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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 16, 1998
MORROW SNOWBOARDS, INC.
(Exact name of registrant as specified in its charter)
OREGON 0-27002 93-1011046
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
2600 PRINGLE ROAD, S.E.
SALEM, OR 97302
(Address of principal executive offices)
(503) 375-9300
Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS.
Morrow Snowboards, Inc. (the "Company" or "Morrow") has announced that the
Company has agreed to restructure its existing loan agreement with LaSalle
Business Credit, Inc. ("Lender"), including waiver of the previous default of
the net worth covenant, an increase in the amount of credit provided and
repayment of its credit facility by May 15, 1998. The Company is actively
pursuing replacement financing, all as more fully described below.
Morrow and the Lender have agreed to revise the terms of Morrow's existing
credit line through a First Amendment dated as of April 16, 1998 ("First
Amendment") to the Loan and Security Agreement dated as of November 10, 1997
("Original Loan Agreement"). All capitalized terms not otherwise defined herein
have the meanings ascribed to them in the Original Loan Agreement and related
documents under the credit line, as contained in the Form 8-K filed with the SEC
by the Company on November 26, 1997. The following is a summary and is
qualified in its entirety by the First Amendment, a copy of which is included as
an exhibit hereto. The principal changes to the credit line are:
. All borrowings under the line must be repaid by May 15, 1998.
. The maximum borrowing under the credit line is capped at $7.0 million.
. The Borrowing Base is reduced with maximum inventory borrowings of $4.0
million, new Inventory Advance Rates and a new formula as to Eligible
Inventory.
. The interest rate on the credit line is set at Prime plus 225 basis
points.
. The financial covenants (including Net Worth) have been eliminated and
all defaults under those covenants have been waived.
. A $25,000 restructuring fee is payable on loan repayment with the prior
prepayment penalties eliminated.
Morrow believes that the credit line as restructured will allow Morrow to
continue its operations without any material adverse impact through May 15,
1998.
Morrow has been in discussions with a number of lenders regarding a
replacement credit line. Morrow has received a financing proposal involving a
$10.0 million credit line, including a $2.0 million term loan, from an asset
based lender, subject to lender due diligence and lender credit committee
approval. Lender due diligence was commenced last week. If approved and
implemented, this proposed financing would provide adequate financing for the
Company's proposed operations based on the Company's present business plan. As
proposed, this new financing would close on or before May 15, 1998, and would be
available through April 30, 2002.
If the Company fails to repay its existing credit line on or before May 15,
1998, the Company will be in default under that credit line. In such event, the
Company may have to limit its operations and be unable to implement its current
business plan. Further, the proposed replacement financing is subject to the
new lender's satisfactory completion of due diligence and lender credit
committee approval. There is no assurance such replacement loan will be
finalized, or finalized on the terms presently proposed.
Statements in this report are made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward looking statements involve risks and uncertainties,
including without limitation obtaining and closing of replacement financing at
levels adequate to fund the Company's operations and implementation of the
Company's business plan for the current and successive years.
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ITEM 7. EXHIBITS.
Exhibit
No. Description
--- -----------
10.1 Loan and Security Agreement dated as of November 10, 1997 between
the Company, as Borrower, and LaSalle Business Credit, Inc. as
Lender (Note 1)
10.2 First Amendment dated as of April 16, 1998 to the Loan and
Security Agreement dated as of November 10, 1997 between the
Company, as Borrower, and LaSalle Business Credit, Inc.
_________
(1) Incorporated herein by reference from the Company's Current Report on
Form 8-K dated November 11,1997 (File No. 0-27002).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Salem, State of Oregon, on April 20, 1998.
MORROW SNOWBOARDS, INC.
By: /s/ DAVID E. CALAPP
David E. Calapp
Chief Executive Officer
(Principal Executive Officer)
By: /s/ P. BLAIR MULLIN
P. Blair Mullin
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT 10.2
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into as of
April 16, 1998 by and between LaSALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), and MORROW SNOWBOARDS, INC., an Oregon corporation
("Borrower"), is as follows:
1. RECITALS. LaSalle and Borrower are parties to a certain Loan and
Security Agreement dated as of November 10, 1998 ("Agreement"). Borrower has
requested, among other things, an increase in the amount of credit extended to
it. LaSalle is willing to make the requested revisions only subject to the
conditions set forth in this First Amendment.
2. DEFINITIONS.
(a) The definition of "INVENTORY ADVANCE RATE" is hereby deleted.
(b) The definition of "BORROWING BASE" is hereby amended in its
entirety to read as follows:
"BORROWING BASE" means, as of any date of determination, an
amount equal to the following amount:
(i) the A/R Advance Rate applied to an amount equal to (A)
the face amount of the then outstanding Eligible Accounts less (B)
sales, excise or similar taxes included in the amount thereof and less
(C) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed
with respect thereto;
(ii) plus the lesser of (A) $4,000,000 or (B) the total of
(i) 50% of the amount of Eligible Inventory consisting of finished
goods plus (ii) the lesser of (x) 10% of the amount of Eligible
Inventory consisting of finished goods plus 10% of the amount of
Eligible Inventory consisting of raw materials or (y) $600,000; with
Eligible Inventory valued at the lower cost (determined on a "first
in, first out" basis) or market value; and
(iii) less all Borrowing Base Reserves."
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(c) Item (ii) of the definition of "ELIGIBLE INVENTORY" is hereby
amended in its entirety to read as follows:
"(ii) it is located at Borrower's location known as 2600 Pringle
Road SE, Salem, Oregon; "
(d) The defined term "REVOLVER MAXIMUM AMOUNT" is hereby amended in
its entirety to read as follows:
"REVOLVER MAXIMUM AMOUNT" means $7,000,000."
3. REVISIONS TO PARAGRAPH 2. Paragraph 2 is hereby amended in its
entirety to read as follows:
"2. REVOLVING LOANS
Subject to the terms and conditions of this Agreement and the
Other Agreements, until May 15, 1998: LaSalle may, in its sole
discretion, from time to time make such revolving loans and advances
(the "REVOLVING LOANS") to Borrower as Borrower may from time to time
request in accordance with the terms hereof. The aggregate unpaid
principal amount of all Revolving Loans outstanding at any one time
made to Borrower shall not exceed the lesser of (i) the Borrowing Base
or (ii) the Revolver Maximum Amount, in each case minus the
outstanding Letter of Credit Obligations. All Revolving Loans shall
be repaid in full upon the earlier to occur of (A) May 15, 1998, or
(B) the acceleration of the Liabilities pursuant to paragraph 17 of
this Agreement. If at any time the total of the outstanding principal
balance of the Revolving Loans plus the Letter of Credit Obligations
exceeds the lesser of (i) the Borrowing Base or (ii) the Revolver
Maximum Amount; Borrower shall immediately, and without the necessity
of a demand by LaSalle, pay to LaSalle such amount as may be necessary
to eliminate such excess, and LaSalle shall apply such payment first
against the outstanding principal balance of the Revolving Loans.
Borrower hereby authorizes LaSalle to charge any of Borrower's
accounts to make any payments of principal, interest, fees or
reimbursable expenses required or provided for by this Agreement. All
Revolving Loans shall, in LaSalle's sole discretion, be evidenced by
one or more promissory notes in form and substance satisfactory to
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LaSalle. However, if such Revolving Loans are not so evidenced, such
Revolving Loans may be evidenced solely by entries upon the books and
records maintained by LaSalle."
4. REVISIONS TO PARAGRAPH 5(a). Paragraph 5(a) is hereby amended in its
entirety to read as follows:
"(a) RATE OF INTEREST
Interest accrued on all Loans shall be due on the earliest of:
(i) the first day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month; (ii)
the occurrence of an Event of Default in consequence of which LaSalle
elects to accelerate the maturity and payment of the Liabilities; or
(iii) termination of this Agreement pursuant to paragraph 12 hereof.
Interest shall accrue on the principal amount of the Revolving Loans
made to Borrower outstanding at the end of each day at a fluctuating
rate per annum equal to 225 basis points above the Prime Rate."
5. REVISIONS TO PARAGRAPH 12. Paragraph 12 is hereby amended in its
entirety to read as follows:
"12. TERMINATION
This Agreement shall be in effect from the date hereof until May
15, 1998 ("ORIGINAL TERM"); provided, however, that the security
interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the date upon which
payment and satisfaction in full of the Liabilities shall have
occurred. At such time as Borrower has repaid all of the Liabilities
and this Agreement has terminated, (i) Borrower shall deliver to
LaSalle a release, in form and substance reasonably satisfactory to
LaSalle, of all obligations and liabilities of LaSalle and its
officers, directors, employees, agents, parents, subsidiaries and
affiliates to Borrower, and if Borrower is obtaining new financing
from another lender, Borrower shall deliver such lender's
indemnification of LaSalle, in form and substance satisfactory to
LaSalle, for checks which LaSalle has credited to Borrower's account,
but which subsequently are dishonored for any reason and (ii) upon
Borrower's
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request, LaSalle shall deliver to Borrower a release in form and
substance reasonably satisfactory to Borrower."
6. REVISIONS TO PARAGRAPH 14(n). Paragraph 14(n) is hereby deleted in its
entirety, and the existing default by Borrower of its obligations under
Paragraph 14(n) is hereby waived.
7. LIBOR. All references to "LIBOR" are hereby deleted from the
Agreement, and Borrower shall have no right to elect a LIBOR Rate or to request
a LIBOR Rate Loan.
8. WEEKLY CASH BUDGETS. On each Monday, Borrower shall deliver to LaSalle
a budget for the eight week period beginning on such Monday, showing Borrower's
projected sources and uses of cash over such eight week period.
9. RESTRUCTURING FEE. Borrower shall pay LaSalle a restructuring fee of
$25,000, which fee is fully earned and nonrefundable, on the earlier of May 15,
1998 or the repayment of the Loans.
10. WAIVER OF CLAIMS. Borrower hereby releases and forever discharges
LaSalle and LaSalle's directors, officers, employees and agents, from all
actions, and causes of action, judgments, executions, suits, debts, claims,
demands, liabilities, counterclaims and offsets of every character, known or
unknown, direct and/or indirect, at law or in equity, of whatever kind or nature
which have arisen or accrued through the date of this First Amendment and in any
way directly or indirectly arising out of or in any way connected with the Loan
Documents through such date.
11. EFFECTIVE DATE. This First Amendment shall be effective as of the
date first written above.
12. RATIFICATION. Except as otherwise provided in this First Amendment,
all of the provisions of the Agreement are hereby ratified and confirmed and
shall remain in full force and effect.
13. ONE AGREEMENT. The Agreement, as modified by the provisions of this
First Amendment, shall be construed as one agreement.
14. OREGON STATUTORY NOTICE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
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SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY LASALLE TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the day and year first written above.
MORROW SNOWBOARDS, INC. LaSALLE BUSINESS CREDIT, INC.
By: /s/ David E. Calapp By: /s/ Robert C. Alexander
-------------------------- ------------------------------
Title: President/CEO Title: Vice President
ACKNOWLEDGMENT OF GUARANTORS
In order to induce LaSalle Business Credit, Inc. to execute to the
foregoing First Amendment to Loan and Security Agreement, the undersigned each
hereby agrees that (i) the term "Borrower's Liabilities" set forth in its
Continuing Unconditional Guaranty includes, without limitation, the
"Liabilities" under the Loan and Security Agreement, as amended by the foregoing
First Amendment, and (ii) except as expanded hereby, all of the provisions of
its Continuing Unconditional Guaranty are hereby ratified and confirmed, and
shall remain in full force and effect.
DATED as of April 16, 1998.
MORROW L.L.C.
By: /s/ David E. Calapp
----------------------------
Title: President/CEO
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MORROW SNOWBOARDS U.L.C.
By: /s/ David E. Calapp
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Title: President/CEO
MORROW INTERNATIONAL, INC.
By: /s/ David E. Calapp
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Title: President/CEO
WESTBEACH SNOWBOARD U.S.A. INC.
By: /s/ David E. Calapp
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Title: President/CEO
MORROW WESTBEACH CANADA ULC
By: /s/ David E. Calapp
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Title: President/CEO
MORROW SNOWBOARDS GESELLSCHAFT m.b.H.
By: /s/ P. Blair Mullin
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Title: Managing Director
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