case, the "Net
Amount"), to the Company as security for and in payment of any and all payment
obligations of Santorufo to the Company evidenced by the Notes and directs that
the Company apply the Net Amount of each Cash Bonus (other than the initial Cash
Bonus) against accrued interest on the Notes and apply the Net Amount of any or
all of the following, as applicable, against the principal amount of, first, the
Initial Promissory Note, second, the Second Promissory Note, and, finally, any
Additional Promissory Note:
(a) Any distribution to Santorufo of any of the Company's AAA Account;
(b) Any other cash distribution to Santorufo on the Conversion Shares,
including, on an after-tax basis, any distribution in purchase of any Conversion
Shares under either Section 5 or 12; and
(c) The net proceeds to which Santorufo is entitled by reason of any
IPO, up to the amount of all principal then outstanding on the Notes.
This assignment shall be irrevocable and any attempt by Santorufo to revoke this
assignment shall be void and a breach of this Agreement. The death or incapacity
of Santorufo shall not revoke or otherwise affect this assignment.
14. Pledge and Escrow. As security for the faithful performance of the
terms of this Agreement and the availability for delivery of the Unvested Shares
upon any exercise of the Repurchase Option by the Company, Santorufo hereby
grants to the Company a security interest in, and pledges with and delivers to
the Company, the Conversion Shares to be held pursuant to the following:
(a) Santorufo hereby pledges the Conversion Shares to the Company in
accordance with this Section 14 and authorizes and directs the Company to
deliver to and deposit with the Secretary of the Company, or such other person
designated from time to time by the Company, as escrow agent (the "Escrow
Agent"), such stock assignments in blank, duly endorsed, with date and number of
shares blank, as may be requested by the Company, together with all certificate
or certificates evidencing the Conversion Shares, which shall be held by the
Escrow Agent as the agent of the Company in accordance with this Section 14.
Santorufo acknowledges that the
9
<PAGE>
Escrow Agent is appointed as the escrow agent as a material inducement to the
Company to make this Agreement and that the appointment is coupled with an
interest and is accordingly irrevocable.
(b) The Escrow Agent shall hold the certificates and stock powers in
escrow and take all actions to give effect to the provisions of this Agreement
relating to the escrow. The Escrow Agent shall not be liable to any party for
any actions or omissions unless the Escrow Agent is grossly negligent and such
negligence results in material financial damage to the complaining party. The
Escrow Agent may rely upon any letter, notice or other document bearing any
signature that the Escrow Agent believes to be genuine. Upon notification to the
Escrow Agent by Santorufo and the Company that the Notes have been paid in full
and of the number of the Conversion Shares that are then vested, the Escrow
Agent shall deliver to Santorufo certificates evidencing the vested Conversion
Shares in the Escrow Agent's possession. As the Unvested Shares thereafter vest
from time to time, the Escrow Agent shall deliver to Santorufo certificates
evidencing the vested Conversion Shares in the Escrow Agent's possession.
(c) In the event of any default by Santorufo in making any payment
owed to the Company under this Agreement, including any payment owed under the
Notes (unless by reason of any failure by the Company to perform its obligations
under this Agreement), the Company shall have the right to exercise all rights
of a secured party with respect to the Conversion Shares held by the Escrow
Agent.
(d) The pledge by Santorufo pursuant to this Section 14 shall be
irrevocable. Any attempt by Santorufo to revoke this pledge shall be void and a
breach of this Agreement. The death or incapacity of Santorufo shall not revoke
or otherwise affect the pledge by Santorufo.
15. Withholding. Notwithstanding any other provision of this Agreement
apparently to the contrary, the Company shall satisfy any and all withholding
obligations of the Company with respect to any amount that is compensation to
Santorufo out of any such amounts payable to or for the benefit of Santorufo in
cash or, if not then payable in cash or if subject to additional withholding for
any reason, either from amounts deposited by Santorufo with the Company on
demand or by withholding any such amount from other amounts payable by the
Company to Santorufo, including salary or compensation, subject to applicable
law. In furtherance and not in limitation of the foregoing, the Company shall be
entitled to withhold from each Cash Bonus and from any loan proceeds under the
Initial Promissory Note and the Second Promissory Note, and to pay over to the
relevant taxing authorities, all amounts the Company is required to withhold
either with respect to such Cash Bonus or by reason of the Conversion. The
Company shall also be entitled to withhold from any bonus payable to Santorufo
under Section 9 and to pay over to the relevant taxing
10
<PAGE>
authorities all amounts the Company is required to withhold with respect to any
such bonus.
16. Personal Tax Information. Santorufo shall from time to time at the
request of the Company provide to the accountants designated by the Company
access to his personal tax information sufficient to enable the accountants to
calculate and inform the Company of the effective federal, state and local
income tax rates at which any amount payable to or for the benefit of Santorufo
under this Agreement will be taxable to Santorufo.
17. Investment Intent; Capacity to Protect Interests. Santorufo represents
and warrants to the Company with respect to the Conversion Shares: Santorufo is
obtaining the Conversion Shares solely for his own account for investment and
not with a view to or for sale in connection with any distribution of the
Conversion Shares or any portion thereof and not with any present intention of
selling, offering to sell or otherwise disposing of or distributing the
Conversion Shares or any portion thereof in any transaction other than a
transaction registered under or exempt from registration under the Act.
Santorufo is obtaining the entire legal and beneficial interest in the
Conversion Shares, and such legal and beneficial interest will be held for
Santorufo's account only and neither in whole or in part for any other person.
Santorufo, as an officer and employee of the Company, has a pre-existing
business relationship with the Company, and, by reason of his business or
financial experience, can reasonably be assumed to have the capacity to evaluate
the merits and risks of an investment in the Company and to protect his own
interests in connection with this transaction. Santorufo recognizes that the
Conversion Shares are subject to purchase by the Company pursuant to the
Repurchase Option and that the Company will have full recourse against Santorufo
under the Notes and that for these and other reasons investment in and ownership
of the Conversion Shares involves a high degree of risk.
18. Legends. In addition to the legend provided for under the Restrictive
Agreement, all certificates evidencing any of the Conversion Shares shall
contain the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, ASSIGNED, PLEDGED OR
OTHERWISE TRANSFERRED FOR VALUE UNLESS THEY ARE REGISTERED UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR COLUMBIA SPORTSWEAR
COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT, OR
OTHERWISE SATISFIES ITSELF, THAT REGISTRATION IS NOT REQUIRED.
11
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT TO WHICH THE
REGISTERED HOLDER IS PARTY, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF COLUMBIA SPORTSWEAR COMPANY.
19. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Oregon (except as to choice of law matters) as applied
to contracts entered into and to be performed entirely within Oregon.
20. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute a single instrument.
21. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the matters set forth herein, and supersedes all
prior discussions or agreements of the parties and, as provided in Section 1,
the Participation Agreement.
22. Amendment; Waiver. This Agreement may be amended only by the written
consent of the parties. No waiver of any provision of this Agreement shall be
effective unless in writing and signed by the waiving party.
23. Assignment. The rights and benefits of this Agreement shall inure to
the benefit of and be enforceable by the Company and its successors and assigns.
The rights and obligations of Santorufo under this Agreement may not be assigned
without the prior written consent of the Company but this Agreement shall bind
any successor to Santorufo, including upon death or incapacity.
IN WITNESS WHEREOF, the parties hereto have executed this Deferred
Compensation Conversion Agreement as of the date first written above.
COLUMBIA SPORTSWEAR COMPANY
By
------------------------------------------
Timothy Boyle, President
--------------------------------------------
Don Santorufo
12
<PAGE>
EXHIBIT A
[Shareholder Signature Page]
SHAREHOLDER SIGNATURE PAGE
This Shareholder Signature Page to the Restrictive Agreement dated as
of May 1, 1993 (the "Restrictive Agreement") pertaining to Columbia Sportswear
Company, an Oregon corporation (the "Corporation"), is executed and delivered as
of the date set forth below.
For and in consideration of the mutual covenants, conditions,
stipulations and agreements set forth in the Restrictive Agreement, and other
valuable consideration, the receipt of which is hereby acknowledged, the
undersigned hereby consents and agrees to all of the terms, restrictions and
conditions of the Restrictive Agreement, and, by execution of this signature
page, and acceptance by the Corporation of this signature page by the
countersignature of the Corporation, is hereby designated a party to and a
"Shareholder" for purposes of, and agrees to be bound by, each and all terms of
the Restrictive Agreement.
Dated this 31st day of December, 1996.
SHAREHOLDER: --------------------------------------------
Don Santorufo
ACCEPTED: COLUMBIA SPORTSWEAR COMPANY
By
------------------------------------------
Title: President
<PAGE>
EXHIBIT B
[Amendment No. 1]
AMENDMENT NO. 1
TO
RESTRICTIVE AGREEMENT
COLUMBIA SPORTSWEAR COMPANY
The undersigned, the parties to that certain Restrictive Agreement dated as
of May 1, 1993, (the "Restrictive Agreement") pertaining to Columbia Sportswear
Company, an Oregon corporation (the "Corporation"), hereby agree as follows:
1. Section 19 of the Restrictive Agreement is amended to read in its
entirety as follows:
19. Alteration, Amendment or Termination. This Restrictive
Agreement may be altered, amended or terminated by a written
instrument executed by the Corporation and all the then Shareholders.
In all events, this Restrictive Agreement shall terminate and be of no
further force and effect upon the earliest to occur of (a) an initial
firm underwritten public offering of common stock of the Corporation
solely for cash (which shall not include a registration relating
solely to the sale of securities to participants in a Company stock
plan or a registration on any form which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of the common stock by
holders), (b) the bankruptcy or dissolution of the Corporation or (c)
the twenty-first (21st) anniversary of the death of the last to die of
the members of the group consisting of Gert, Tim and Sally and such of
their issue as are living on the date of this Restrictive Agreement.
Notwithstanding the preceding provisions of this Paragraph 19, no
alteration, amendment or termination of this Restrictive Agreement
shall have the effect of relieving any person of any obligation that
has accrued hereunder by reason of any event or circumstance occurring
or existing prior to the effective date of such termination, nor shall
any such alteration, amendment or termination have the
<PAGE>
effect of terminating or modifying any option, privilege or other
right that has arisen hereunder by reason of such pre-existing event
or circumstance.
2. The Restrictive Agreement is in all other respects ratified and
affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
to Restrictive Agreement effective December 31, 1996.
COLUMBIA SPORTSWEAR COMPANY,
an Oregon corporation
By
------------------------------------------
President
--------------------------------------------
Gertrude Boyle
--------------------------------------------
Timothy Boyle
--------------------------------------------
Sarah A. Bany
--------------------------------------------
Don Santorufo
The undersigned spouses hereby consent to the foregoing Amendment No. 1:
- -----------------------------------
Mary Boyle
- -----------------------------------
David Bany
- -----------------------------------
Carole Santorufo
2
<PAGE>
EXHIBIT C
[Spousal Agreement]
SPOUSAL AGREEMENT
SPOUSAL AGREEMENT ("this Agreement") dated as of December 31, 1996
between COLUMBIA SPORTSWEAR COMPANY, an Oregon corporation (the "Corporation"),
and CAROLE SANTORUFO (herein referred to as "CAROLE"), the spouse of Don
Santorufo (herein referred to as the "Shareholder"), a shareholder in the
Corporation.
RECITALS:
A. The Shareholder is the owner of record of shares of voting common stock
and shares of nonvoting common stock of the Corporation. These shares are
subject to that certain Restrictive Agreement among the Corporation, Gertrude
Boyle, Timothy Boyle and Sarah A. Bany (and such additional Shareholders as may
later become parties thereto) dated as of May 1, 1993 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Restrictive
Agreement").
B. CAROLE is the spouse of the Shareholder, having been married to the
Shareholder in the County of Multnomah, Oregon on the 1st day of February, 1986.
C. The parties to this Agreement believe that it is in their best interest
to enter into this Agreement in order to assure that the Corporation remains a
family-owned enterprise and to assure the continued ease of administration of
the Corporation's business. CAROLE specifically recognizes and acknowledges the
significant economic value and benefit to the Shareholder and the Shareholder's
family from the terms and provisions of the Restrictive Agreement governing the
purchase and sale of stock in the circumstances therein described, and that said
value and benefit is adequate consideration to support this Agreement.
Furthermore, CAROLE hereby acknowledges that she is entering into this Agreement
after conferring with an attorney of her own choosing.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, conditions, stipulations, and assignments hereafter contained, the
parties hereto do mutually covenant and agree as follows:
<PAGE>
AGREEMENT:
1. The above recitals are hereby incorporated into this Agreement by this
reference.
2. CAROLE hereby acknowledges that she has read the Restrictive Agreement
and has conferred with an attorney of her own choosing to determine its meaning
and legal effect. Specifically, CAROLE has read the provisions contained in
Paragraphs 2, 3, 4, 5, 6, 7, 9 and 10 of the Restrictive Agreement pertaining to
restrictions on the transfer of the Shareholder's shares of stock in the
Corporation and to the rights of the Corporation and other shareholders of the
Corporation to purchase any or all shares of stock which may come into her
possession or ownership, as a Transferee (within the meaning of the Restrictive
Agreement) or as a personal representative, heir or beneficiary of the
Shareholder's estate.
3. CAROLE hereby agrees to abide by the provisions of the Restrictive
Agreement and, without limiting the generality of the foregoing, she
specifically agrees that if any shares of the stock of the Corporation are
transferred to or for her benefit under an order or decree of divorce,
dissolution, annulment or separate maintenance, or if she is appointed guardian
or conservator of the estate of the Shareholder, or if she becomes the legal or
beneficial owner of any shares of common stock of the Corporation by reason of
the death of the Shareholder, or by reason of any other circumstance or event,
she shall comply with the provisions of the Restrictive Agreement and shall
offer to sell any and all of her interest in the said shares of stock of the
Corporation to the Corporation or the Remaining Shareholders (as such term is
defined in the Restrictive Agreement), as the case may be, on the terms and
under the conditions provided for by the Restrictive Agreement.
4. CAROLE hereby agrees and acknowledges that she shall have no rights or
recourse under the Restrictive Agreement, except those provided for in the
provisions of Paragraphs 9 and 10 of the Restrictive Agreement pertaining to the
purchase price and payment for shares. CAROLE hereby agrees to be bound by the
arbitration provisions contained in the Restrictive Agreement. CAROLE hereby
relinquishes and forever disclaims any other right, as a third party beneficiary
or otherwise, under the Restrictive Agreement.
5. This Agreement shall be subject to and governed by the laws of the State
of Oregon.
2
<PAGE>
6. If any party to this Agreement should institute legal proceedings to
enforce such party's rights under this Agreement or to rescind or disaffirm this
Agreement in whole or in part, the prevailing party shall recover, in addition
to all other costs and damages awarded, and the losing party shall pay, the
prevailing party's reasonable attorneys' fees and costs at trial, on appeal,
upon petition for review, or in any bankruptcy proceeding, whether or not such
fees or costs are prescribed by statute, as determined by the court at trial or
upon any appeal.
7. The parties acknowledge that an interest in the stock of the Corporation
is unique, and they accordingly agree that, in the event of a breach of this
Agreement, in addition to any other available remedies, any award or judgment
may include the remedy of specific performance.
IN WITNESS WHEREOF, the parties hereby have executed this Spousal
Agreement as of the day and year first above written.
COLUMBIA SPORTSWEAR COMPANY,
an Oregon corporation
By
------------------------------------------
President
--------------------------------------------
Carole Santorufo
<PAGE>
EXHIBIT D
[Initial Promissory Note]
PROMISSORY NOTE
Portland, Oregon
$3,818,316 December 31, 1996
FOR VALUE RECEIVED, Don Santorufo ("Maker"), promises to pay to the order
of Columbia Sportswear Company, an Oregon corporation, at 6600 N. Baltimore,
Portland, Oregon 97283, the sum of Three Million Eight Hundred Eighteen Thousand
Three Hundred Sixteen and no/100 Dollars ($3,818,316), with interest thereon,
compounded annually, at the applicable federal rate under the Internal Revenue
Code of 1986, as amended, on the date hereof. The principal amount of this Note
shall be payable in full, with all accrued and unpaid interest thereon, on
December 31, 2001 or upon any earlier acceleration of this Note (except as
provided in clause (c) in the case of partial acceleration thereunder). Interest
accrued on the outstanding balance shall be due and payable on the first
anniversary of the date of this Note and on each December 31 thereafter on which
any principal amount continues to be outstanding under this Note. Each payment
made on this Note shall be applied first against accrued interest and then
against principal.
This Note is delivered pursuant to that certain Deferred Compensation
Conversion Agreement dated the date hereof between Maker and the holder
identified above (the "Conversion Agreement"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Conversion
Agreement.
At the election of the holder of this Note, the entire outstanding
principal balance of this Note (or such lesser amount as is provided for under
clause (c) below in the circumstances therein described), together with all
accrued interest, shall become immediately due and payable on the happening of
any one or more of the following events, each of which shall be considered an
acceleration event:
(a) Maker fails to make any payment under this Note on the due date
thereof (unless by reason of any failure by the Company to perform its
obligations under this Agreement) or otherwise breaches the Conversion
Agreement, including in respect of the assignment provided for in Section
13 or the escrow and pledge provided for in Section 14;
(b) Maker becomes insolvent; any of Maker's assets are attached,
levied, or seized; Maker institutes or has instituted against him any
bankruptcy or similar proceeding; or any receiver or trustee is appointed
for any of Maker's property; or
1
<PAGE>
(c) Maker receives proceeds in an IPO (in which event the principal
balance of this Note up to but not exceeding the amount of the net proceeds
received by Maker after payment of all taxes owed on the proceeds received
by Maker, shall at the option of the holder of this Note be accelerated).
If this Note is placed in the hands of an attorney for collection, Maker
promises and agrees to pay the reasonable attorneys' fees and collection costs
of the holder of this Note, whether or not such fees or costs are prescribed by
statute, even though no suit or action is filed hereon; however, if a suit or
action is filed, the amount of such reasonable attorneys' fees and collection
costs shall be fixed by the court or courts in which such suit or action,
including any appeal therein or petition for review or bankruptcy proceeding, is
tried, heard or decided.
Maker reserves the right to prepay at any time or from time to time,
without premium or penalty, all or any portion of the balance owing on this
Note. Any such sum so prepaid, after application of any payment against accrued
interest, shall be applied to the principal then owing on this Note.
In the event any amount due under this Note (including all amounts due on
acceleration or maturity) is not paid as and when due, the entire unpaid
principal balance of this Note, together with all accrued interest, and all
other sums owing by Maker to the holder of this Note, shall bear interest from
the date of default at an annual rate equal to 18% per annum or the highest rate
allowed by law, whichever is lower ("Default Rate"). Such Default Rate shall
continue for so long as any amounts then due remain unpaid and any other default
remains uncured. The holder of this Note may levy and collect interest at the
Default Rate in addition to all other remedies allowed under this Note or any
other instrument. Collection of interest at the Default Rate shall not waive the
breach caused by the late payment or other default or acceleration.
No delay or omission on the part of the holder of this Note in the exercise
of any right or remedy, whether before or after an event of default or
acceleration, shall impair any such right or remedy or operate as a waiver of
such right or remedy or of any default or acceleration under this Note.
This Note shall be governed by and construed in accordance with the laws of
the State of Oregon.
--------------------------------------------
Don Santorufo
2
<PAGE>
EXHIBIT E
[Second Promissory Note]
PROMISSORY NOTE
Portland, Oregon
$1,906,466 April 15, 1997
FOR VALUE RECEIVED, Don Santorufo ("Maker"), promises to pay to the order
of Columbia Sportswear Company, an Oregon corporation, at 6600 N. Baltimore,
Portland, Oregon 97283, the sum of One Million Nine Hundred Six Thousand Four
Hundred Sixty Six and no/100 Dollars ($1,906,466), with interest thereon,
compounded annually, at the applicable federal rate under the Internal Revenue
Code of 1986, as amended, on the date hereof. The principal amount of this Note
shall be payable in full, with all accrued and unpaid interest thereon, on April
15, 2002 or upon any earlier acceleration of this Note (except as provided in
clause (c) in the case of partial acceleration thereunder). Interest accrued on
the outstanding balance shall be due and payable on the first anniversary of the
date of this Note and on each April 15 thereafter on which any principal amount
continues to be outstanding under this Note. Each payment made on this Note
shall be applied first against accrued interest and then against principal.
This Note is delivered pursuant to that certain Deferred Compensation
Conversion Agreement dated the date hereof between Maker and the holder
identified above (the "Conversion Agreement"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Conversion
Agreement.
At the election of the holder of this Note, the entire outstanding
principal balance of this Note (or such lesser amount as is provided for under
clause (c) below in the circumstances therein described), together with all
accrued interest, shall become immediately due and payable on the happening of
any one or more of the following events, each of which shall be considered an
acceleration event:
(a) Maker fails to make any payment under this Note on the due date
thereof (unless by reason of any failure by the Company to perform its
obligations under this Agreement) or otherwise breaches the Conversion
Agreement, including in respect of the assignment provided for in Section
13 or the escrow and pledge provided for in Section 14;
(b) Maker becomes insolvent; any of Maker's assets are attached,
levied, or seized; Maker institutes or has instituted against him any
bankruptcy or similar proceeding; or any receiver or trustee is appointed
for any of Maker's property; or
1
<PAGE>
(c) Maker receives proceeds in an IPO (in which event the principal
balance of this Note up to but not exceeding the amount of the net proceeds
received by Maker after payment of all taxes owed on the proceeds received
by Maker, shall at the option of the holder of this Note be accelerated).
If this Note is placed in the hands of an attorney for collection, Maker
promises and agrees to pay the reasonable attorneys' fees and collection costs
of the holder of this Note, whether or not such fees or costs are prescribed by
statute, even though no suit or action is filed hereon; however, if a suit or
action is filed, the amount of such reasonable attorneys' fees and collection
costs shall be fixed by the court or courts in which such suit or action,
including any appeal therein or petition for review or bankruptcy proceeding, is
tried, heard or decided.
Maker reserves the right to prepay at any time or from time to time,
without premium or penalty, all or any portion of the balance owing on this
Note. Any such sum so prepaid, after application of any payment against accrued
interest, shall be applied to the principal then owing on this Note.
In the event any amount due under this Note (including all amounts due on
acceleration or maturity) is not paid as and when due, the entire unpaid
principal balance of this Note, together with all accrued interest, and all
other sums owing by Maker to the holder of this Note, shall bear interest from
the date of default at an annual rate equal to 18% per annum or the highest rate
allowed by law, whichever is lower ("Default Rate"). Such Default Rate shall
continue for so long as any amounts then due remain unpaid and any other default
remains uncured. The holder of this Note may levy and collect interest at the
Default Rate in addition to all other remedies allowed under this Note or any
other instrument. Collection of interest at the Default Rate shall not waive the
breach caused by the late payment or other default or acceleration.
No delay or omission on the part of the holder of this Note in the exercise
of any right or remedy, whether before or after an event of default or
acceleration, shall impair any such right or remedy or operate as a waiver of
such right or remedy or of any default or acceleration under this Note.
This Note shall be governed by and construed in accordance with the laws of
the State of Oregon.
--------------------------------------------
Don Santorufo
2
<PAGE>
EXHIBIT F
[Additional Promissory Note]
PROMISSORY NOTE
Portland, Oregon
$
--------------------------- ----------------------, ----
FOR VALUE RECEIVED, Don Santorufo ("Maker"), promises to pay to the order
of Columbia Sportswear Company, an Oregon corporation, at 6600 N. Baltimore,
Portland, Oregon 97283, the sum of ____________________ Dollars
($_______________), with interest thereon, compounded annually, at the
applicable federal rate under the Internal Revenue Code of 1986, as amended, on
the date hereof. The principal amount of this Note shall be payable in full,
with all accrued and unpaid interest thereon, on the fifth anniversary of the
date of this Note or upon any earlier acceleration of this Note (except as
provided in clause (c) in the case of partial acceleration thereunder). Interest
accrued on the outstanding balance shall be due and payable commencing on the
first anniversary of the date of this Note and on each ___________ thereafter on
which any principal amount continues to be outstanding under this Note. Each
payment made on this Note shall be applied first against accrued interest and
then against principal.
This Note is delivered pursuant to that certain Deferred Compensation
Conversion Agreement dated the date hereof between Maker and the holder
identified above (the "Conversion Agreement"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Conversion
Agreement.
At the election of the holder of this Note, the entire outstanding
principal balance of this Note (or such lesser amount as is provided for under
clause (c) below in the circumstances therein described), together with all
accrued interest, shall become immediately due and payable on the happening of
any one or more of the following events, each of which shall be considered an
acceleration event:
(a) Maker fails to make any payment under this Note on the due date
thereof (unless by reason of any failure by the Company to perform its
obligations under this Agreement) or otherwise breaches the Conversion
Agreement, including in respect of the assignment provided for in Section
13 or the escrow and pledge provided for in Section 14;
(b) Maker becomes insolvent; any of Maker's assets are attached,
levied, or seized; Maker institutes or has instituted against him any
bankruptcy or similar proceeding; or any receiver or trustee is appointed
for any of Maker's property; or
<PAGE>
(c) Maker receives proceeds in an IPO (in which event the principal
balance of this Note up to but not exceeding the amount of the net proceeds
received by Maker after payment of all taxes owed on the proceeds received
by Maker, shall at the option of the holder of this Note be accelerated).
If this Note is placed in the hands of an attorney for collection, Maker
promises and agrees to pay the reasonable attorneys' fees and collection costs
of the holder of this Note, whether or not such fees or costs are prescribed by
statute, even though no suit or action is filed hereon; however, if a suit or
action is filed, the amount of such reasonable attorneys' fees and collection
costs shall be fixed by the court or courts in which such suit or action,
including any appeal therein or petition for review or bankruptcy proceeding, is
tried, heard or decided.
Maker reserves the right to prepay at any time or from time to time,
without premium or penalty, all or any portion of the balance owing on this
Note. Any such sum so prepaid, after application of any payment against accrued
interest, shall be applied to the principal then owing on this Note.
In the event any amount due under this Note (including all amounts due on
acceleration or maturity) is not paid as and when due, the entire unpaid
principal balance of this Note, together with all accrued interest, and all
other sums owing by Maker to the holder of this Note, shall bear interest from
the date of default at an annual rate equal to 18% per annum or the highest rate
allowed by law, whichever is lower ("Default Rate"). Such Default Rate shall
continue for so long as any amounts then due remain unpaid and any other default
remains uncured. The holder of this Note may levy and collect interest at the
Default Rate in addition to all other remedies allowed under this Note or any
other instrument. Collection of interest at the Default Rate shall not waive the
breach caused by the late payment or other default or acceleration.
No delay or omission on the part of the holder of this Note in the exercise
of any right or remedy, whether before or after an event of default or
acceleration, shall impair any such right or remedy or operate as a waiver of
such right or remedy or of any default or acceleration under this Note.
This Note shall be governed by and construed in accordance with the laws of
the State of Oregon.
--------------------------------------------
Don Santorufo
2
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 5th day of December, 1997, between COLUMBIA
SPORTSWEAR COMPANY, an Oregon corporation, with its principal office located at
6600 N. Baltimore, Portland, Oregon 97203, hereinafter called "Company," and
CARL K. DAVIS, residing at 16225 N.W. Gianola Court, Beaverton, Oregon 97006,
hereinafter called "Employee."
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of designing, manufacturing
and the international distribution of various items of clothing and apparel, and
desires to employ Employee under the terms of this Agreement; and
WHEREAS, Employee is licensed to practice law in the State of Oregon and
the District of Columbia, and desires to work as an employee of the Company; and
WHEREAS, the parties desire to terminate and cancel all present agreements
and understandings between them, and in lieu thereof, to enter into this
Agreement; and
WHEREAS, Employee is willing to enter into this Agreement with respect to
his employment and the services to be provided hereunder upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
1. MUTUAL RELEASES
Any and all agreements heretofore entered into between Company and Employee
are hereby terminated, and each of the parties hereby releases and discharges
the other from any and all obligations and liabilities heretofore or now
existing under or by reason of any such
Page 1 - EMPLOYMENT AGREEMENT
<PAGE>
agreements, it being the intention of Company and Employee that this Agreement,
effective October 27, 1997, shall superseded and be in lieu of any and all prior
agreements or understandings between them.
2. EMPLOYMENT
a) The Company hereby employs Employee, and Employee accepts such
employment as Vice President/General Counsel of Company, and to render
professional and other related services on behalf of the Company, subject to the
supervision and direction of the Company's officers and the Board of Directors,
and subject to the laws of the Company as given in the Articles of Incorporation
and the Bylaws, the rules of the Oregon State Bar and the district of Columbia
Bar, and the appropriate canons of professional ethics. In addition to the
above, it is the contemplation of the parties that Employee shall, during the
term of this Agreement, serve as a member of Company's Executive Committee, as
determined by its Board of Directors.
b) This Agreement, and Employee's employment by Company, shall continue in
full force and effect until the termination thereof as provided for in paragraph
6 below.
3. DUTIES
a) Employee agrees to devote all of Employee's time, attention and skill to
the performance of Employee's duties as the employee of the Company unless
otherwise authorized by the Board of Directors. Employee shall perform the
normal and customary functions of the Vice President/General Counsel. Employee
shall promote, to the extent permitted by law and professional ethics, the
business and interests of the Company by establishing maintaining and improving
rapport with other employees, representatives and customers of Company, as well
as outside counsel and government officials. To a reasonable extent, Employee
shall attend professional and other business conventions, seminars, and
professional meetings, and shall do
Page 2 - EMPLOYMENT AGREEMENT
<PAGE>
all things reasonably necessary and desirable to maintain and improve Employee's
professional skills. During the term of this Agreement, Employee shall not
render professional services on Employee's own behalf of any party other than
the Company unless authorized by the Board of Directors. Nothing contained
herein shall be construed to forbid Employee the right to those activities
listed in paragraph b) below.
b) All income accruing to Employee for professional services and activities
related thereto, such as lecturing, writing treatises or articles, or working as
a consultant for any government or other agency, shall, unless otherwise agreed
by the parties, belong to the Company, whether paid directly to the Company or
to Employee. Employee agrees that a true accounting to the Company may be
required of transactions relating to such services or activities during the term
of employment hereunder.
4. RELATIONSHIP BETWEEN THE PARTIES
a) The parties acknowledge that the Board of Directors of the Company, in
accordance with Oregon law regulating the organization and practice of
corporations, shall manage the business affairs of the Company.
b) The relationship between the Company and Employee is that of an employer
and employee. This Agreement confers no authority to the Employee, in Employee's
capacity as an employee, to enter into any contracts binding upon the Company or
to create any obligations on behalf of the Company except as authorized by the
Company.
c) The Employee is employed to actively carry out the business of the
Company. The Company shall have the exclusive power to determine not only what
specific duties shall be performed by the Employee, but also the power to
determine the means and manner by which those duties shall be performed. All
work performed by the Employee shall be subject to review
Page 3 - EMPLOYMENT AGREEMENT
<PAGE>
by the Company. The power to direct, control, and supervise in detail the
duties to be performed, the manner of performing such duties, and the time of
performing such duties shall be exercised by the Board of Directors of the
Company.
d) The Employee shall devote full time and best efforts to the performance
of employment under this Agreement. During the term of this Agreement the
Employee shall not at any time or place, either directly or indirectly, engage
in the practice of law to any extent whatsoever, except under and pursuant to
this Agreement.
e) Notwithstanding paragraph 4d), reasonable amounts of volunteer nonpaid
work may be done by the Employee in Employee's discretion, as long as such
commitments do not materially interfere with Employee's obligations hereunder.
Major departures from the foregoing standard must be approved by the Board of
Directors.
f) The Company shall provide and maintain such facilities, equipment,
supplies, and staff as is necessary for the Employee's performance of his duties
under this Agreement. In addition, Company shall assume and satisfy the cost of
all professional dues, licenses, fees, and the reasonable cost of membership in
any professional affiliations, groups and societies to which Employee belongs.
Employee shall further be furnished, at Company's expense, a cell phone and home
computer with internet access to be used by Employee in connection with his
duties. Should employee be required to travel by air in fulfilling his duties on
Company's behalf, all such flights shall be booked as business class and
Employee shall be provided with a membership, at Company's expense, in the Crown
Room or other comparable membership in an airline executive lounge.
Page 4 - EMPLOYMENT AGREEMENT
<PAGE>
5. COMPENSATION
a) Compensation shall be paid to Employee for all services rendered under
this Agreement. It is intended that the total of Employee's compensation,
including annual salary, bonuses, which may be paid at such times and in such
amounts as the Board of Directors of the Company may determine in its sole
discretion, and any available benefits or deferred income shall reflect
reasonable compensation to Employee for services rendered to the Company.
b) Employee shall be paid a base annual salary of $200,000, payable in
installments in accordance with the Company's regular payroll procedures
applicable to all management employees, which base salary shall be reviewed
annually, at which time appropriate increases, based upon Employee's
performance, shall be considered. All direct compensation shall be subject to
the customary withholding of federal and Oregon income tax and other employment
taxes as required with respect to compensation paid by a corporation to an
employee.
c) In addition to his base salary, Employee shall also be entitled to
participate in any discretionary bonus plan that the Company makes available to
all or any part of its employees. Such bonus shall be at the same rate as other
executive employees of the Company.
d) In addition to salary and discretionary bonuses, Employee shall have the
option to purchase all or any part of 46,268 shares of the Company's Nonvoting
Common Stock at a purchase price of $8.97 per share pursuant to the terms and
provisions of that certain Incentive Stock Option executed by the parties on
December 1, 1997, a copy of which is attached hereto as Exhibit 1, and by this
reference incorporated herein. Employee shall also be eligible to participate in
any other stock options offered at any time by the Company to other members of
its management.
Page 5 - EMPLOYMENT AGREEMENT
<PAGE>
e) Employee shall have the right to receive or participate in any
additional fringe benefits, both taxable and tax qualified, including but not
limited to insurance programs (disability, life, medical, dental and vision) and
pension or profit sharing plans or both, which are now and during the term of
this Agreement may become available to management employees of the Company and
under the terms of which Employee is eligible.
f) Unless Company furnishes an automobile for the use of Employee, Company
shall reimburse Employee at the rate set by the Board of Directors for the use
of personally-owned automobiles in the furtherance of Company's business and
practice, and Company shall also reimburse Employee for all other expenses
Employee incurs in the furtherance of Company's business.
6. TERMINATION OF AGREEMENT
This Agreement and the Employee's employment hereunder shall commence with
the date of this Agreement and may only be terminated upon the occurrence of any
one of the following events:
a) The death of Employee;
b) Mutual agreement of termination in writing between the Company and
Employee;
c) Sixty (60) days' written notice of termination given by Employee to the
Company:
d) Sixty (60) days' written notice given by Company to Employee if such
termination is without cause;
e) The suspension, revocation, or nonrenewal of Employee's license to
practice law;
f) This Agreement may be immediately terminated in the sole discretion of
the Board of Directos of Company upon the occurrence of any one of the
following events:
Page 6 - EMPLOYMENT AGREEMENT
<PAGE>
i) Employee willfully and continuously fails or refuses to comply with
the policies, standards and regulations of Company from time to time
established;
ii) Employee shall be guilty of fraud, dishonesty or other acts of
gross misconduct in the rendering of services on behalf of Company;
iii) Employee becomes permanently disabled and such disability
continues for more than six months. "Permanent disability" shall be defined as
Employee's inability, through physical or mental illness or other cause, to
perform the majority of his duties for the Company, unless such disability
occurred in the course of Employee's performance of his duties hereunder.
g) Employee shall have the discretion, at any time after he reaches the age
of fifty-five (55) years, to retire from full-time active service to the
Company, upon sixty (60) days' written notice to the Company. In that event,
Employee shall serve as "of counsel" to the Company and the Company shall keep
Employee on such medical, dental and vision insurance plans as are then made
available to the Company's management employees.
h) In the event of the termination of Employee's employment by the Company
without cause as provided for in sub-paragraph d) above, Company agrees to pay
Employee, in addition to any amount otherwise then due, the equivalent of one
year of Employee's base compensation as provided in paragraph 5 above, or as
hereafter amended, together with any bonus to which Employee would have
otherwise been entitled during the one-year period following said termination.
Should the Company wish to terminate Employee's employment without cause and
without the notice required by subparagraph d) above, Company shall have that
right if, in addition to the payment otherwise provided in this subparagraph,
Company makes a payment to Employee of an amount equal to two months of
Employee's then annual base compensation.
Page 7 - EMPLOYMENT AGREEMENT
<PAGE>
i) Notwithstanding the termination of this Agreement, the parties shall be
required to carry out any provisions hereof which contemplate performance by
them subsequent to such termination; and such termination shall not affect any
liability or other obligation which shall have accrued prior to such
termination, including, but not limited to, any liability for loss or damage on
account of default.
7. DEATH OF EMPLOYEE
In the event of Employee's death during the term of this Agreement, it
shall terminate immediately, and Employee's legal representatives shall be
entitled to receive the compensation due through the last day worked prior to
Employee's death.
8. LEAVES OF ABSENCE
Leaves of absence of not more than 80 hours each fiscal year with full
payment of salary shall be granted to Employee for attendance at professional
conventions, continuing legal education seminars and other professional or
business activities approved by the Company. All approved expenses incurred by
Employee in connection with his attendance at such conventions, seminars and
activities shall be paid by the Company.
9. PAID TIME OFF
Employee shall be entitled to 240 hours per year of paid time off ("PTO"),
during which time Employee's salary shall be paid in full, to be used by
Employee for illness, vacation or personal reasons, such as doctor's
appointments. PTO shall accumulate on a pro rata basis through the term of this
Agreement. Employee shall take PTO for vacation at such time or times as shall
be approved by the Company. Where the Company's business will not be seriously
inconvenienced, the Board of Directors shall endeavor to honor reasonable
requests for scheduling. Any days taken by Employee for attendance of those
activities permitted by
Page 8 - EMPLOYMENT AGREEMENT
<PAGE>
paragraph 8 above shall not be considered for the purposes of calculating
Employee's entitlement to PTO. PTO may be accumulated from year to year, not to
exceed 500 hours. Employee's annual entitlement to PTO shall also be reviewed
annually, at which time appropriate increases, based upon Employee's
performance, shall be considered.
10. SUCCESSION
This Agreement is personal to the parties hereto and neither party may
assign or delegate any of the rights or obligations hereunder without first
obtaining the written consent of the other party.
11. NOTICES
Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and mailed by either registered or certified mail,
return receipt requested, postage prepaid, to the Company at its principal place
of business and to the Employee at Employee's last known residence address.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
with respect to the employment of Employee by Company and no change in the terms
hereof shall be binding unless in writing and duly executed by the parties
hereto. Should any part of this Agreement be judicially determined to be void,
the remainder thereof shall remain valid and enforceable.
13. DISPUTE RESOLUTION
No civil action concerning any dispute arising under this Agreement shall
be instituted before any court and all such disputes shall be submitted to final
and binding arbitration under the auspices of the Arbitration Service of
Portland, Inc., or such other similar independent arbitration service which is
designed to provide a fair and impartial arbitration process as the
Page 9 - EMPLOYMENT AGREEMENT
<PAGE>
parties may agree to. Such arbitration shall be conducted in accordance with the
rules of such association before a single arbitrator. In addition to a decree of
specific performance, the arbitrator may, in his or her discretion, make an
award of money damages. All costs and expenses of any such action or arbitration
commenced in accordance herewith, including actual attorneys' fees incurred,
shall be allocated among the parties according to the arbitrator's discretion.
The arbitrator's award resulting from such arbitration may be confirmed and
entered as a final judgment in any court of competent jurisdiction and enforced
accordingly.
b) The waiver by either Company or Employee of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by either Company or Employee.
14. VALIDITY
This Agreement, having been executed and delivered in the State of Oregon,
its validity, interpretation, performance and enforcement will be governed by
the laws of that state.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers thereunto duly authorized; and Employee has signed this Agreement,
as of the day and year first above written.
"COMPANY" "EMPLOYEE"
COLUMBIA SPORTSWEAR COMPANY
By:TIMOTHY P. BOYLE CARL K. DAVIS
-------------------------------- ---------------------------------------
Carl K. Davis
Its:President
-------------------------------
Page 11 - EMPLOYMENT AGREEMENT
COLUMBIA SPORTSWEAR COMPANY
INDEMNITY AGREEMENT
This Indemnity Agreement is made as of __________ ___, 1997 by and between
Columbia Sportswear Company, an Oregon corporation (the "Company"), and
_________________ ("Indemnitee"), a director of the Company.
RECITALS
A. It is essential to the Company to retain and attract as directors the
most capable persons available.
B. Corporate litigation subjects directors to expensive litigation risks at
the same time that adequate coverage of directors' and officers' liability
insurance may be unavailable.
C. The Restated Articles of Incorporation of the Company (the "Articles")
require indemnification of the directors of the Company to the fullest extent
not prohibited by law. The Articles and the Oregon Business Corporation Act, as
amended (the "Act"), expressly provide that the indemnification provisions set
forth in the Act are not exclusive, and thereby contemplate that contracts may
be entered into between the Company and members of the Board of Directors with
respect to indemnification of directors.
D. Indemnitee does not regard the protection available under the Company's
Articles and insurance adequate in the present circumstances, and may not be
willing to serve as a director without adequate protection, and the Company
desires Indemnitee to serve in such capacity.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a
director of the Company for so long as Indemnitee is duly elected or appointed
or until such time as Indemnitee tenders a resignation in writing.
<PAGE>
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" includes any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Company or otherwise, whether of a civil, criminal, administrative or
investigative nature, and whether formal or informal, in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the Company, or
is or was serving at the Company's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, whether or not serving in that capacity at the time any liability or
expense is incurred for which indemnification or reimbursement can be provided
under this Agreement.
(b) The term "Expenses" includes, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals, amounts paid
in settlement by Indemnitee, attorneys' fees and disbursements and any expenses
of establishing a right to indemnification under this Agreement, but shall not
include the amount of judgments or fines against Indemnitee.
(c) References to "other enterprises" include employee benefit plans;
references to "fines" include any excise tax assessed with respect to any
employee benefit plan; references to "serving at the Company's request" include
any service as a director, officer, employee or agent of the Company which
imposes duties on, or involves services by, that director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner reasonably
believed to be in the interest of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
3. Indemnity in Third-Party Proceedings. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is
a party to or threatened to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Company to procure a judgment in its favor)
against all Expenses, judgments and fines actually and reasonably incurred by
Indemnitee in connection with the Proceeding, but only if Indemnitee acted in
good faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company and, in the case of a criminal
proceeding, in addition, had no reasonable cause to believe that Indemnitee's
conduct was unlawful. The termination of any such Proceeding by judgment, order
of court, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
the best interests of the Company, and with respect to any criminal proceeding,
that Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
2
<PAGE>
Pursuant to this Agreement, the Company specifically will, and hereby does,
indemnify, to the fullest extent permitted by law, Indemnitee against any and
all losses, claims, damages, liabilities and expenses, joint or several (or
actions or proceedings, whether commenced or threatened, in respect thereof), to
which Indemnitee may become subject, as a result of serving as a director of the
Company, under the Securities Act of 1933, as amended, or any other statute or
common law, including any amount paid in settlement of any litigation, commenced
or threatened, and to reimburse Indemnitee for any legal or other expenses
incurred by Indemnitee in connection with investigating any claims and defending
any actions, insofar as any such losses, claims, damages, liabilities, expenses
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact regarding the Company, or the omission or alleged
omission to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4. Indemnity in Proceedings By or In the Right of the Company. The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 4
if Indemnitee is a party to or threatened to be made a party to any Proceeding
by or in the right of the Company to procure a judgment in its favor against all
Expenses actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of the Proceeding, but only if Indemnitee acted in good
faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification for
Expenses shall be made under this Section 4 in respect of any claim, issue or
matter as to which Indemnitee shall have been finally adjudged by a court to be
liable for negligence or misconduct in the performance of Indemnitee's duty to
the Company, unless and only to the extent that any court in which the
Proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred in connection therewith.
6. Advances of Expenses. The Expenses incurred by Indemnitee pursuant to
Sections 3, 4 and 8 in any Proceeding shall be paid by the Company in advance if
Indemnitee (i) in writing shall undertake to repay such amount to the extent it
is ultimately determined that Indemnitee did not meet the standard of conduct
required for indemnification and (ii) shall furnish the Company a written
affirmation of the Indemnitee's good faith belief that Indemnitee is entitled to
be indemnified by the Company under this Agreement. Such expenses shall be paid
no later than 45 days after receipt of Indemnitee's written request, unless a
determination is made within that 45-day
3
<PAGE>
period by (a) the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such proceeding, or (b) independent legal
counsel in a written opinion (which counsel shall be appointed if a quorum is
not obtainable), that the Indemnitee has not met the relevant standards for
indemnification set forth in Section 3, 4 or 8 or an exclusion set forth in
Section 9 is applicable.
7. Board Authorization of Indemnification. Except with respect to Expenses
advanced pursuant to Section 6, indemnification pursuant to this Agreement shall
be made only upon a determination by the Board of Directors that indemnification
is permissible in the circumstances because the Indemnitee has met the standards
of conduct described herein or otherwise required by the Act.
8. Additional Indemnification.
(a) Notwithstanding any limitation in Section 3 or 4, the Company
shall indemnify Indemnitee in accordance with the provisions of this Section
8(a) to the fullest extent permitted by law if Indemnitee is a party to or
threatened to be made a party to any Proceeding (including a Proceeding by or in
the right of the Company to procure a judgment in its favor) involving a claim
against Indemnitee for breach of fiduciary duty by Indemnitee, against all
Expenses, judgments and fines actually and reasonably incurred by Indemnitee in
connection with the Proceeding, provided that no indemnity shall be made under
this Section 8(a) (1) on account of Indemnitee's conduct which (i) constitutes a
breach of Indemnitee's duty of loyalty to the Company or its shareholders, (ii)
is an act or omission not in good faith or which involves intentional misconduct
or a knowing violation of the law, or (iii) results in Indemnitee being adjudged
liable to the Company, or (2) with respect to an unlawful distribution under ORS
60.367.
(b) Notwithstanding any limitation in Section 3, 4 or 8(a), the
Company shall indemnify Indemnitee if Indemnitee is a party to or threatened to
be made a party to any Proceeding (including a Proceeding by or in the right of
the Company to procure a judgment in its favor) against all Expenses, judgments
and fines actually and reasonably incurred by Indemnitee in connection with the
Proceeding to the fullest extent permitted by the Act, including the
nonexclusivity provision of ORS 60.414(1) and any successor provision and
including any amendments to the Act adopted after the date hereof that may
increase the extent to which a corporation may indemnify its directors.
(c) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Articles, Bylaws, any other agreement, any vote of shareholders or directors,
the Act or otherwise, both as to action in Indemnitee's official capacity or as
to action in another capacity while holding that office. The indemnification
under this Agreement shall continue as to Indemnitee even though Indemnitee may
have ceased to be a director and shall inure to the benefit of Indemnitee's
heirs and personal representatives.
4
<PAGE>
9. Exclusions. Notwithstanding any provision in this Agreement, the Company
shall not be obligated to make any indemnification or advances of expenses in
connection with any claim made against Indemnitee:
(a) For which payment is required to be made to or on behalf of
Indemnitee under any insurance policy, except with respect to any excess beyond
the amount of required payment under such policy, unless payment under such
insurance policy is not made after reasonable effort by Indemnitee to obtain
payment. The Company shall be subrogated with respect to any other rights of
Indemnitee with respect to any payment made by the Company or on behalf of the
Company under this Agreement;
(b) For any transaction from which Indemnitee derived an improper
personal benefit; or
(c) For an accounting of profits made from the purchase and sale by
Indemnitee of securities of the Company within the meaning of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or similar provisions of any
state statutory law or common law.
10. Partial Indemnification. If Indemnitee is entitled under any provisions
of this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments and fines actually and reasonably incurred by Indemnitee in
the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of those Expenses, judgments or fines to which
Indemnitee is entitled.
11. Severability. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee as to Expenses, judgments and
fines with respect to any Proceeding to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated or by
any other applicable law.
12. Notices. Indemnitee shall, as a condition precedent to Indemnitee's
right to be indemnified under this Agreement, give the Company written notice as
soon as practicable of any claim made against Indemnitee for which indemnity
will or could be sought under this Agreement. Notice to the Company shall be
directed to Columbia Sportswear Company, 6600 N. Baltimore, Portland, Oregon
97283-0239, Attention: Chief Financial Officer (or such other address as the
Company shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by prepaid mail, properly
addressed. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
5
<PAGE>
13. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
15. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Oregon.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed and signed as of the date set forth above.
COLUMBIA SPORTSWEAR COMPANY
By:
-----------------------------------------
INDEMNITEE
--------------------------------------------
6
Exhibit 21.1
LIST OF SUBSIDIARIES
Jurisdiction of
Name Incorporation
- ---- ---------------
Columbia Sportswear Holdings Limited Ontario, Canada
Columbia Sportswear Canada Limited Ontario, Canada
Columbia Sportswear Japan, Inc. Japan
Columbia Sportswear (France) S.N.C. France
Columbia Sportswear GmbH Germany
Columbia Sportswear Korea Korea
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Columbia Sportswear
Company on Form S-1 of our report dated April 10, 1997 (December 15, 1997 as to
Notes 1 and 17) appearing in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
December 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,058
<SECURITIES> 0
<RECEIVABLES> 145,355
<ALLOWANCES> 3,640
<INVENTORY> 69,249
<CURRENT-ASSETS> 217,425
<PP&E> 32,337
<DEPRECIATION> 0
<TOTAL-ASSETS> 259,069
<CURRENT-LIABILITIES> 143,951
<BONDS> 2,862
0
0
<COMMON> 17,886
<OTHER-SE> 94,370
<TOTAL-LIABILITY-AND-EQUITY> 259,069
<SALES> 258,355
<TOTAL-REVENUES> 0
<CGS> 144,571
<TOTAL-COSTS> 77,757
<OTHER-EXPENSES> 2,497
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,530
<INCOME-TAX> 1,730
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,800
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
