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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-26738
BOYDS WHEELS, INC.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
CALIFORNIA 93-1000272
8380 Cerritos Ave.
Stanton, CA 90680
714-952-4038
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Title Outstanding as of May 13th
Common Stock No Par Value 3,848,618
Transitional Small Business Disclosure Format (check one);
Yes No X
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BOYDS WHEELS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $2,690,779 $5,792,764
Restricted cash 443,000 -
Accounts receivable, net 2,016,542 2,316,979
Other receivables 185,328 178,339
Income tax receivable 570,623 355,623
Inventories 9,947,667 7,710,149
Cost and estimated earnings in excess of billings 92,423 56,616
Prepaids and other current assets 539,242 605,186
Deferred income taxes 296,956 296,956
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Total current assets 16,782,560 17,312,612
Property and equipment, net 14,118,388 11,047,029
Covenants not to compete, net 137,987 145,487
Other assets 110,461 97,655
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Total assets $31,149,396 $28,602,783
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LIABILITITES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $3,919,058 $3,307,176
Accrued liabilities 760,572 663,467
Revolving credit agreements - 1,634,154
Current maturities of long-term debt 669,721 560,140
Billings in excess of cost and estimated earnings 230,886 122,286
Other current liabilities 50,663 139,163
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Total current liabilities 5,630,900 6,426,386
Long-term debt 6,708,514 2,397,695
Other long-term liabilities 12,340 53,738
Deferred income taxes 345,572 345,572
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Total liabilities 12,697,326 9,223,391
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Shareholders' Equity:
Preferred stock, no par value 5,000,000 shares
authorized, no shares outstanding
Common stock, no par value; authorized
25,000,000 shares, issued and outstanding
3,816,850 shares at March 31, 1997 and
3,780,106 at December 31, 1996 17,856,101 17,585,262
Contributed capital 1,036,516 1,036,516
Unearned compensation - (3,123)
Retained (deficit) earnings (440,547) 760,737
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Total shareholders' equity 18,452,070 19,379,392
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Total liabilities and shareholders' equity $31,149,396 $28,602,783
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The accompanying notes are an integral part of these consolidated
financial statements.
2
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BOYDS WHEELS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three
Months Ended
March 31,
-------------------------
1997 1996
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(Restated)
Net sales $3,576,093 $5,519,150
Cost of goods sold 3,869,892 4,067,776
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Gross (loss) profit (293,799) 1,451,374
Selling, general and administrative expenses 1,011,580 744,928
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(Loss) income from operations (1,305,379) 706,446
Interest and other expenses, net 110,906 10,799
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(Loss) income before provision for income taxes (1,416,285) 695,647
(Benefit) provision for income taxes (215,000) 236,032
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Net (loss) income ($1,201,285) $459,615
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Net (loss) income per share ($0.32) $0.17
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Weighted average common shares and common
equivalent shares outstanding 3,817,000 2,655,000
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The accompanying notes are an integral part of these consolidated
financial statements.
3
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BOYDS WHEELS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three
Months Ended
March 31
--------------------------
1997 1996
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Cash flows from operating activities: (Restated)
Net (loss) income $ (1,201,285) $ 459,615
Adjustments to reconcile net income to cash
used by operating activities:
Depreciation and amortization 412,568 189,016
Loss on on disposal of property and equipment - 8,160
Bad debt expense 70,150 20,000
Reserve for inventory obsolescence - 20,000
Compensation related to stock option vesting 3,123 -
Decrease (increase) in accounts receivable 230,287 (100,302)
Increase in income tax receivable (215,000) -
Increase in other receivable (6,989) -
Increase in inventories (2,237,51) (1,038,886)
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts (35,807) (164,045)
Decrease in prepaid and other current assets 65,944 3,300
Increase in other assets (12,806) -
Increase in accounts payable 611,882 222,662
Increase (decrease) in accrued liabilities 97,105 (504,199)
Increase in income taxes payable - 72,832
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 108,600 24,397
Decrease in other current liabilities (88,500) (20,098)
(Decrease) increase in other long term liabilities (41,397) 18,222
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Net cash used by operating activities (2,239,643) (789,326)
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Cash flows from investing activities:
Purchase of property and equipment (3,476,428) (442,049)
Proceeds from the sale of property and equipment - 2,400
Cash acquired in acquisition - 37,693
Payments on covenants not to compete - (24,585)
Decrease in due from affiliates - (62,206)
Increase in restricted cash (443,000) -
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Net cash used by investing activities (3,919,428) (488,747)
Cash flows from financing activities:
Borrowings on revolving lines of credit 956,104 550,000
Payments on revolving lines of credit (2,590,258) -
Proceeds from issuance of long-term debt 7,141,950 332,407
Principal repayments of long-term debt (2,721,550) (88,032)
Proceeds from exercise of common stock warrants 270,840 -
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Net cash provided by financing activities 3,057,086 794,375
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The accompanying notes are an integral part of these consolidated financial
statements.
4
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BOYDS WHEELS, INC, AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31
---------------------------
1997 1996
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(Restated)
Net decrease in cash and cash equivalents (3,101,985) (483,698)
Cash and cash equivalents at beginning of year 5,792,764 1,061,889
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Cash and cash equivalents at end of year $ 2,690,779 $ 578,191
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Cash paid during the year for:
Income taxes $ - $ 163,200
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Interest $ 262,798 $ 142,956
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Supplemental schedule of noncash investing
and financing activities:
Equipment leases capitalized $ 162,297 $ 40,084
Common stock issued in settlement of an
employment agreement - 50,000
Noncash reductions of due from shareholder - 14,542
Reversal of unearned compensation related to stock
options granted 12,500 -
5
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BOYDS WHEELS, INC, AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Basis of Presentation:
The accompanying consolidated financial statements include the accounts of
Boyds Wheels, Inc. (the "Company") and its wholly owned subsidiary, Hot
Rods by Boyd, Inc. ("HRBB"). The acquisition of HRBB in December 1996 was
accounted for as a pooling of interests business combination (see Note 4).
The interim financial data as of and for the three months ended March 31,
1997 and March 31, 1996 are unaudited and have been prepared in accordance
with the generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
The year-end balance sheet information was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. These financial statements should be read
in conjunction with the Company's audited financial statements.
2. Inventories:
Inventories consist of the following:
(Unaudited)
March 31, 1997 December 31, 1996
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Finished goods $2,472,455 $1,572,189
Work in process 5,212,128 3,869,080
Raw Materials 1,507,505 1,814,270
Construction-in-progress automobiles 680,579 380,831
Completed automobile 75,000 73,779
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$9,947,667 $7,710,149
3. Long Term Debt
In March 1997, the Company negotiated new bank credit facilities with a
bank to replace an existing revolving line of credit agreement, a term note
payable and a capital lease obligation. The new credit facilities allow
for borrowings up to $9,000,000 for Boyds Wheels, Inc. and $500,000 for Hot
Rods by Boyd, Inc. The notes mature in April 1999, and require interest
only payments until maturity. Total borrowings at March 31, 1997 under the
combined notes are $5,335,933. At March 31, 1997 the Company was not in
compliance with certain loan covenants, for which a waiver has been
obtained.
In January 1997 the Company entered into two loan agreements with a bank,
to finance the purchase of land and building for a total of $1,643,000
($1,200,000 and $443,000). The note for $1,200,000 matures January 1,
2002, has an interest rate of 9.125% and is collateralized by land and
building. Interest and principal payments are $123,117 annually with
payment of the remaining principal and interest of $1,130,986 on January 1,
2002.
6
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The note for $443,000 matures January 9, 1998 and has an interest rate of
6.980%. As a part of the loan agreement the Company is required to
maintain a cash balance of $443,000 in a money market account to
collateralize this loan (restricted cash). Interest and principal payments
are due upon maturity.
4. Pooling of Interests:
In 1996 the Company completed an acquisition of HRBB which was accounted
for as a pooling of interests, and accordingly the Company's interim
financial statements for the three months ended March 31, 1996 have been
restated to include HRBB for such period. Consolidated and separate
results of the Company and HRBB were as follows:
Net Sales:
Boyds Wheels, Inc., as previously reported $5,334,074
Hot Rods by Boyds, Inc. 200,385
Adjustments (15,309)
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Consolidated $5,519,150
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----------
Net income:
Boyds Wheels, Inc, as previously reported $360,008
Hot Rods by Boyds, Inc. 99,607
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Consolidated $459,615
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The adjustments relate to intercompany transactions between the two
companies.
5. Statements of Financial Accounting Standards not yet adopted
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
SFAS No. 128 requires companies to adopt its provisions for fiscal years
beginning after December 15, 1997 and requires restatement of all prior
period earnings per share (EPS) data presented. Earlier application is not
permitted. SFAS No. 128 specifies the computation, presentation and
disclosure requirements for EPS. The implementation of SFAS No. 128 is not
expected to have a material effect on the EPS data presented by the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
GENERAL
The Company designs, manufactures and markets high quality aluminum
wheels for the specialty automotive and motorcycle aftermarkets. The Company
also designs, manufactures and markets a premium line of car care products
and a line of sportswear under its own label. The Company sells its products
domestically through a national distribution network of tire and performance
retailers, warehouse distributors and mail order outlets and internationally
through foreign distribution channels. The Company's wholly owned subsidiary,
Hot Rods By Boyd, Inc. designs and manufactures custom vehicles sold directly
to private clientele.
Since the Company utilizes its own facility and equipment for the
manufacture of its products, gross margins are especially dependent upon
sales volumes as a result of substantial fixed manufacturing overhead.
Overhead costs were significantly increased by the Company's recent
expansion, in which it increased square footage by approximately 50%. At low
sales volumes it is unlikely, that positive gross margins from proprietary
products can be achieved. However, at higher sales volumes, the allocation of
fixed costs over more sales could result in increased gross margins.
Accordingly, the Company anticipates variances in gross margins from quarter-
to-quarter as a result of fluctuations in production, which coincide with
seasonality of the Company's business.
7
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Sales of and demand for the Company's wheel products during the first
quarter of 1997 did not meet management's expectations due to a variety of
factors including, competitive pressure, changes in consumer demand and
slower than expected sales in its newer markets. The Company has responded
by: 1) focusing its sales efforts on expanding its domestic and, to a lesser
degree, its international distribution channels; 2) introducing new product
lines to respond to new trends; and 3) streamlining and restructuring its
sales and customer service departments to more effectively target new
business and service its existing customer base.
Sales are expected to be subject to degrees of month-to-month and
quarter-to-quarter variability due to the limited market penetration in the
Company's new markets to date. The markets for the aluminum aftermarket
wheels are subject to rapidly changing consumer tastes and a high level of
competition. Demand for the Company's products is expected to be influenced
by marketing and advertising expenditures, product positioning through its
distributors and retailers, design trends and general economic conditions.
Because these factors can change rapidly, customer demand can also shift
quickly. The Company may not be able to respond to changes in consumer demand
because of the time required to change or introduce new products, production
limitations or limited financial resources.
Comparison of Three Months Ended March 31, 1997 and Three Months Ended March
31, 1996
NET SALES
Net sales for the three months ended March 31, 1997, were $3,576,093
compared to $5,519,150 for the same period in 1996, a decrease of $1,943,057
or 35%. The decrease in sales for the period was the result of a reduced
backlog from year end 1996, resulting from greater production capacity and
strong fourth quarter 1996 sales. Sales in the first of quarter 1997 were
driven by actual bookings during the quarter, which is traditionally the
weakest quarter in the industry. The seasonality impact was not felt in the
first quarter of 1996 as a result of the backlog accumulated by general
capacity constraints.
GROSS (LOSS) PROFIT
Gross (loss) profit for the three months ended March 31, 1997 was
($293,799) compared to $1,451,374 for the same period in 1996, a decrease of
$1,745,173 or 120%. The decrease in gross profit was primarily attributable
to a 35% decrease in sales combined with an increase in fixed costs and under
utilization of the facility. The fixed costs in the first quarter of 1997,
compared to the same period in 1996 included higher wages of $406,067 and
increased overhead costs of rent of $43,944 and depreciation of $205,572 as a
result of the Company's expansion.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
March 31, 1997 were $1,011,580 compared to $744,928 for the same period in
1996, an increase of $266,652 or 36%. This increase is primarily the result
of increased advertising and promotional expenses in the amount of $118,872,
together with expenses of $70,087 associated with the addition of sales,
marketing, investor relations and accounting personnel.
INTEREST AND OTHER EXPENSES (NET)
Interest and other expenses (net) for the three months ended March 31,
1997 were $110,906 compared to $10,799 for the same period in 1996, an
increase of $100,107 or 927%. Interest expense increased as a result of a
one-time charge on the payoff of a capital lease in the amount of $124,909
along with increased borrowings for working capital and long-term debt, which
partially were offset by interest income from available funds and other
income in the first quarter of 1997.
8
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INCOME TAX (BENEFIT) PROVISION
Income tax (benefit) for the three months ended March 31,1997 was
($215,000), compared to a provision of $236,032 for the same period in 1996, a
decrease of $451,032 or 191%.
NET (LOSS) INCOME
As a result of the above, net loss for the three months ended March 31,
1997 was ($1,201,285), compared to net income of $459,615 for the three
months ended March 31, 1996, a decrease of $1,660,900, or 361%.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997 the Company's inventory increased to
$9,947,667 from $7,710,149 at December 31, 1996, an increase of $2,237,518.
This increase was primarily due to the manufacture of new products and
styles, including new one-piece cast wheels and motorcycle components. The
increase in one-piece cast wheels and other new products and styles was made
in anticipation of the Company's planned expansion of its sales efforts in the
Eastern United States. In order to meet the needs of Harley-Davidson dealers,
the Company increased its motorcycle inventory levels to supply the dealers
directly, as they require shipment in less than one week. Slower than
expected sales overall also contributed to the increase in inventory levels.
Working capital was $11,151,660 at March 31, 1997 compared to $10,886,226
at December 31, 1996, or an increase of $265,434. The Company's cash position
at March 31, 1997 was $2,690,779 compared to $5,792,764 at December 31, 1996,
a decrease of $3,101,985. Cash was utilized with the Company's line of credit
to increase inventory, add equipment and leasehold improvements and finance
the Company's ongoing operations. The Company intends to utilize the current
funds, along with cash generated from operations to repay debt and for other
general corporate purposes. In addition, the Company has negotiated a new
line of credit, which is available for working capital needs and equipment
financing. At March 31, 1997, the $9,500,000 two year revolving line of
credit had available funds of $4,164,067. The borrowing on the line of credit
increased during the period as a result of equipment and leasehold
improvements of $1,826,426, the payoff of previous line of credit borrowings
of $2,590,258 and the payoff of a long-term capital lease of $888,011. Total
borrowings also increased by $1,643,000 as these funds were used for the
purchase of 2.5 acres of land with 26,000 square feet of buildings to
accommodate the Company's distribution center. To the extent that such
amounts are insufficient to finance the Company's working capital
requirements, it will be required to raise funds through additional equity or
debt financing.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in routine litigation incidental to the conduct
of its business. There are currently no material pending legal proceedings to
which the Company is a party or to which any of its property is subject.
ITEM 2 THROUGH ITEM 4.
Have been omitted because the related information is either inapplicable
or has been previously reported.
ITEM 5.
On January 21, 1997 the Company filed a registration statement on Form
S-3 with the Securities and Exchange Commission (registration no. 333-20099),
registering 1,019,565 shares to be sold from time to time by certain
Shareholders of the Company. The Company will receive no proceeds from the
sale of such shares.
9
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The Company purchased 2.5 acres of land with two buildings totaling
approximately 26,000 square feet on January 10, 1997. The purchase was
financed in the amount of $1,643,000. See Note 3 to the financial statements .
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. (a) Exhibits.
Number
10.37 Promissory Note dated January 9,1997 by and between Boyds
Wheels, Inc. and Eldorado Bank
10.38 Promissory Note dated January 9, 1997 by and between Boyds
Wheels, Inc. and Eldorado Bank
10.39 Revolving Note and Security Agreement dated March 25, 1997
by and between Boyds Wheels, Inc. and City National Bank
10.40 Revolving Note and Security Agreement dated March 25, 1997
by and between Hot Rods By Boyd and City National Bank
27.1 Financial Data Schedule
2. (b) None.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Boyds Wheels, Inc.
By: /s/ Boyd L. Coddington
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Boyd L. Coddington Chief Executive Officer (Principal Executive Officer)
Date: May 15, 1997
By: /s/ Rex A. Ours
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Rex A. Ours Chief Financial Officer and Corporate Secretary
(Principal Financial Officer)
Date: May 15, 1997
<PAGE>
EXHIBIT 10.37
EL DORADO BANK
PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$1,200,000 01-09-1997 01-01-2002 43943 170 98 405GG
</TABLE>
PROMISE TO PAY. BOYD'S WHEELS, INC. ("Borrower") promises to pay to ELDORADO
BANK ("Lender"), or order, in lawful money of the United States of America,
the principal amount of One Million Two Hundred Thousand & 00/100 Dollars
($1,200,000.00), together with interest at the rate of 9.125% per annum on
the unpaid principal balance from January 9, 1997, until paid in full.
PAYMENT. Borrower will pay this loan in 59 regular payments of $10,259.77
each and on irregular last payment estimated at $1,130,085.54. Borrower's
first payment is due February 1, 1997, and all subsequent payments are due on
the same day of each month after that. Borrower's final payment due January
1, 2002, will be for all principal and all accrued interest not yet aid.
Payments include principal and interest. Interest on this Note is computed
on a 365/360 simple interest basis; that is by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment(whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full repayment of this Note, Borrower understands that Lender is
entitled to a minimum interest charge of $100.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier that it is due. Early
payments will not, unless greed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under that payment
schedule. Rather, they will reduce the principal balance due any may result
in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $10.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower Has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower default under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (e) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding
is commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (f) Any creditor tries to take any Borrower's property on
or which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (g) Any
<PAGE>
guarantor dies or any of the other events described in this default section
occurs with respect to any guarantor of this Note. (h) A material adverse
change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the interest rate on this Note 5.000
percentage points. Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount .
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction),appeals, and any anticipate post-judgment collection services.
Borrower also will pay any court costs. In addition to all other sums
provide by law. This note has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuits, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Orange
County, the State of California. This Note shall be governed by an construed
in accordance with the laws of the State of California.
COLLATERAL. Borrower acknowledges this Note is secured by a Deed of Trust
date January 9, 1997, to a trustee in favor of Lender on real property
located in ORANGE County, State of California. That agreement contains the
following due on sale provision: Lender may, at its option, declare
immediately due and payable all sums secured by this Deed of Trust upon the
sale or transfer, without the Lender's prior written consent, of all or any
part of the Real Property, or any interest in the Real Property. A "sale or
transfer" means the conveyance of Real Property or any right, title or
interest therein; whether legal, beneficial or equitable; whether voluntary
or involuntary; whether by outright sale, deed, installment sale contract,
land contract, contract for deed, leasehold interest with a term greater than
three (3) years, lease-option contract, or by sale, assignment, or transfer
of any beneficial interest in or to any land trust holding title to the Real
Property, or by any other method of conveyance of Real Property interest. If
any Trustor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests or limited liability
company interests, as the case may be, of Trustor. However, this option
shall not be exercised by Lender if such exercise is prohibited by applicable
law.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who sighs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statue of limitations, presentment demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who sighs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
BOYD'S WHEELS, INC.
<PAGE>
By: ___________________________
BOYD CODDINGTON, CEO
BUSINESS LOAN AGREEMENT
THIS BUSINESS LOAN AGREEMENT between BOYD'S WHEELS, INC. ("Borrower") and
ELDORADO BANK ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as
the "Loan" and collectively as the "Loans" Borrower understands and agrees
that: (a) in granting, renewing, or extending any Loan, Lender is replying
upon Borrowers representations, warranties, and agreements, as set forth in
this Agreement; (b) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgment and
discretion; and (c) all such Loans shall be and shall remain subject to the
following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of January 9, 1997, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when use
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement may be
amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time to time.
Borrower. The word "Borrower" means BOYD'S WHEELS, INC. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
Debt. The word "Debt" means all Borrower's liabilities excluding
Subordinated Debt. ERISA. The word "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any Collateral
for the Indebtedness, including without limitation all Borrowers granting
such a Security Interest.
<PAGE>
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with any indebtedness. Indebtedness. The word "indebtedness" means and
includes without limitation all Loans, together with all other obligations,
debts and liabilities of Borrower to Lender, or any one or more of them, as
well as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be obligated
as a guarantor's surely, or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means ELDORADO BANK, its successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described herein
or described on any exhibit or schedule attached to this Agreement from time
to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory not or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being contested
in good faith; (c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (d) purchase money liens
or purchase money security interests upon or in any property acquired or held
by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled "indebtedness and Liens"; (e) liens
and security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens and
security interest which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
Related Documents/ The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreement, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form of a
lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
<PAGE>
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The word "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owned by Borrower to Lender in form and substance acceptable to
Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrower's current liabilities. CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Loan
Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interest; (d)evidence of
insurance as required below; and (e) any other documents required under this
Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorization and other documents and instruments as Lender or
its counsel, in their sole discretion, may require. Payment of Fees and
Expenses. Borrower shall have paid to Lender all fees, charges, and other
expenses which are then due and payable as specified in this Agreement of any
Related Document.
Representations and Warranties. The representations and warranties set forth
in the Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Even of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of default under this Agreement.
REPRESENTATIONS WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any
Loan, and at all times any indebtedness exists: Organization. Borrower is a
corporation which is duly organized, validly existing, and in good standing
under the laws of the state of Borrower's Incorporation and is validly
existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties
and to transact the businesses in which it is presently engaged or presently
proposes to engage. Borrower also is duly qualified as a foreign corporation
and is in good standing in all states in which the failure to so qualify
would have a material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under (a) any
provision of its articles of Incorporation or organization, or bylaws, or any
agreement or other instrument biding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
<PAGE>
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required thereunder to be given by Borrower when delivered will constitute,
legal, valid and biding obligations of Borrower enforceable against Borrower
in accordance with their respective terms. Properties. Except as
contemplated by this Agreement or as previously disclosed in Borrower's
financial statements or in writing to Lender and as accepted by Lender, and
except for property tax liens for taxes not presently due and payable,
Borrower owns and has good title to all of Borrower's properties free and
clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not use, or
filed a financing statement under, any other name for at least the last five
(5)years.
Hazardous Substances. The terms "hazardous waste" "hazardous substance,"
"disposal", "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA" "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq. the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, etc. seq.,
Chapter 6.5 through 7.77 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state of Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing. Borrower represents and
warrants that (a) During the period of Borrower's ownership of the
properties, there has been on use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous waste or
substance by any person on. under, about or from any of the properties. (b)
Borrower has no knowledge of, or reason to believe that there has been (I)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance or under, about or
from the properties by any prior owners or occupants of any properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable federal, state,
and local laws, regulations, and ordinances, including without limitation
those laws, regulations and ordinance described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such inspections
and tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspection or tests made
by Lender shall be at Borrower's expense and for Lender's purposes only and
shall not be construed to create any responsibility or liability on the part
of Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste and hazardous substances.
Borrower hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release
or threatened release occurring prior to Borrower's ownership or interest in
the properties, whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the indebtedness and
the termination or expiration of the Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claims, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no
<PAGE>
other event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing
Borrower has not entered into or granted any Security Agreement, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or Indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are biding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (I) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, (iii) no steps have been taken to terminate any such plan,
and (iv) there are no unfunded liabilities other than those previously
disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 8380 CERRITOS AVE. STANTON, CA 90680. Unless
Borrower has designated otherwise in writing this location is also the office
or offices where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnish by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information
is dated or certified; and none of such information is or will be incomplete
by omitting to state any material fact necessary to make such information not
misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is replying upon the above
representations and warranties in making the above referenced Loan to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE CONVENANTS. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
<PAGE>
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower' books and records at all
reasonable times.
Financial Statements. Furnish Lender with as soon as available, but in no
event later than ninety (90) days after the end of each fiscal year,
Borrowers balance sheet and income statement for the year ended, audited by a
certified public accountant satisfactory to Lender. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender
may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less than
$18,000,000.00.
Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net
Worth of less than 0.65 to 1.00.
Current Ratio. Maintain a ratio of Current Assets to Current Liabilities
in excess if 1.50 to 1.00.
Other Ratio. Maintain a ratio of Debt Coverage of 1.50 to 1.00. Except as
provide above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Borrower
or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans, Borrower
will provide Lender with such loss payable or other endorsement as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the same
of the insurer; (b) the risk insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of
which insurance has been obtained, and the manner of determining those
values; and (f) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection
with any other such agreements.
<PAGE>
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any Borrower's properties, Income, or profits.
Provide however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the legality of
the same shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with respect
to such contested assessment tax, charge, levy, lien, or claim in accordance
with generally accepted accounting practices. Borrower, upon demand of
Lender, will furnish to Lender evidence of payment of the assessments, taxes,
charges , levies, liens and claims and will authorize the appropriate
governmental official to deliver to Lender at any time a written statement of
any assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely manner,
and promptly notify Lender if Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement or under any of
the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation, compliance with the American with Disabilities Act and all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
Inspection. Permit employees of Lender at any reasonable time to inspect any
and all Collateral for the Loan or Loans and borrower's other properties and
to examine or audit Borrower's books, accounts, and records and to make
copies and memoranda of Borrower's books, accounts and records. If Borrower
now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access
to such records at all reasonable times and to provide Lender with copies of
any records it may request, all a t Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other officer
or person acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of the date of
the certificate and further certifying that, as of the date of this
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statues,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, or properly owned and /or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental
<PAGE>
agency or instrumentality concerning any intentional or unintentional action
or omission on Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorney may
reasonably request to evidence and secure the Loans and to perfect all
Security Interests.
Negative Covenants. Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:
Indebtedness and Liens (a). Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital
leases, (b) except as allowed as a Permitted Lien, sell transfer, mortgage,
assign, pledge, lease grant a security interest in , or encumber any of
Borrower's assets, or (c) sell with recourse any of Borrower's accounts,
except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, acquire or consolidate with any other entity,
change ownership, change its name, dissolve or transfer or sell Collateral
out of the ordinary course of business, (c) pay any dividends on Borrower's
stock (other than dividends payable in its stock), provided however that
notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result form the payment of dividends, if
Borrower is a "Subchapter S Corporation" ( as defined in the Internal Revenue
code of 1986, as amended), Borrower may pay cash dividends on its stock to
its shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments to
satisfy their liabilities under federal and state law which arise solely from
their status as Shareholders of a Subchapter S Corporation because of their
ownership shares of stock of Borrower or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital structure.
Loans, Acquisitions, and Guaranties (a) Loan, invest or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in
the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that
Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor
becomes insolvent, files a petition in bankruptcy or similar proceedings, or
is adjudged a bankrupt: (c) there occurs a material adverse change in the
Borrower's financial condition, in the financial condition of any Guarantor,
or in the value of any Collateral securing any Loan; or (d) any Guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender. Additional
Provisions.
1. Borrower to submit to Bank 10K report within 90 days after fiscal year end
2. Borrower to pay all out of pocket costs including appraisal, title, and
recording fees.
3. Borrower to submit to Bank quarterly 10Q reports within 45 days after
quarter's end.
4. Borrower to submit to Bank Federal Tax Returns within 15 days after filing
each year.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
<PAGE>
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on
the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that my materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.
DEFECTIVE COLLATERALIZATION. This agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceedings under
any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure proceedings,
whether by judicial proceedings, self-help, repossession or any other method,
by any creditor of Borrower, any creditor of any Grantor against any
collateral securing the Indebtedness, or by any governmental agency. This
includes garnishment, attachment, or levy on or of any of the Borrower's
deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any event of default shall occur except
where otherwise provided in this Agreement or the Related Documents, or any
other agreement immediately will terminate and at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all rights and
remedies provided in the Related Documents or available by law, in equity or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower or any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are part of
this Agreement.
<PAGE>
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party unless
sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Orange
County the State of California. This agreement shall be governed by and
construed in accordance with the laws of the State of California.
CAPTION HEADINGS. Caption headings in this agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale
or transfer, whether now or later, of one or more participation interests in
the Loans to one or more purchasers, whether related or unrelated to the
Lender. Lender may provide, without nay limitation whatsoever, to any one or
more purchasers, or potential purchasers, any information or knowledge Lender
may have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners of
such interests in the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and conditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
loans irrespective of the failure or insolvency of any holder of any interest
in the Loans. Borrower further agrees that the purchaser of such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses including without limitation attorneys' fees, incurred in connection
with the preparation, execution, enforcement, modification, and collection of
this Agreement or in connection with the Loans made pursuant to this
Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This includes,
subject to any limits applicable law, Lender's attorneys' fees and Lender's
legal expenses, whether or not there is a lawsuit, including attorneys' fees
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Borrower will also pay any court costs, in addition to
all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifically that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower, notice to
any Borrower will constitute notice to all Borrowers. For notice purposes,
Borrower will keep Lender informed at all times of Borrower's current
address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision for this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be
<PAGE>
striken and all other provisions of this Agreement in all other respects
shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate , including without
limitation and representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assignees. Borrower shall not,
however, have the right to assign its rights under this agreement or any
interest therein, without the prior consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery to
Lender of the Related Documents, regardless of any investigation made by
Lender on Lender's behalf.
TIME IS OF THE ESSENCE Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision of
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in all
cases such consent may be granted or withheld in the sole discretion of
Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
JANUARY 9, 1997.
BORROWER:
BOYD'S WHEELS, INC.
BY:_____________________________
BOYD CODDINGTON, CEO
LENDER:
ELDORADO BANK
BY: ______________________________
AUTHORIZED OFFICER
<PAGE>
EXHIBIT 10.38
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$443,000.00 01-09-1997 01-09-1998 33945 510 24 104121 405GG
- ---------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item
- ---------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: BOYDS WHEELS, INC. LENDER: ELDORADO BANK
8380 CERRITOS AVE. TUSTIN OFFICE
STANTON, CA 90680 17752 E. 17TH STREET
TUSTIN, CA 92680
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT: $443,000.00 INTEREST RATE: 6.980% DATE OF NOTE: JANUARY 9,1997
</TABLE>
PROMISE TO PAY BOYD'S WHEELS, INC. ("BORROWER") PROMISES TO PAY TO ELDORADO
BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA,
THE PRINCIPAL AMOUNT OF FOUR HUNDRED FORTY THREE THOUSANDS & 00/100 DOLLARS
($443,000.00), TOGETHER WITH INTEREST AT THE RATE OF 6.980% PER ANNUM ON THE
UNPAID PRINCIPAL BALANCE FROM JANUARY 9, 1997, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN
ONE PRINCIPAL PAYMENT OF $443,000.00 PLUS INTEREST ON JANUARY 9, 1998. THIS
PAYMENT DUE JANUARY 9, 1998, WILL BE FOR ALL PRINCIPAL AND ACCRUED INTEREST
NOT YET PAID. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ALL
ACCRUED UNPAID INTEREST DUE AS OF EACH PAYMENT DATE, BEGINNING FEBRUARY 9,
1997, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON THE SAME DAY OF EACH
MONTH AFTER THAT. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual Interest rate
over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
LATE CHARGE. IF A PAYMENT IS 10 DAYS OR MORE LATE, BORROWER WILL BE CHARGED
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $10.00 WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or Insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
Interest. This includes a garnishment of any of Borrower's account with
Lender. (f) Any guarantor dies or any of the of the events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the interest rate on this Note 5.000
percentage points. Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount .
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction),appeals, and any anticipate post-judgment collection services.
Borrower also will pay any court costs. In addition to all other sums
provide by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF ORANGE
COUNTY, THE STATE OF CALIFORNIA. THIS NOTE SHALL BE GOVERNED BY AN CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly
stated in writing no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$443,000.00 01-09-1997 01-09-1998 33945 510 24 104121 405GG
- ---------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item
- ---------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: BOYDS WHEELS, INC. LENDER: ELDORADO BANK
8380 CERRITOS AVE. TUSTIN OFFICE
STANTON, CA 90680 17752 E. 17TH STREET
TUSTIN, CA 92680
- -------------------------------------------------------------------------------
LOAN TYPE. This is a Fixed Rate (6.980%), Single Pay Loan to a Corporation
for $443,000.00 due on January 9, 1998.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for (please
initial):
[ ] _____ Personal, Family, or Household Purposes or Personal Investment.
[ ] _____ Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: TO ASSIST IN
FINANCING THE ACQUISITION OF REAL ESTATE.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $443,000.00 as follows:
<TABLE>
<CAPTION>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $443,000.00
$443,000.00 Wire to: First American Title Insurance Company _____________
Note Principal: $443,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO
LENDER. THIS AUTHORIZATION IS DATED JANUARY 9, 1997.
BORROWER:
BOYD'S WHEELS, INC.
BY:_____________________________________
BOYD CODDINGTON, CEO
<PAGE>
ASSIGNMENT OF DEPOSIT ACCOUNT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$443,000.00 01-09-1997 01-09-1998 33945 510 24 104121 405GG
- ---------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item
- ---------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: BOYDS WHEELS, INC. LENDER: ELDORADO BANK
8380 CERRITOS AVE. TUSTIN OFFICE
STANTON, CA 90680 17752 E. 17TH STREET
TUSTIN, CA 92680
- -------------------------------------------------------------------------------
THIS ASSIGNMENT OF DEPOSIT ACCOUNT IS ENTERED INTO BETWEEN BOYD'S WHEELS,
INC. (REFERRED TO BELOW AS "GRANTOR"); AND ELDORADO BANK (REFERRED TO BELOW
AS "LENDER").
ASSIGNMENT. For valuable consideration, Grantor assigns and grants to Lender
a security interest in the Collateral, including without limitation the
deposit accounts described below, to secure the indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral. In addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
ACCOUNT. The word "Account" means the deposit account described below in
the definition for "Collateral."
AGREEMENT. The word "Agreement" means this Assignment of Deposit Account,
as this Assignment of Deposit Account may be amended or modified from time
to time, together with all exhibits and schedules attached to the
Assignment of Deposit Account from time to time.
COLLATERAL. The word "Collateral" means the following described deposit
account:
ELDORADO BANK T.C.D. #341-720094 IN THE NAME OF BOYD'S WHEELS, INC. AT A
RATE OF 5.35% WITH MATURITY DATE OF JANUARY 9, 1998 AND ANY
SUBSEQUENT RENEWALS THEREAFTER ISSUED BY LENDER IN AN AMOUNT NOT LESS
THAN $443,000.00
together with (a) all interest, whether now accrued or hereafter
accruing; (b) all additional deposits hereafter made to the Account; (c) any
and all proceeds from the Account; and (d) all renewals, replacements and
substitutions for any of the foregoing.
In addition, the word "Collateral" includes all property of Grantor
(however owned if owned by more than one person). In the possession of
Lender (or in the possession of a
third party subject to the control of Lender), whether existing now or later
and whether tangible or intangible in character, including without
limitation each and all of the following:
(a) ALL PROPERTY TO WHICH LENDER ACQUIRES TITLE OR DOCUMENTS OF TITLE.
(b) ALL PROPERTY ASSIGNED TO LENDER.
(c) ALL PROMISSORY NOTES, BILLS OF EXCHANGE, STOCK CERTIFICATES, BONDS,
SAVINGS PASSBOOKS, TIME CERTIFICATES OF DEPOSIT, INSURANCE POLICIES
AND ALL OTHER INSTRUMENTS AND EVIDENCES OF AN OBLIGATION.
(D) ALL RECORDS RELATING TO ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION, WHETHER IN THE FORM OF WRITING, MICROFILM,
MICROFICHE, OR ELECTRONIC MEDIA.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of Events of Default set forth below in the section titled
"Even of Default."
GRANTOR. The word "Grantor" means BOYD'S WHEELS, Inc., its successors
and assigns
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
INDEBTEDNESS. The word "indebtedness" means the indebtedness evidenced
by the Note, including all principal and interest, together with all other
Indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means ELDORADO BANK, its successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated January 9,
1997, in the principal amount of $443,000.00 from BOYD'S WHEELS,
INC. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions
for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
With respect to the Collateral, Grantor represents and warrants to Lender
that:
<PAGE>
ASSIGNMENT OF DEPOSIT ACCOUNT
(CONTINUED)
- -------------------------------------------------------------------------------
OWNERSHIP. Grantor is the lawful owner of the Collateral free and clear of
all loans, liens, encumbrances, and claims except as disclosed to and
accepted by Lender in writing.
RIGHT TO GRANT SECURITY INTEREST. Grantor has the full right, power, and
authority to enter into this Agreement and to assign to the Collateral to
Lender.
NO FURTHER TRANSFER. Grantor will not sell, assign, encumber, or
otherwise dispose of any of Grantor's rights in the Collateral except as
provided in this Agreement.
NO DEFAULTS. There are no defaults relating to the Collateral, and there
are no offsets or counterclaims to the same. Grantor will strictly and
promptly do everything required of Grantor under the terms, conditions,
promises, and agreements contained in or relating to the Collateral.
PROCEEDS. Any and all replacement or renewal certificates, instruments,
or other benefits or proceeds related to the Collateral that are received by
Grantor shall be held by Grantor in trust for Lender and immediately shall be
delivered by Grantor to Lender to be held as part of the Collateral.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. While this
Agreement is in effect, Lender may retain the rights to possession of the
Collateral, together with any and all evidence of the Collateral, such as
certificates or passbooks. This Agreement will remain in effect until (a)
there no longer is any indebtedness owning to Lender; (b) all other
obligations secured by this Agreement have been fulfilled; and (c) Grantor,
in writing, has requested from Lender a release of this Agreement.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under the Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of indebtedness and, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment payments to
become due during either (I) the term of any applicable insurance policy or
(II) the remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Agreement also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon the occurrence
of an Event of Default.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable
care in the physical preservation and custody of any certificate or passbook
for the Collateral but shall have no other obligation to protect the
Collateral or its value. In particular, but without limitation, Lender shall
have no responsibility (a) for the collection or protection of any income on
the Collateral, (b) for the preservation of rights against issuers of the
Collateral or against third persons; (c) for ascertaining any maturities,
conversions, exchanges, offers, lenders, or similar matters relating to the
Collateral; nor (d) for incoming the Grantor about any of the above, whether
or not Lender has or is deemed to have knowledge of such matters.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the Indebtedness.
necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable
and shall remain in full force and effect until renounced by Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision
of the Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent
is required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS ASSIGNMENT OF
DEPOSIT ACCOUNT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JANUARY 9,
1997
GRANTOR:
BOYD'S WHEELS, INC.
BY:___________________________________________________
BOYD CODDINGTON, CEO
<PAGE>
EXHIBIT 10.39
CITY NATIONAL BANK
14241 E. Firestone Blvd.
La Mirada, CA 90638-5568
(310)483-5947 (714)724-4330
Fax(310)483-5950 Fax(714)724-4367
ROBERT W. JOHNSON ORANGE COUNTY
VICE PRESIDENT COMMERCIAL BANKING CENTER
March 25, 1997
Boyds Wheels, Inc.
8380 Cerritos Avenue
Stanton, CA 90680
Attention: Boyd Coddington
RE: REVOLVING NOTE DATED MARCH 25, 1997, IN THE ORIGINAL PRINCIPAL SUM OF
$9,000,000.00 ("NOTE") EXECUTED BY BOYDS WHEELS, INC. ("BORROWER") IN
FAVOR OF CITY NATIONAL BANK ("CNB")
Dear Mr. Coddington:
This is to confirm that CNB will extend the credit facility more
completely described in the enclosed Note, subject to the additional terms
and conditions set forth herein. Capitalized terms not defined in this
letter have the meanings given them in the Note. This letter is hereby
incorporated into the Note (this letter and the Note, collectively, the
"Note").
A. ADDITIONAL EVENTS OF DEFAULT.
The following shall constitute additional Events of Default under the Note:
1. Failure of Borrower to furnish CNB, within the times specified, the
following statements:
a. Within forty-five (45) days after the end of each quarterly accounting
period of each fiscal year, a consolidated financial statement for
Borrower and the Subsidiaries consisting of not less than a balance
sheet, and income statement, with notes thereto, prepared in
accordance with generally accepted accounting principles consistently
applied, which financial statement may be internally prepared;
b. Within ninety (90) days after the close of each fiscal year, a copy of
the annual consolidated audit report for such year for Borrower and
the Subsidiaries including therein a balance sheet, income statement,
reconciliation of net worth and statement of cash flows, with notes
thereto, the balance sheet, income statement and statement of cash
flows to be audited by a certified public accountant acceptable to
CNB, and certified by such accountants to have been prepared in
accordance with generally accepted accounting principles consistently
applied and accompanied by Borrower's certification as to whether any
event has occurred which constitutes an Event of Default, and if so,
stating the facts with respect thereto;
<PAGE>
BOYD CODDINGTON, COB
BOYDS WHEELS, INC.
MARCH 25, 1997
PAGE 2
c. Annual 10-K report of Borrower, as soon as available, but in no event
later than ninety (90) days after the end of each fiscal quarter;
d. Quarterly reports of agings of Borrower's accounts payable and
accounts receivable, as soon as available, but in no event later than
forty-five (45) days after the end of each fiscal quarter;
e. Quarterly I 10Q report of Borrower, as soon as available, but in no
event later than forty-five (45) days after the end of each fiscal
quarter;
f. The Federal Income Tax Return for Borrower and each guarantor of this
Note, within ten (10) days after its filing of each Return,
respectively; and
g. Such additional information, reports and/or statements as CNB may,
from time to time, reasonably request;
2. Failure of Borrower to maintain the following, measured on a consolidated
basis:
a. Tangible Net Worth plus Subordinated Debt of not less than
$18,500,000 at all times, to increase by 50% of net profits,
annually;
b. A ratio of Total Senior Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than .75 to 1 at all times;
C. A ratio of Quick Assets to Current Liabilities of not less than I
to I at an times;
d. Working Capital of not less than $10,000,000 at all times; and,
e. A ratio of Cash Flow from Operations to Debt Service of not less
than 2 to 1, measured quarterly on the prior four quarters
rolling average.
B. DEFINITIONS
For purposes of the Note, the following terms have the following meanings:
"CASH FLOW FROM OPERATIONS" shall be determined on a consolidated basis
for Borrower and the Subsidiaries and shall mean the sum of (a) net income
after taxes earned over the twelve month period ending on the date of
determination, plus (b) amortization of intangible assets, plus (c) interest
expense, plus (d) depreciation expensed during the twelve month period ending
on the date of determination.
"CURRENT ASSETS" shall be determined on a consolidated basis for Borrower
and the Subsidiaries in accordance with generally accepted accounting
principles consistently applied, excluding, however, from the determination
of Current Assets, loans to shareholders, management or employees, amounts
due from Subsidiaries or affiliates, deferred costs, and other intangible
assets.
"CURRENT LIABILITIES" shall be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with generally accepted
accounting principles consistently applied, and shall include without
limitation (a) all payments on Subordinated Debt required to be made within
one (1) year after the date on which the determination is made; and (b) all
indebtedness payable to stockholders, affiliates, Subsidiaries or officers
regardless of maturity, unless such indebtedness shall have been subordinated
to CNB, on terms satisfactory to CNB.
<PAGE>
BOYD CODDINGTON, COB
BOYDS WHEELS, INC.
MARCH 25, 1997
PAGE 3
"DEBT SERVICE" shall mean (a) the aggregate amount of Current Maturity of
Long Term Debt plus (b) all interest incurred on borrowed money during the
twelve month period ending on the date of determination. "Current Maturity
of Long Term Debt" shall mean that portion of Borrower's consolidated long
term liabilities, determined in accordance with generally accepted accounting
principles consistently applied, which shall, by the terms thereof, become
due and payable within one (1) year following the date of the balance sheet
upon which such calculations are based.
"QUICK ASSETS" shall mean the sum of cash, plus cash equivalents, plus
accounts receivable, plus securities classified as short-term marketable
securities according to generally accepted accounting principles consistently
applied, as such items appear on Borrowees consolidated balance sheet,
determined in accordance with generally accepted accounting principles
consistently applied.
"SUBSIDIARY" shall mean any corporation, the majority of whose voting
shares are at any time owned, directly or indirectly by Borrower and/or by
one or more Subsidiaries.
"TANGIBLE NET WORTH" shall mean the total of all assets appearing on a
balance sheet prepared in accordance with generally accepted accounting
principles consistently applied for Borrower and the Subsidiaries on a
consolidated basis, minus (a) all intangible assets, including, without
limitation, unamortized debt discount, affiliate, employee and officer
receivables or advances, goodwill, research and development costs, patents,
trademarks, the excess of purchase price over underlying values of acquired
companies, any covenants not to compete, deferred charges, copyrights,
franchises and appraisal surplus; minus (b) all obligations which are
required by generally accepted accounting principles consistently applied to
be reflected as a liability on the consolidated balance sheet of Borrower and
the Subsidiaries; minus, (c) the amount, if any, at which shares of stock of
a non-wholly owned Subsidiary appear on the asset side of Borrowees
consolidated balance sheet, as determined in accordance with generally
accepted accounting principles consistently applied; minus (d) minority
interests; and minus (e) deferred income and reserves not otherwise reflected
as a liability on the consolidated balance sheet of Borrower and the
Subsidiaries.
"Total Senior Liabilities" shall mean, as of any date of determination,
the amount of all obligations that should be reflected as a liability on a
consolidated balance sheet of Borrower and the Subsidiaries prepared in
accordance with generally accepted accounting principles consistently
applied, less Subordinated Debt.
"Working Capital" shall mean Current Assets minus Current Liabilities."
C. ADDITIONAL TERMS AND CONDITIONS.
The following additional terms and conditions shall also apply to the Note:
1. FEES. Borrower shall pay to CNB a fee equal to 0.125% of the unused
principal amount of the Note, payable quarterly, in arrears.
2. TERM LOAN. Upon the Termination Date of the Note, and provided Borrower is
not in default under the terms of the Note, Borrower may elect to fully
amortize up to $4,000,000 in outstandings under the Note at sixty (60)
equal monthly principal and interest payments. The interest rate is to be
established on the Termination Date and will be set at the applicable U.S.
Treasury rate plus two percent (2.0%).
3. ENVIRONMENTAL INDEMNIFICATION. Due to the environmentally sensitive
nature of the industry in which Borrower is principally engaged and upon
which CNB will rely as its primary source of repayment, and in
consideration of CNB extending credit to Borrower, Borrower has agreed to
indemnify CNB against any claims that may arise as a result of Borrowees
business activities that are environmental in nature and for which CNB may
be named as a liable party.
<PAGE>
BOYD CODDINGTON, COB
BOYDS WHEELS, INC.
MARCH 25, 1997
PAGE 4
Borrower agrees that it shall indemnify and hold harmless CNB, its
parent company, subsidiaries and all of their respective directors,
officers, employees, agents, successors, attorneys, and assigns from and
against any loss, damage, cost, expense, or liability directly of
indirectly arising out of or attributable to the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal, or presence of a hazardous substance on, under, or about
Borrowees property or operations or property leased to Borrower, including
but not limited to attorneys' fees (including the reasonable estimate of
the allocated cost of in-house counsel and staff). For these purposes, the
term "hazardous substances" means any substance which is or becomes
designated as "hazardous" or "toxic" under any Federal, state, or local
law. This indemnity shall survive repayment of Borrowees obligations to
CNB.
Except for documents and instruments specifically referenced herein or
in the Note, this letter and the Note constitute the entire agreement of
the parties hereto and supersedes any prior or contemporaneous oral or
written agreements, understandings, representations, warranties and
negotiations, if any, which are merged into this letter and the Note. If
you agree to accept the terms of this letter and the Note, please sign the
enclosed acknowledgment copy of this letter, as well as the enclosed Note,
and return them to me on or before April 1, 1997.
Sincerely,
CITY NATIONAL BANK, a national
banking association
By: _______________________________________
John F. Marder, Vice President and Team Leader
By: _______________________________________
Robert W. Johnson, Vice President
Accepted and Agreed this _____day of _________1997
BOYDS WHEELS, INC.
By: ___________________________________
Title: Boyd Coddington, Chairman of Board
By: ___________________________________
Title: Rex Ours, Secretary
<PAGE>
REVOLVING NOTE
(LIBOR and/or Prime)
$9,000,000.00 La Mirada, California
MARCH 25, 1997
On April 1, 1999 ("Termination Date"), BOYDS WHEELS, INC., A CALIFORNIA
CORPORATION ("Borrower"), promises to pay to the order of CITY NATIONAL BANK,
a national banking association ("CNB"), at its office in this city, in United
States Dollars and in immediately available funds, the principal sum of NINE
MILLION AND NO/100 DOLLARS ($9,000,000.00) ('Revolving Credit Commitment") or
so much thereof as may be advanced and then outstanding, plus interest on the
unpaid balance, until fully repaid, at a rate computed on the basis of a
360-day year, actual days elapsed, at the rates, times and in accordance with
the terms set forth below.
As provided herein, the principal of this Note may be borrowed, repaid
and reborrowed from time to time prior to the Termination Date, provided at
the time of any borrowing no Event of Default (as hereinafter defined)
exists, and provided further that the total borrowings outstanding at any one
time shall not exceed the Revolving Credit Commitment. Each borrowing and
repayment shall be noted in the books and records of CNB. The excess of
borrowings over repayments shall evidence the principal balance due hereon
from time to time and at any time. Borrowings hereunder shall be
conclusively presumed to have been made to or for the benefit of Borrower
when made as noted in such books and records.
For purposes of this Note, the following definitions shall apply:
"BUSINESS DAY" means a day that CNB's Head Office is open and conducts a
substantial portion of its business.
"EUROCURRENCY RESERVE REQUIREMENT" means the aggregate (without
duplication) of the rates (expressed as a decimal) of reserves (including,
without limitation, any basic, marginal, supplemental, or emergency reserves)
that are required to be maintained by banks during the Interest Period under
any regulations of the Board of Governors of the Federal Reserve System, or
any other governmental authority having jurisdiction with respect thereto,
applicable to funding based on so-called "Eurocurrency Liabilities",
including Regulation D (12 CFR 204).
"INTEREST PERIOD" means the period commencing on the date a LIBOR Loan is
made (including the date a Prime Loan is converted to a LIBOR Loan, or a
LIBOR Loan is renewed as a LIBOR Loan, which, in the latter case, shall be
the last day of the expiring Interest Period) and ending three (3), four (4),
five (5), six (6) months thereafter, as selected by the Borrower; provided,
however, (a) -any Interest Period that would end on a day not a Business Day,
shall extend to the next Business Day; and (b) no Interest Period may extend
beyond the Termination Date.
"LIBOR BASE RATE" means the British Banker's Association definition of
the London InterBank Offered Rates as made available by Telerate Monitor on
Telerate Screen 3750, or such other information service available to CNB, for
the applicable Interest Period for the LIBOR Loan selected by Borrower and as
quoted by CNB on the Business Day Borrower requests a LIBOR Loan.
1
<PAGE>
"LIBOR INTEREST RATE" means the rate per year (rounded upward TO THE NEXT
one-sixteenth (1/16th) of one percent (0.0625%), if necessary) determined by
CNB to be the quotient of (a) the LIBOR Base Rate divided by (b) one minus
the Eurocurrency Reserve Requirement for the Interest Period; which is
expressed by the following formula:
LIBOR Base. Rate
------------------------------------
1 - Eurocurrency Reserve Requirement
"LIBOR LOAN" means any Loan tied to the LIBOR Interest Rate.
"LOAN(S)" means the principal balance outstanding on this Note, and any
LIBOR Loan and/or any Prime Loan made hereunder, as the case may be.
"PRIME LOAN" means any Loan tied to the Prime Rate. A Loan hereunder
shall be a Prime Loan any time it is not a LIBOR Loan.
"PRIME RATE" means the rate most recently announced by CNB at its
principal office in Beverly Hills, California, as its "Prime Rate." Amy
change in the interest rate resulting from a change in the Prime Rate shall
be effective on the day on which each change in the Prime Rate is announced
by CNB.
1. INTEREST ON LOANS. Each Loan shall bear interest from disbursement until
due (whether at stated maturity, by acceleration or otherwise) at a rate
equal to, at Borrower's option, either (a) for a LIBOR Loan, the LIBOR
Interest Rate plus TWO percent (2.00%) per annum, or (b) for a Prime Loan,
the fluctuating Prime Rate per annum. Interest on the Loans shall accrue
daily and be payable (a) if a Prime Loan, monthly, in arrears, on the first
(lst) day of each month, commencing on the first such date following
disbursement; (b) if a LIBOR Loan, (i) at the same time as interest payments
are due on Prime Loans, (ii) on the last day of each Interest Period, and
(iii) upon any prepayment of any LIBOR Loan (to the extent accrued on the
amount prepaid); (c) on the date a Prime Loan is converted to a LIBOR Loan;
and (d) at the Termination Date. Anything herein to the contrary
notwithstanding, all principal and interest remaining unpaid on the
Termination Date shall be immediately due and payable.
2. PROCEDURE FOR LIBOR LOANS. Borrower may request that a Loan be a LIBOR
Loan, if herein allowed (including conversion of a Prime Loan to a LIBOR
Loan, or continuation of a LIBOR Loan as a LIBOR Loan upon the expiration of
the Interest Period). Borrower's request shall be irrevocable, shall be made
to CNB, verbally or in writing, no earlier than two (2) Business Days before
and no later than 1:00 p.m. Pacific Time on the date the LIBOR Loan is to be
made, and shall specify the Interest Period, the amount of the LIBOR Loan,
and such other information as CNB requests. If Borrower fails to select a
LIBOR Loan in accordance herewith, the Loan shall be a Prime Loan, and any
LIBOR Loan shall be deemed a Prime Loan upon expiration of the Interest
Period.
3. AVAILABILITY OF LIBOR LOANS. Notwithstanding anything herein to the
Contrary, each LIBOR Loan must be in the minimum amount of $500,000.00 and
increments of $100,000.00. Borrower may not have more than five (5) LIBOR Loans,
outstanding at any one time under the
2
<PAGE>
Revolving Credit Commitment. Borrower may have Prime Loans and LIBOR Loans
outstanding simultaneously.
4. PREPAYMENT OF PRINCIPAL. Borrower may prepay the principal amount
outstanding on a Prime Loan at any time and in any amount without a
prepayment fee. Borrower may not make a partial principal prepayment on a
LIBOR Loan. Borrower may prepay the full outstanding principal- balance on a
LIBOR Loan prior to the end of the Interest Period, provided, however, that
such prepayment is accompanied by a fee ("LIBOR Prepayment Fee") equal to the
amount, if any, by which (a) the additional interest which would have been
earned by CNB had the LIBOR Loan not been prepaid exceeds (b) the interest
which would have been recoverable by CNB by placing the amount of the LIBOR
Loan on deposit in the LIBOR market for a period starting on the date on
which it was prepaid and ending on the last day of the applicable Interest
Period. CNB's calculation of the LIBOR Prepayment Fee shall be conclusive
absent manifest error.
5. SUSPENSION OF LIBOR LOANS. In the event CNB, on any Business Day, is
unable to determine the LIBOR Base Rate applicable for a new, continued, or
converted LIBOR Loan for any reason, or any law, regulation, or governmental
order, rule or determination, makes it unlawful for CNB to make a LIBOR Loan,
Borrower's right to select LIBOR Loans shall be suspended until CNB is again
able to determine the LIBOR Base Rate or make LIBOR Loans, as the case may
be. During such suspension, new Loans, outstanding Prime Loans and LIBOR
Loans whose Interest Periods terminate may only be Prime Loans.
The occurrence of any of the following with respect to any Borrower or
guarantor of this Note shall constitute an "Event of Default" hereunder:
1. Failure to make any payment of principal or interest when due under this
Note;
2. Filing of a petition by or against any of such parties under any provision
of the BANKRUPTCY CODE;
3. Appointment of a receiver or an assignee for the benefit of creditors;
4. Commencement of dissolution or liquidation proceedings or the
disqualification (under any applicable law or regulation) of any of such
parties which is a corporation, partnership, joint venture or any other
type of entity;
5. Death or incapacity of any of such parties which is an individual;
6. Revocation of any guaranty of this Note, or any guaranty of this Note
becomes unenforceable as to any future advances under this Note;
7. Any financial statement provided by any of such parties to CNB is false or
materially misleading;
8. Any material default in the payment or performance of any obligation, or
any default under any provision of any contract or instrument pursuant to
which any of such parties
3
<PAGE>
has incurred any obligation for borrowed money, any purchase obligation or
any other liability of any kind to any person or entity, including CNB;
9. Any sale or transfer of all or a substantial part of the assets of any of
such parties other than in the ordinary course of business; or
10. Amy violation, breach or default under this Note, any letter agreement,
guaranty, security agreement, deed of trust, subordination agreement or,
any other contract or instrument executed in connection with this Note or
securing this Note.
Upon the occurrence of any Event of Default, CNB, at its option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are expressly waived by Borrower, and CNB shall have
no obligation to make any further advances hereunder. Borrower agrees to pay
all costs and expenses, including reasonable attorneys' fees, expended or
incurred by CNB (or allocable to CNB's in-house counsel) in connection with
the enforcement of this Note or the collection of any sums due hereunder and
irrespective of whether suit is filed.
Upon the occurrence of any Event of Default (and without constituting a
waiver of the Event of Default), and until the Event of Default has been
cured, the outstanding principal (and interest, to the extent permitted by
law) shall bear additional interest at a fluctuating rate equal to five
percent (5%) per annum higher than the interest rate as determined above;
provided, however, for purposes hereof, a LIBOR Loan shall be treated as a
Prime Loan upon the termination of the Interest Period.
This Note and all matters related hereto shall be governed by the laws of
the State of California. If this Note is executed by more than one Borrower,
all obligations are joint and several.
BOYDS WHEELS, INC.,
A CALIFORNIA CORPORATION
BY:_________________________________
BOYD CODDINGTON CHAIRMAN OF THE BOARD
BY:_________________________________
REX OURS SECRETARY
4
<PAGE>
DISBURSEMENT INSTRUCTIONS
Branch:ORANGE COUNTY CBC #050
Date:MARCH 25, 1997
City National Bank is authorized to disburse the proceeds of that certain
note dated MARCH 25, 1997 in the amount of $9,000,000.00 executed by the
undersigned Borrower as follows:
CREDIT ACCOUNT NO. IN THE NAME OF AMOUNT
$
- -------------------- ------------------------ ------------------------
$
- -------------------- ------------------------ ------------------------
ISSUE CASHIER'S CHECK(S)/DRAFT(S) PAYABLE TO:
$
- ------------------------------------------------ ------------------------
$
- ------------------------------------------------ ------------------------
WIRE FUNDS TO BANK ACCOUNT NO. IN THE NAME OF
$
- -------------------- ------------------------ ------------------------
$
- -------------------- ------------------------ ------------------------
RENEW LOAN NO. IN THE NAME OF
$
- -------------------- ------------------------ ------------------------
$
- -------------------- ------------------------ ------------------------
APPLY TO LOAN NO. IN THE NAME OF
$
- -------------------- ------------------------ ------------------------
$
- -------------------- ------------------------ ------------------------
REMAINING AMOUNT AVAILABLE AS OF THIS DATE $
------------------------
TOTAL: $9,000,000.00
------------------------
DISBURSE AS REQUESTED BY: (IDENTIFY PERSONS AUTHORIZED TO MAKE REQUESTS)
BOYD CODDINGTON OR REX OURS BY VERBAL OR WRITTEN REQUESTS
BOYDS WHEELS, INC.
a California Corporation
By:
---------------------------------------
Boyd Coddington, Chairman of the Board
By:
---------------------------------------
Rex Ours, Secretary
5
<PAGE>
CITY NATIONAL
BANK
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$9,000,000.00 03-25-1997 04-01-1999 27113 036599085 RWJ
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: BOYDS WHEELS, INC. A LENDER: CITY NATIONAL BANK A NATIONAL
CALIFORNIA CORPORATION BANKING ASSOCIATION
8380 CERRITOS AVE. ORANGE COUNTY COMMERCIAL
STANTON, CA 90680 BANKING CENTER #050000
14241 EAST FIRESTONE BOULEVARD
LA MIRADA, CA 90638-5568
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN BOYDS WHEELS,
INC,. A CALIFORNIA CORPORATION (REFERRED TO BELOW AS 'GRANTOR'); CITY
NATIONAL BANK, A NATIONAL BANKING ASSOCIATION (REFERRED TO BELOW AS
'LENDER-). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A
SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND
AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH
RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER
MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform
Commercial Code. All references to dollar amounts shall mean amounts
in lawful money of the United States of America-
AGREEMENT. The word 'Agreement' means this Commercial Security
Agreement, an this Commercial Security Agreement may be amended
or modified from time to time, together with all exhibits and
schedules attached to this Commercial Security Agreement from
time to time.
COLLATERAL. The word "Collateral' means the following described
property of Grantor, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located:
ALL INVENTORY, CHATTEL PAPER, ACCOUNT, EQUIPMENT AND GENERAL
INTANGIBLES
In addition, the word 'Collateral' includes all the following,
whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of
and substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described
in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of
a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor's right, title, and
interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on
electronic media.
EVENT OF DEFAULT. The words 'Event of Default" mean and include
without limitation any of the Events of Default set forth below in
the section titled "Events of Default.-
GRANTOR. The word 'Grantor' means BOYDS WHEELS, INC., A CALIFORNIA
CORPORATION, its successors and assigns.
GUARANTOR. The word 'Guarantor' means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness.
INDEBTEDNESS. The word 'Indebtedness' means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses for
which Grantor is responsible under this Agreement or under any
of the Related Documents. In addition, the word "Indebtedness'
includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to
Lender, as well as all claims by Lender against Grantor, or any
one or more of them, whether existing now or later; whether they
are voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether Grantor
may be liable individually or jointly with others; whether Grantor
may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
LENDER. The word 'Lender' means City National Bank, a National
Banking Association, its successors and assigns.
NOTE. The word 'Note' means the note or credit agreement dated
March 25, 1997, in the principal amount of $9,000,000.00 from
BOYDS WHEELS, INC-, A CALIFORNIA CORPORATION to Lender, together
with all renewals of, extensions of, modifications of, refinancings
of, consolidations of and substitutions for the note or credit
agreement-
<PAGE>
03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 2
LOAN NO 27113 (CONTINUED)
RELATED DOCUMENTS. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, and
all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, convoys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts
Grantor may open in the future, excluding, however, all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all Indebtedness against any
and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
ORGANIZATION. Grantor is a corporation which is duly organized,
validly existing, and in good standing under the laws of the
State of California. Grantor has its chief executive office at
8380 CERRITOS AVE., STANTON, CA 90680. Grantor will notify
Lender of any change in the location of Grantor's chief
executive office.
AUTHORIZATION. The execution, delivery, performance of this
Agreement by Grantor have been duly authorized by all necessary
action by Grantor and do not conflict with, result in violation
of, or constitute a default under (a) any provision of its
articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Grantor or (b) any
law, governmental regulation, court decree or order applicable
to Grantor.
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such
financing and to take whatever other actions are requested by
Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lendor, Grantor will deliver to
Lender any and all of the documents evidencing or constituting
the Collateral and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession
by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest
granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic
or other reproduction of any financing statement or of this
Agreement for use as financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in
the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed
business names of Grantor. This is a continuing Security
Agreement and will continue in effect even through all or any
part of the indebtedness is paid in fully and even though for a
period of time Grantor may not be indebted to Lender.
NO VIOLATION. The execution and delivery of this Agreement
will not violate any law or agreement governing Grantor or to
which Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition
of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is
genuine, and complies with applicable laws concerning form,
content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and
capacity to contract and are in fact obligated as they appear to
be on the Collateral. At the time any account becomes subject
to a security interest in favor of Lender, the account shall be
a good and valid account representing an undisputed, bone fide
indebtedness incurred by the account debtor, for merchandise
held subject to delivery instructions or theretofore shipped or
delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor:
there shall be no setoffs or counterclaims against any such
account: and no agreement under which any deductions or
discounts may be claimed shall have been made with the account
debtor except those disclosed to Lender in writing.
LOCATION OF COLLATERAL. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of
real property and Collateral locations relating to Grantor's
operations, including without limitation the following (a) all
real property owned or being purchased by Grantor; (b) all real
property being rented or leased by Grantor; (c) all storage
facilities owned, rented, leased or being used by Grantor; and
(d) all other properties where Collateral is or may be located.
Except in the ordinary course of its business, Grantor shall not
remove the Collateral from its existing locations without the
prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or
to the extent the Collateral consists of intangible property
such as accounts, the records concerning the Collateral) at
Grantor's address shown above, or at such other locations as are
acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the
prior written consent of Lender. To the extent that the
Collateral consists of vehicles, or other titled property,
Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside
the State of California, without the prior written consent of
Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. While Grantor is not in default
under the Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify
as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk
sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security
interest, encumbrances, or charge, other than the security
interest provided for in this Agreement, without prior written
consent of Lender. This includes security interests even if
junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any
other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition.
Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds
good and marketable title to the Collateral, free and clear of
all liens and encumbrances except for the lien of this
Agreement. No financing statement covering any of the
Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or
to which Lender has specifically consented. Grantor shall
defend Lender's rights in the Collateral against the claims and
demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall
require, and insofar as the Collateral consists of accounts and
general intangibles. Grantor shall deliver to Lender schedules
of such Collateral, including such information as Lender may
require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of Inventory and equipment,
Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such
Collateral as Lender my require
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03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 3
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to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall
maintain all tangible Collateral in good condition and repair.
Grantor will not commit or permit damage to or destruction of
the Collateral or any part of the Collateral. Lender and its
designated representative and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor shall immediately notify Lender of
all cases involving the return, rejection, repossession, loss or
damage of or to any Collateral; of any request for credit
adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting
the Collateral or the value or the amount of the Collateral.
TAXES AND ASSESSMENTS AND LIENS. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note to
notes evidencing the indebtedness, or upon any of the other
Related Documents. Grantor may without any such payment or may
elect to contest any lien if Grantor is in good faith conducting
an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not
jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15)
days, Grantor shall deposit with Lender cash, a sufficient
corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien
plus any interest, costs, attorneys' fees or other charges that
could accrue as a result of foreclosure or sale of the
Collateral. In any contest the Grantor shall defend itself and
Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as
an additional obligee under any surety bond furnished in the
contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable
to the ownership, production, disposition or use of the
Collateral, Grantor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not
jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this
Agreement remains a lion on the Collateral, used for the
generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any hazardous waste
or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ('CERCLA'), the
Superfund Ammendments and Reauthorization Act of 1986, Pub. L.
No. 99-499 ('SARA'), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et sec., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 8.5
through 7.7 of Division 20 of the California Health and Safety
Code, Section 26100, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of
the foregoing. The terms 'hazardous waste and hazardous
substance shall also include, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based an
Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a) releases
and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and
hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement.
This obligation to indemnify shall survive the payment of the
Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and
maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance
as Lender may require with respect to the Collateral, in form,
amounts coverages and basis reasonably acceptable to Lender and
issued by a company or companies reasonably acceptable to
Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in
form satisfactory to Lender, including stipulations that
coverages will not be canceled or diminished without at least
seven (7) days' prior written notice to Lender and not including
any disclaimer of the insurer's liability for failure to give
such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or
other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if
it so chooses 'single interest insurance,' which will cover only
lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS Grantor shall promptly notify
Lender of any lose or damage to the Collateral. Lender may make
proof of loss if Grantor fails to do so within fifteen (1 5)
days of the casualty. All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by
Lender as part of the Collateral. If Lender consents to repair
or replacement of the damaged or destroyed Collateral, Lender
shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. It Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall
pay the balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the
Collateral shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premium, which reserves
shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least
fifteen (1 5) days before the premium due date, amounts at least
equal to the insurance premiums to be paid. If fifteen (15)
days before payment is due, the reserve funds are insufficient,
Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and
shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid
by Grantor as they become due. Lender does not hold the reserve
funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be
paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance
showing such information as Lender may reasonably request
including the following: (a) the name of the insurer; (b) the
risks insured; (c) the amount of the policy; (d) the property
insured; (a) the then current value on the basis of which
insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition,
Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to
Lender determine, as applicable, the cash value or replacement
cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified
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03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 4
LOAN NO 27113 (CONTINUED)
by Lender, Grantor may collect any of the Collateral consisting of accounts.
At any time and even though no Event of Default exists, Lender may exercise
its rights to collect the accounts and to notify account debtors to make
payments directly to Lender for application to the Indebtedness. If Lender
at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action
for that purpose as Grantor shall request or as Lender, in Lender's sole
discretion, shall deem appropriate under the circumstances, but failure to
honor any request by Grantor shall not of itself be deemed to be a failure to
exercise reasonable care. Lender shall not be required to take any steps
necessary to preserve any rights in the Collateral against prior parties, nor
to protect, preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, lions, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of the Indebtedness and, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment payments to
become due during either (1) the term of any applicable insurance policy or
(ii) the remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Agreement also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon the occurrence
of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
the Indebtedness. Other Defaults. Failure of Grantor to comply with or to
perform any other term, obligation, covenant or condition contained in
this Agreement or in any of the Related Documents or in any other
agreement between Lender and Grantor.
FALSE STATEMENTS. Any warranty, representation of statement made or
furnished by Lender by or on behalf of Grantor under his Agreement, this Note
or the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceedings, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or such Guarantor dies or becomes
incompetent.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself secure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral an y any and all certificates of title and
other documents related to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender shall also have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender make reasonable efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)
days, or such lesser time as required by state law, before the time of the
sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part
of the Indebtedness secured by this Agreement and shall be payable on demand
with interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver; (a) Lender may have a receiver appointed as a matter of right. (b)
the receiver may be an employee of Lender and may serve without bond, and (c)
all fees of the receiver and his or her attorney shall become part of the
indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate form date of expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name of that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security or the
indebtedness or apply it to payment of the indebtedness in such order of
preference as Lender may determine. In so far as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses in action, or
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03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 27113 (CONTINUED)
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not indebtedness or Collateral is the due.
For these purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any address to
which mail and payments are to be sent and endorse notes, checks, drafts,
money orders, documents of title, instruments and items portaining to
payment, shipment, or storage of any Collateral. To facilitate collection,
Lender may notify account debtors and obligors on any Collateral to make
payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the Indebtedness due to Lender after application of all amounts received from
the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may
be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
CUMULATIVE REMEDIES. All of the Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other writing,
shall be cumulative and may be exercised singularly or concurrently.
Election of Lender to pursue any remedy shall not exclude pursuit of any
other remedy, and an election to make expenditures or take action to perform
an obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by alteration or amendment.
APPLICABLE LAW. This agreement has been delivered to Lender and accepted by
Lender in the Sate of California. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of Los Angeles
County, the State of California. This agreement shall be governed by and
construed in accordance with the laws of the State of California.
ATTORNEY'S FEES: EXPENSES. Grantor agrees to pay upon demand all
of the Lender's costs and expenses, including attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and other expenses, whether or not there
is, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all
court costs and such additional fees as may be directed by the
court.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of
Grantor under this Agreement shall be joint and several, and all
references to Grantor shall mean each and every Grantor. This
means that each of the persons signing below is responsible for
all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile, and
shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed
to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable low,
if there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of grantor's current
address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true
and lawful attorney-in-fact, irrevocably, with full power of
substitution to do the following: (a) to demand, collect,
receive, receipt for, sue and recover all sums of money or other
property which may now or hereafter become due, owing or payable
from the Collateral; (b) to execute, sign and endorse any and
all claims, instruments, receipts, checks, drafts or warrants
issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and,
in the place and stood of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to Me any claim or
claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor,
or otherwise, which in the discretion of Lender may seem to be
necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be
irrevocable and shall remain in full force and effect until
renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will become a
part of the Indebtedness and, at Lender's option, shall be
payable by Borrower as provided above in the 'EXPENDITURES 13Y
LENDER' paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such off ending provision shall
be deemed to be modified to be within the limits of
enforceability or validity, however, if the offending provision
cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above
on transfer of the Collateral, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors
and assigns.
WAIVER. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or
any other right. A waiver by Lender of a provision of this
Agreement shall not prejudice or constitute a waiver of Lender's
right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
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03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 6
LOAN NO 27113 (CONTINUED)
WAIVER OF CO-OBLIGATOR'S RIGHTS. If more than one person is
obligated for the Indebtedness, Borrower irrevocably waives,
disclaims and relinquishes all claims against such other person
which Borrower has or would otherwise have by virtue of payment
of the Indebtedness or any part thereof, specifically including
but not limited to all rights of indemnity, contribution or
exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
MARCH 25, 1997.
GRANTOR:
BOYDS WHEELS, INC., A CALIFORNIA CORPORATION
BY: _____________________________________________
BOYD CODDINGTON, CHAIRMAN OF THE BOARD
BY: _____________________________________________
REX OURS, SECRETARY
<PAGE>
03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 7
LOAN NO 27113 (CONTINUED)
CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$9,000,000.00 03-25-1997 04-01-1999 27113 036599085 RWJ
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: BOYDS WHEELS, INC. A LENDER: CITY NATIONAL BANK A NATIONAL
CALIFORNIA CORPORATION BANKING ASSOCIATION
8380 CERRITOS AVE. ORANGE COUNTY COMMERCIAL
STANTON, CA 90680 BANKING CENTER #050000
14241 EAST FIRESTONE BOULEVARD
LA MIRADA, CA 90638-5568
- -------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of BOYDS WHEELS, INC.,
A CALIFORNIA CORPORATION (the Corporation), HEREBY CERTIFY that the
Corporation is organized and existing under and by virtue of the laws of
the State of California as a corporation for profit, with its principal
office at 8380 CERRITOS AVE., STANTON, CA 90680, and is duly authorized to
transact business in the State of California.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held on March 25, 1997, at which a quorum was present and
voting, or by other duly authorized corporate action in lieu of a meeting,
the following resolutions were adopted:
BE IT RESOLVED, that any two (2) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
BOYD CODDINGTON CHAIRMAN OF THE BOARD
X_______________________________
REX OURS SECRETARY
X.______________________________
</TABLE>
acting for and on behalf of the Corporation and as its act and deed
be, and they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from City National Bank, a
National Banking Association ('Lender'), on such terms as may be agreed
upon between the Corporation and Lender, such sum or sums of money as in
their judgment should be borrowed, without limitation.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accommodations of the Corporation, on
Lender's forms, at such rates of interest and on such terms as may be
agreed upon, evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Lender, and also to execute and deliver to Lender one
or more renewals, extensions, modifications, refinancing, consolidations,
or substitutions for one or more of the notes, any portion of the notes, or
any other evidence of credit accommodations.
GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of
any loans or credit accommodations so obtained, any promissory notes so
executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness
of the Corporation to Lender at any time owing, however the same may be
evidenced, any property now or hereafter belonging to the Corporation or in
which the Corporation now or hereafter may have an interest, including
without limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans
are obtained or such indebtedness is incurred, or at any other time or
times, and may be either in addition to or in lieu of any property
therefore mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and
other security agreements and financing statements which may be required by
Lender, and which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which
Lender may deem necessary or proper in connection with or pertaining to the
giving of the liens and encumbrances. Notwithstanding the foregoing, any
one of the above authorized persons may execute, deliver, or record
financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Lender, or
to cause such other disposition of the proceeds derived therefrom as they
may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of these Resolutions.
The following person or persons currently are authorized to request
advances and authorize payments under the line of credit
<PAGE>
03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 8
LOAN NO 27113 (CONTINUED)
until Lender receives written notice of revocation of their authority:
BOYD CODDINGTON, CHAIRMAN OF THE BOARD; and REX OURS, SECRETARY.
BE IT FURTHER resolved, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are
hereby ratified and approved, that these Resolutions shall remain in full
force and effect and Lender may rely on these Resolutions until written
notice of their revocation shall have been delivered to and received by
Lender. Any such notice shall not affect any of the Corporation's
agreements or commitments in effect at the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing
at Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (a) change in the name of the
Corporation, (b) change in the assumed business name(s) of the Corporation,
(c) change in the management of the Corporation,, (d) change in the
authorized signer(s), (a) conversion of the Corporation to a new or
different type of business entity, or (f) change in any other aspect of the
Corporation that directly or indirectly relates to any agreements between
the Corporation and Lender. No change in the name of the Corporation will
take effect until after Lender has been notified.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have
not been modified or revoked in any manner whatsoever. The Corporation has
no corporate seal, and therefore, no seal is affixed to this certificate.
<PAGE>
EXHIBIT 10.40
PROMISSORY NOTE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-25-1997 04-01-1999 27114 036599077 RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Principal Amount: $500,000.00 Initial Rate: 8.250% Date of Note: March 25, 1997
</TABLE>
PROMISE TO PAY. HOT RODS BY BOYD, INC., A DELAWARE CORPORATION ('Borrower')
promises to pay to City National Bank, a National Banking Association
(-Lender'), or order, In lawful money of the United States of America, the
principal amount of Five Hundred Thousand & 00/100 Dollars ($500,000.00) or
so much as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be calculated
from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest an April 1, 1999. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning May 1, 1997, and all subsequent Interest payments are due on the
same day of each month after that. Interest on this Note is computed on a
365/360 simple interest basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest. then to principal. and any remaining amount
to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the City National
Bank Prime Rate (the 'Index"). Prime Rate shall mean the rate most recently
announced by Lender at its principal office in Beverly Hills, California, as
its 'Prime Rate.' Any change in the Prime Rate shall become effective on the
same business day on which the Prime Rate shall change, without prior notice
to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each day. The Index currently is 8.250% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate equal
to the Index, resulting in an initial rate of 8.250'% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note. Borrower understands that Lender is entitled to a minimum
interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments of accrued unpaid interest. Rather, they will
reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. b)) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation. covenant. or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. la) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired. (h) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Note to 5.000 percentage points over the Index. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether
or not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other
sums provided by law. This Note has been delivered -to Lender and accepted
by Lender in the State of California. If there is a lawsuit, Borrower agrees
upon lender's request to submit to the jurisdiction of the courts of Los
Angeles County, the State of -California. This Note shall be governed by and
construed in accordance with the laws of the State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $10.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns. conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts. and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested either orally or in writing by Borrower or
by an authorized person. Lender may, but need not. require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
BOYD CODDINGTON, PRESIDENT & SECRETARY; DIANE CODDINGTON, VICE PRESIDENT; and
REX OURS. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or ..(b) credited to
any of Borrower's accounts with Lender. The unpaid principal balance owing
on this Note at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note: (b) Borrower or any guarantor
ceases doing business or is insolvent (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Note or any other loan with Lender; (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.
General Provisions. Lender may delay or forge enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorses, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly or for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice of anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.
<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
HOT RODS BY BOYD INC, A DELAWARE CORPORATION
<TABLE>
<S> <C> <C> <C>
BY: x________________________________________ BY: x________________________________
BOYD CODDINGTON, PRESIDENT AND SECRETARY DIANE CODDINGTON, VICE PRESIDENT
</TABLE>
<PAGE>
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-25-1997 04-01-1999 27114 036599077 RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
</TABLE>
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT in entered into between HOT RODS BY BOYD,
INC., A DELAWARE CORPORATION (referred to below as 'Grantor-); and City
National Bank, a National Banking Association (referred to below as
'Lender-). For valuable consideration, Grantor grants to Lender a security
Interest in the Collateral to secure the Indebtedness and agrees that Lender
shelf have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word 'Agreement' means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word 'Collateral' means the following described property
of Grantor. whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment and general
intangibles
In addition, the word 'Collateral' includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of
and substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies. payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described
in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss. or other disposition of any of t@
property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph. microfilm, microfiche, or electronic
media, together with all of Grantor's right, title, and
interest in and to all computer software required to utilize,
create. maintain, and process any such records or data on
electronic media.
Event of Default. The words 'Event of Default' mean and include without
limitation any of the Events of Default set forth below in the section
titled 'Events of Default.'
Grantor. The word "Grantor' means HOT RODS BY BOYD, INC., A DELAWARE
CORPORATION, its successors and assigns.
Guarantor. The word 'Guarantor' means and includes without limitation each
and all of the guarantors, sureties. and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word 'Indebtedness' means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the
word 'Indebtedness' includes all other obligations, debts and liabilities,
plus interest thereon, of Grantor, or any one or more of them, to Lender,
as well as all claims by Lender against Grantor, or any one or more of
them, whether existing now or later; whether they are voluntary or
involuntary, due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Grantor may be liable individually or
jointly with others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word 'Lender' means City National Bank, a National Banking
Association, its successors and assigns.
Note. The word 'Note' means the note or credit agreement dated March 25,
1997, in the principal amount of $500,000.00 from HOT RODS BY BOYD, INC., A
DELAWARE CORPORATION to Lender, together with all renewals of, extensions
of, modifications of, refinancings of, consolidations of and substitutions
for the note or credit agreement.
Related Documents. The words 'Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, convoys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts hold jointly with someone else and all accounts
Grantor may open in the future, excluding, however, all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all Indebtedness against any
and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
ORGANIZATION. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
Grantor has its chief executive office at 8380 CERRITOS AVE., STANTON, CA
9063O. Grantor will notify Lender of any change in the location of
Grantor's chief executive office.
AUTHORIZATION. The execution, delivery, performance of this Agreement
by Grantor have been duly authorized by all necessary action by
Grantor and do not conflict with, result in violation of, or
constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Grantor or (b) any law, governmental
regulation, court decree or order applicable to Grantor.
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such
financing and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of
the documents evidencing or constituting the Collateral and Grantor
will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender.
<PAGE>
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for
the purpose of executing any documents necessary to perfect or to
continue the security interest granted in this Agreement. Lender may
at any time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of any financing statement
or of this Agreement for use as financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even through all or any part of the indebtedness is paid in
fully and even though for a period of time Grantor may not be indebted
to Lender.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is
a party, and its certificate or articles of incorporation and bylaws
do not prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists
of accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies
with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated
on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time
any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an
undisputed, bone fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor: there
shall be no setoffs or counterclaims against any such account: and no
agreement under which any deductions or discounts may be claimed shall
have been made with the account debtor except those disclosed to
Lender in writing.
LOCATION OF COLLATERAL. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real property
and Collateral locations relating to Grantor's operations, including
without limitation the following (a) all real property owned or being
purchased by Grantor; (b) all real property being rented or leased by
Grantor; (c) all storage facilities owned, rented, leased or being
used by Grantor; and (d) all other properties where Collateral is or
may be located. Except in the ordinary course of its business,
Grantor shall not remove the Collateral from its existing locations
without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as
accounts, the records concerning the Collateral) at Grantor's address
shown above, or at such other locations as are acceptable to Lender.
Except in the ordinary course of its business, including the sales of
inventory, Grantor shall not remove the Collateral from its existing
locations without the prior written consent of Lender. To the extent
that the Collateral consists of vehicles, or other titled property,
Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the
State of California, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. While Grantor is not in default under the
Agreement, Grantor may sell inventory, but only in the ordinary course
of its business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course of
Grantor's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrances, or charge, other than the
security interest provided for in this Agreement, without prior
written consent of Lender. This includes security interests even if
junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for
Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good
and marketable title to the Collateral, free and clear of all liens
and encumbrances except for the lien of this Agreement. No financing
statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by
this Agreement or to which Lender has specifically consented. Grantor
shall defend Lender's rights in the Collateral against the claims and
demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall
require, and insofar as the Collateral consists of accounts and
general intangibles. Grantor shall deliver to Lender schedules of
such Collateral, including such information as Lender may require,
including without limitation names and addresses of account debtors
and agings of accounts and general intangibles. Insofar as the
Collateral consists of Inventory and equipment, Grantor shall deliver
to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender my require to identify
the nature, extent, and location of such Collateral. Such information
shall be submitted for Grantor and each of its subsidiaries or related
companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not
commit or permit damage to or destruction of the Collateral or any
part of the Collateral. Lender and its designated representative and
agents shall have the right at all reasonable times to examine,
inspect, and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of
any request for credit adjustment or of any other dispute arising with
respect to the Collateral; and generally of all happenings and events
affecting the Collateral or the value or the amount of the Collateral.
TAXES AND ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note to notes evidencing the
indebtedness, or upon any of the other Related Documents. Grantor may
without any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral
is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest the Grantor
shall defend itself and Lender and shall satisfy any final adverse
judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished
in the contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to
the ownership, production, disposition or use of the Collateral,
Grantor may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate
appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
<PAGE>
03-25,1997 COMMERCIAL SECURITY AGREEMENT PAGE 3
LOAN NO 27114 (CONTINUED)
- -------------------------------------------------------------------------------
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those 'terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, at seq. ('CERCLA'). the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ('SARA'),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1 601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., Chapters 6.S through 7.7 of Division 20 of the California Health
and Safety Code, Section 25100, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms 'hazardous waste' and 'hazardous substance' shall
also include, without limitation, petroleum and petroleum by-products or
any fraction thereof and asbestos. The representations and warranties
contained herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor' hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws, and b) agrees to indemnify and hold harmless Lender
against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive
the payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverage's and basis
reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender. including stipulations that
coverage's will not be canceled or diminished without at least seven (7)
days' prior written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act. omission or default
of Grantor or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest. Grantor
will provide Lender with such loss payable or other endorsements as Lender
may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including
if it so chooses 'single interest insurance,' which will cover only
Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (1 5) days of the casualty. All
proceeds of any insurance on the Collateral. including accrued proceeds
thereon, shall be hold by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall. upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not boon disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce. at least fifteen (1 5) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (1 5) days before payment is due. the reserve funds are
insufficient. Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due: Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a)
the name of the insurer; b)) the risks insured; (c) the amount of the
policy; (d) the property insured; (a) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified by Lender,
Grantor may collect any of the Collateral consisting of accounts. At any time
and even though no Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make payments directly
to Lender for application to the Indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose
as Grantor shall request or as Lender. in Lender's sole discretion, shall
deem appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve
any rights in the Collateral against prior parties, nor to protect, preserve
or maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of the Indebtedness and, at Lender's
option, will (a) be payable on demand, b)) be added to the balance of the
Note and be apportioned among and be payable with any installment payments to
become due during either (1) the term of any applicable insurance policy or
(ii) the remaining term of the Note, or to) be treated as a balloon payment
which will be due and payable at the Note's maturity. This Agreement also
will secure payment of these amounts- Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon the occurrence
of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on
the Indebtedness.
Other Default Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
FALSE STATEMENTS. Any warranty, representation of statement made or
furnished by Lender by or on behalf of Grantor under his Agreement, this Note
or the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy under any bankruptcy or insolvency laws by or against Grantor.
<PAGE>
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceedings, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or such Guarantor dies or becomes
incompetent.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself secure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral an y any and all certificates of title and
other documents related to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender shall also have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender make reasonable efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)
days, or such lesser time as required by state law, before the time of the
sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part
of the Indebtedness secured by this Agreement and shall be payable on demand
with interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver; (a) Lender may have a receiver appointed as a matter of right. (b)
the receiver may be an employee of Lender and may serve without bond, and (c)
all fees of the receiver and his or her attorney shall become part of the
indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate form date of expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name of that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security or the
indebtedness or apply it to payment of the indebtedness in such order of
preference as Lender may determine. In so far as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, chooses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not indebtedness or
Collateral is the due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items portaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the Indebtedness due to Lender after application of all amounts received from
the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may
be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
CUMULATIVE REMEDIES. All of the Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other writing,
shall be cumulative and may be exercised singularly or concurrently.
Election of Lender to pursue any remedy shall not exclude pursuit of any
other remedy, and an election to make expenditures or take action to perform
an obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by alteration or amendment.
APPLICABLE LAW. This agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of Los Angeles
County, the State of California. This agreement shall be governed by and
construed in accordance with the laws of the State of California.
ATTORNEY'S FEES: EXPENSES. Grantor agrees to pay upon demand all of the
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and other expenses whether or not there is
, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any
<PAGE>
03-25-1997 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 27114 (CONTINUED)
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall
mean each and every Grantor. This means that each of the persons signing
below is responsible for ail obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile. and shall be effective when
actually delivered- or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal writ-ton notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current addressee(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any claim
or claims or to take any action or institute or take part in any proceedings,
either in its own name or in the name of Grantor, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. This power is
given as security for the Indebtedness, and the authority hereby conferred is
and shall be irrevocable and shall remain in full force and effect until
renounced by Lender.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Borrower as
provided above -in the 'EXPENDITURES BY LENDER' paragraph.
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor. shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for the
Indebtedness, Borrower irrevocably waives, disclaims and relinquishes ail
claims against such other person which Borrower has or would otherwise have
by virtue of payment of the Indebtedness or any part thereof, specifically
including but not limited to all rights of indemnity, contribution or
exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
MARCH 25, 1997.
GRANTOR:
HOT RODS BY DELAWARE CORPORATION
<TABLE>
<S> <C> <C> <C>
BY: ______________________________________ By: ____________________________
BODY CODDINGTON, PRESIDENT & SECRETARY DIANE CODDINGTON, VICE PRESIDENT
</TABLE>
<PAGE>
CORPORATE RESOLUTION TO GUARANTEE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-25-1997 04-01-1999 27114 036599077 RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
</TABLE>
- -------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of BOYDS WHEELS, INC., A
CALIFORNIA CORPORATION (the -Corporation-), HEREBY CERTIFY that the
Corporation is organized and existing under and by virtue of the laws of the
State of California with its principal office at 8380 CERRITOS AVE., STANTON,
CA 90680.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held an March 25, 1997, at which a quorum was present and voting,
or by other duly authorized corporate action in lieu of a meeting, the
following resolutions were adopted:
BE IT RESOLVED, that any two (2) of the following named officers, employees,
or agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
BOYD CODDINGTON CHAIRMAN OF THE BOARD x______________________________
REX OURS SECRETARY x______________________________
acting for and on behalf of the Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
Guaranty. To guarantee or act as surety for loans or other financial
accommodations to HOT RODS BY BOYD, INC.. A DELAWARE CORPORATION from City
National Bank, a National Banking Association (-Lender') on such guarantee
or surety terms as may be agreed upon between the officers or employees of
this Corporation and Lender and in such sum or sums of money as in their
judgment should be guaranteed or assured, not exceeding, however, at any
one time the amount of Five Hundred Thousand & 00/100 Dollars
($500,000.00), in addition to such sum or sums of money as may be currently
guaranteed by the Corporation to Lender (the 'Guaranty').
Grant Security. To mortgage. pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the Guaranty, any
property now or hereafter belonging to the Corporation or in which the
Corporation now or hereafter may have an interest, including without
limitation all real property and all personal property (tangible or
intangible) of the Corporation- Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans
are obtained or such indebtedness is incurred, or at any other time or
times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered. The provisions of these Resolutions authorizing or relating to
the pledge, mortgage, transfer, endorsement, hypothecation, granting of a
security interest in, or in any way encumbering, the assets of the
Corporation shall include, without limitation, doing so in order to lend
collateral security for the indebtedness, now or hereafter existing, and of
any nature whatsoever, of HOT RODS BY BOYD, INC., A DELAWARE CORPORATION to
Lender. The Corporation has considered the value to itself of lending
collateral in support of such indebtedness, and the Corporation represents
to Lender that the Corporation is benefited by doing so.
Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust. pledge agreement, hypothecation agreement, and
other security agreements and financing statements which may be required by
Lender, and which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which
Lender may doom necessary or proper in connection with or pertaining to the
giving of the liens and encumbrances. Notwithstanding the foregoing, any
one of the above authorized persons may execute, deliver, or record
financing statements.
Further Acts. To do and perform such other acts and things and to execute
and deliver such other documents and agreements as they may in their
discretion deem reasonably necessary or proper in order to carry into
effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation,, (d) change in the authorized signer(s), (a)
conversion of the Corporation to a new or different type of business entity,
or (f) change in any other aspect of the Corporation that directly or
indirectly relates to any agreements between the Corporation and Lender. No
change in the name of the Corporation will take affect until after Lender has
been notified.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are
hereby ratified and approved, that these Resolutions shall remain in full
force and effect and Lender may rely on these Resolutions until written
notice of their revocation shall have been delivered to and received by
Lender. Any such notice shall not affect any of the Corporation's agreements
or commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have
not been modified or revoked in any manner whatsoever.
<PAGE>
CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-25-1997 04-01-1999 27114 036599077 RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
</TABLE>
- -------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of BOYDS WHEELS, INC., A
CALIFORNIA CORPORATION (the -Corporation-), HEREBY CERTIFY that the
Corporation is organized and existing under and by virtue of the laws of the
State of California with its principal office at 8380 CERRITOS AVE., STANTON,
CA 90680.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held an March 25, 1997, at which a quorum was present and voting,
or by other duly authorized corporate action in lieu of a meeting, the
following resolutions were adopted:
BE IT RESOLVED, that any two (2) of the following named officers, employees,
or agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
BOYD CODDINGTON PRESIDENT & SECRETARY x______________________________
DIANE CODDINGTON VICE PRESIDENT x______________________________
acting for and on behalf of the Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from City National Bank, a
National Banking Association Lender-), on such terms as may be agreed upon
between the Corporation and Lender. such sum or sums of money as in their
judgment should be borrowed. without limitation.
Execute Notes. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accommodations of the Corporation, on
Lender's forms, at such rates of interest and on such terms as may be
agreed upon, evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Lender, and also to execute and deliver to Lender one
or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, any portion of the notes, or
any other evidence of credit accommodations.
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of
any loans or credit accommodations so obtained, any promissory notes so
executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness
of the Corporation to Lender at any time owing, however the same may be
evidenced, any property now or hereafter belonging to the Corporation or in
which the Corporation now or hereafter may have an interest, including
without limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans
are obtained or such indebtedness is incurred, or at any other time or
times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered.
Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and
other security agreements and financing statements which may be required by
Lender, and which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which
Lender may deem necessary or proper in connection with or pertaining to the
giving of the liens and encumbrances. Notwithstanding the foregoing, any
one of the above authorized persons may execute, deliver, or record
financing statements.
Negotiate Items. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Lender or to
cause such other disposition of the proceeds derived therefrom as they may
deem advisable.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of these resolutions.
The following person or persons currently are authorized to request
advances and authorize payments under the line of credit until Lender
receives written notice of revocation of their authority: BOYD CODDINGTON,
PRESIDENT & SECRETARY; DIANE CODDINGTON. VICE PRESIDENT; and REX OURS.
BE IT FURTHER RESOLVED), that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are
hereby ratified and approved, that these Resolutions shall remain in full
force and effect and Lender may rely on these Resolutions until written
notice of their revocation shall have been delivered to and received by
Lender. Any such notice shall not affect any of the Corporation's agreements
or commitments in effect at the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation,, (d) change in the authorized signer(s), (a)
conversion of the Corporation to a new or different type of business entity,
or (f) change in any other aspect of the Corporation that directly or
indirectly relates to any agreements between the Corporation and Lender. No
change in the name of the Corporation will take effect until after Lender has
been notified.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have
not been modified or revoked in any manner whatsoever. The Corporation has
no corporate seal, and therefore, no seal is affixed to this certificate.
<PAGE>
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
Guarantor: BOYDS WHEELS. INC., A CALIFORNIA CORPORATION
8380 CERRITOS AVE.
STANTON. CA 90680
</TABLE>
- -------------------------------------------------------------------------------
AMOUNT OF GUARANTY. The amount of this Guaranty in Five Hundred Thousand &
001100 Dollars ($500,000.00).
CONTINUING GUARANTY. For, good and valuable consideration, BOYDS WHEELS,
INC., A CALIFORNIA CORPORATION ( Guarantor') absolutely and unconditionally
guarantees and promises to pay to City National Bank, a National Banking
Association ('Lender') or its order, in legal tender of the United States of
America, the Indebtedness (as that term in defined below) of HOT RODS BY
BOYD, INC.. A DELAWARE CORPORATION ('Borrower') to Lender on the terms and
conditions set forth in this Guaranty. The obligations of Guarantor under
this Guaranty are continuing.
DEFINITIONS. The following words shall have the following meanings when used
in this Guaranty:
Borrower. The word 'Borrower' means HOT RODS BY BOYD, INC., A DELAWARE
CORPORATION.
Guarantor. The word -Guarantor' means BOYDS WHEELS, INC.. A CALIFORNIA
CORPORATION.
Guaranty. The word 'Guaranty' means this Guaranty made by Guarantor for
the benefit of Lender dated March 25, 1 997.
Indebtedness. The word 'Indebtedness' is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans. advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness,
lease obligations, other obligations, and liabilities of Borrower. or any
of them, and any present or future judgments against Borrower. or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the Indebtedness arises from transactions which may be voidable
on account of infancy, insanity. ultra vires, or otherwise.
Lender. The word 'Lender' means City National Bank, a National Banking
Association, its successors and assigns.
Related Documents. The words 'Related Documents' mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements. guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty
shall not exceed at any one time $500,000.00 plus all costs and expenses of
(a) enforcement of this Guaranty and b)) collection and sale of any
collateral securing this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one
time. If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all
guaranties shall be cumulative. This Guaranty shall not (unless specifically
provided below to the contrary) affect or invalidate any such other
guaranties. The liability of Guarantor will be the aggregate liability of
Guarantor under the terms of this Guaranty and any such other unterminated
guaranties.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when
due, whether at maturity or earlier by reason of acceleration or otherwise,
of all Indebtedness within the limits set forth in the preceding section of
this Guaranty. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection
with any remaining portions of the Indebtedness or any of the Indebtedness
which subsequently arises or is thereafter incurred or contracted. Any
married person who signs this Guaranty hereby expressly agrees that r course
may be had against both his or her separate property and community property.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower. and will continue in full force until all Indebtedness
incurred or contracted before receipt by Lender of any notice of revocation
shall have been fully and finally paid and satisfied and all other
obligations of Guarantor under this Guaranty shall have been performed in
full. If Guarantor elects to revoke this Guaranty. Guarantor may only do so
in writing. Guarantor's written notice of revocation must be mailed to
Lender, by certified mail, at the address of Lender listed above or such
other place as Lender may designate in writing. Written revocation of this
Guaranty will apply only to advances or now Indebtedness created after actual
receipt by Lender of Guarantor's written revocation. For this purpose and
without limitation, the term 'new Indebtedness" does not include Indebtedness
which at the time of notice of revocation is contingent, unliquidated,
undetermined or not due and which later becomes absolute, liquidated,
determined or due. This Guaranty will continue to bind Guarantor for all
Indebtedness incurred by Borrower or committed by Lender prior to receipt of
Guarantor's written notice of revocation, including any extensions, renewals,
substitutions or modifications of the Indebtedness. All renewals,
extensions, substitutions, and modifications of the Indebtedness granted
after Guarantor's revocation are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty
shall bind the estate of Guarantor as to Indebtedness created both before and
after the death or incapacity of Guarantor, regardless of Lender's actual
notice of Guarantor's death. Subject to the foregoing, Guarantor's executor
or administrator or other legal representative may terminate this Guaranty in
the same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty
of the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this
Guaranty. It is anticipated that fluctuations may occur in the aggregate
amount of Indebtedness covered by this Guaranty, and It is specifically
acknowledged and agreed by Guarantor that reductions in the amount of
Indebtedness, even to zero dollars ($0.00), prior to written revocation of
this Guaranty by Guarantor shall not constitute a termination of this
Guaranty. This Guaranty In binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness remains
unpaid and even though the Indebtedness guaranteed may from time to time be
zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof.' without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above. to make
<PAGE>
03-25-1997 COMMERCIAL GUARANTY PAGE 3
LOAN NO 27114 (CONTINUED)
- -------------------------------------------------------------------------------
security interest is specifically waived or released by an instrument in
writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender. whether now existing or hereafter
created, shall be prior to any claim that Guarantor may now have or hereafter
acquire against Borrower, whether or not Borrower becomes insolvent.
Guarantor hereby expressly subordinates any claim Guarantor may have against
Borrower, upon any account whatsoever, to any claim that Lender may now or
hereafter have against Borrower. In the event of insolvency and consequent
liquidation of the assets of Borrower, through bankruptcy, by an assignment
for the benefit of creditors, by voluntary liquidation, or otherwise, the
assets of Borrower applicable to the payment of the claims of both Lender and
Guarantor shall be paid to Lender and shall be first applied by Lender to the
Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender
all claims which it may have or acquire against Borrower or against any
assignee or trustee in bankruptcy of Borrower; provided however, that such
assignment shall be effective only for the purpose of assuring to Lender full
payment in legal tender of the Indebtedness. If Lender so requests, any
notes or credit agreements now or hereafter evidencing any debts or
obligations of Borrower to Guarantor shall be marked with a legend that the
same are subject to this Guaranty and shall be delivered to Lender. Guarantor
agrees, and Lender hereby is authorized, in the name of Guarantor, from time
to time to execute and file financing statements and continuation statements
and to execute such other documents and to take such other actions as Lender
deems necessary or appropriate to perfect, preserve and enforce its rights
under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Guaranty:
Integration, Amendment. Guarantor warrants, represents and agrees that
this Guaranty, together with any exhibits or schedules incorporated herein,
fully incorporates the agreements and understandings of Guarantor with
Lender with respect to the subject matter hereto of and all prior
obligations, drafts, and other extrinsic communications between Guarantor
and Lender shall have no evidentiary effect whatsoever. Guarantor further
agrees that Guarantor has read and fully understands the terms of this
Guaranty: Guarantor further agrees that Guarantor has read and fully
understands the terms of this Guaranty; Guarantor has had the opportunity
to be advised by Guarantor's attorney with respect to this Guaranty; the
Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to Lender's attorneys' fees) suffered or incurred by Lender as a
result of any breach by Guarantor of the warranties, representations and
agreements of this paragraph. No alteration or amendment to this Guaranty
shall be effective unless given in writing and signed by the parties sought
to be charged or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of Los
Angeles County, State of California. This Guaranty shall be governed by
and construed in accordance with the laws of the State of California.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile, and,
except for revocation notices by Guarantor, shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier, or when deposited in the United States mail, first class postage
prepaid, addressed to the party to whom the notice is to be given at the
address shown above or to such other addresses as either party may
designate to the other in writing. All revocation notices by Guarantor
shall be in writing and shall be effective only upon delivery to Lender as
provided above in the section titled 'DURATION OF GUARANTY.' If there is
more than one Guarantor, notice to any Guarantor will constitute notice to
all Guarantors. For notice purposes, Guarantor agrees to keep Lender
informed at all times of Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words 'Borrower' and 'Guarantor" respectively shall mean all and any one or
more of them. The words 'Guarantor,' 'Borrower,' and 'Lender' include the
heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. if any one or more of Borrower
or Guarantor are corporations or partnerships, it is not necessary for
Lender to inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Guaranty. No prior waiver by Lender, nor
any course of dealing between Lender and Guarantor, shall constitute a
waiver of any of Lender's rights or of any of Guarantor's obligations as to
any future transactions. Whenever the consent of Lender is required under
this Guaranty, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted of
withheld in the sole discretion of Lender.
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-25-1997 04-01-1999 27114 036599077 RWJ
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
<TABLE>
<S> <C> <C> <C>
Borrower: HOT RODS BY BOYD, INC., A DELAWARE CORPORATION Lender: City National Bank, a National Banking Association
8380 CERRITOS AVE. Orange County Commercial Banking Center #050000
STANTON, CA 90680 14241 East Firestone Boulevard
La Mirada, CA 90638-5566
</TABLE>
- -------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate (at City National Bank Prime Rate, making
an initial rate of 8.250%), Revolving Line of Credit Loan to a Corporation
for $500,000.00 due on April 1, 1999.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] Personal, Family, or Household Purposes or Personal Investment.
[ ] Business (Including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: WORKING CAPITAL.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will
be disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $500,000.00 as follows:
Undisbursed Funds: $500,000.00
-----------------------
Note Principal: $500,000.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO
LENDER. THIS AUTHORIZATION IS DATED MARCH 25, 1997.
BORROWER:
HOT RODS BY BOYDS, INC. A DELAWARE CORPORATION
By:x_______________________________________ By:x________________________________
BOYD CODDINGTON, PRESIDENT & SECRETARY DIANE CODDINGTON, VICE PRESIDENT
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,133,779
<SECURITIES> 0
<RECEIVABLES> 2,335,940
<ALLOWANCES> 319,398
<INVENTORY> 9,947,667
<CURRENT-ASSETS> 16,782,560
<PP&E> 14,118,388
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,149,396
<CURRENT-LIABILITIES> 5,630,900
<BONDS> 0
0
0
<COMMON> 17,856,101
<OTHER-SE> 595,969
<TOTAL-LIABILITY-AND-EQUITY> 31,149,396
<SALES> 3,576,093
<TOTAL-REVENUES> 3,576,093
<CGS> 3,869,892
<TOTAL-COSTS> 1,011,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,906
<INCOME-PRETAX> (1,416,285)
<INCOME-TAX> (215,000)
<INCOME-CONTINUING> (1,201,285)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,201,285)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> 0
</TABLE>
