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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-25974
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R-B RUBBER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0967413
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
904 E. 10th Avenue, McMinnville, Oregon 97128
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 503-472-4691
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 2,239,167
(Class) (Outstanding at August 7, 1998)
Transitional Small Business Disclosure Format (check one): Yes___ No __X__
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R-B RUBBER PRODUCTS, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
------------------------------ -----
<S> <C>
Item 1. Financial Statements
Report of Independent Accountants 2
Balance Sheets - June 30, 1998 and December 31, 1997 3
Statements of Operations - Three and Six Months Ended
June 30, 1998 and 1997 4
Statements of Cash Flows - Six Months Ended June 30, 1998
and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
R-B Rubber Products, Inc.
We have made a review of the condensed balance sheets of R-B Rubber Products,
Inc. as of June 30, 1998 and December 31, 1997, the related condensed statements
of operations for the three and six month periods ended June 30, 1998 and 1997,
and the related condensed statements of cash flows for the six month periods
ended June 30, 1998 and 1997, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of the interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
Morrison & Liebswager, P.C.
King City, Oregon
August 7, 1998
2
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R-B RUBBER PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 163,922 $ 291,990
Accounts receivable, net of allowances of $3,425 and $6,216 788,018 910,480
Income taxes receivable, net 20,779 -
Inventories, net 956,137 692,073
Prepaid expenses and other 83,485 37,738
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Total Current Assets 2,012,341 1,932,281
Property, Plant and Equipment, net of accumulated
depreciation and valuation allowance of $1,944,498
and $1,727,139 4,980,176 4,066,562
Other Assets 508,107 276,693
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Total Assets $7,500,624 $6,275,536
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---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable - bank $ 277,230 $ -
Notes payable - other 19,302 -
Accounts payable 610,085 404,210
Payroll and related benefits payable 86,389 68,747
Interest payable - 4,363
Income taxes payable - 19,180
Current portion of long-term debt 238,507 134,507
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Total Current Liabilities 1,231,513 631,007
Long-Term Debt, net of current portion 1,186,345 772,866
Deferred Income Taxes 249,856 238,034
Commitments and Contingencies
Shareholders' Equity:
Common stock, 20,000,000 shares authorized;
2,239,167 and 2,172,500 shares issued and outstanding 4,014,110 3,797,442
Additional paid-in capital 282,849 282,849
Retained earnings 535,951 553,338
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Total Shareholders' Equity 4,832,910 4,633,629
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Total Liabilities and Shareholders' Equity $7,500,624 $6,275,536
---------- -----------
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</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
3
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R-B RUBBER PRODUCTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Net sales $1,965,859 $1,725,485 $3,891,559 $3,352,376
Cost of sales 1,602,309 1,009,958 2,767,760 1,983,479
---------- ---------- ---------- -----------
Gross profit 363,550 715,527 1,123,799 1,368,897
Operating expenses:
Selling 200,673 172,274 430,579 317,270
General and administrative 370,986 292,621 693,317 597,432
---------- ---------- ---------- -----------
571,659 464,895 1,123,896 914,702
---------- ---------- ---------- -----------
Income (loss) from operations (208,109) 250,632 (97) 454,195
Other income (expense)
Interest income 2,197 - 4,918
Interest expense (28,063) (25,535) (52,281) (52,496)
Gain on sale of assets 13,100 - 13,100 555
Other income (expense), net (5,494) - 8,016 3,630
---------- ---------- ---------- -----------
(18,260) (25,535) (26,247) (48,311)
---------- ---------- ---------- -----------
Income (loss) before provision for income taxes (226,369) 225,097 (26,344) 405,884
Provision for (benefit from) income taxes (76,099) 78,517 (8,957) 139,057
---------- ---------- ---------- -----------
Net income (loss) $ (150,270) $ 146,580 $ (17,387) $ 266,827
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Net income (loss) per share $ (0.07) $ 0.07 $ (0.01) $ 0.12
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Shares used in per share calculations 2,276,474 2,220,615 2,276,474 2,214,035
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
4
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R-B RUBBER PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (17,387) $ 266,827
Adjustments to reconcile net income (loss) to net cash
flows provided by operating activities:
Depreciation and amortization 257,865 258,718
Gain on sale of equipment (13,100) (555)
(Increase) decrease in:
Accounts receivable, net 122,462 81,222
Income taxes receivable (20,779) -
Inventories, net (264,064) (237,349)
Prepaid expenses and other (45,747) (50,330)
Increase (decrease) in:
Income taxes payable (19,180) 76,590
Accounts payable 205,875 66,431
Payroll and related benefits payable 17,642 62,734
Interest payable (4,363) (10,485)
Deferred income taxes 11,822 62,478
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Net cash provided by operating activities 231,045 576,281
Cash flows from investing activities:
Payments for purchase of property and equipment (571,479) (645,309)
Proceeds from sale of fixed assets 13,100 555
Cash paid for acquisition (600,000) -
Other assets (14,746) (56,240)
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Net cash used in investing activities (1,173,125) (700,994)
Cash flows from financing activities:
Proceeds from short-term debt, net 296,532 302,000
Payments on short-term debt
- (112,770)
Proceeds from long-term debt 600,000 -
Payments on long-term debt (82,521) (69,431)
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Net cash provided by financing activities 814,011 119,799
Decrease in cash and cash equivalents (128,068) (4,914)
Cash and cash equivalents:
Beginning of period 291,990 26,547
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End of period $ 163,922 $ 21,633
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Non-cash investing activity:
Common Stock issued for acquisition $ 216,668 -
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</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
5
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R-B RUBBER PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three and six month periods
ended June 30, 1998 and 1997 and the financial information as of June 30, 1998
is unaudited; however, such information reflects all adjustments consisting only
of normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. The interim financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's 1997 Annual Report to Shareholders on
Form 10-KSB. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
NOTE 2. INVENTORIES
Inventories are stated at lower of cost, using average costs, which approximates
the first-in, first-out (FIFO) method, or market, and include materials, labor
and manufacturing overhead. Unsalable or unusable items are carried at scrap
value and reprocessed.
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
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<S> <C> <C>
Raw materials $ 108,003 $ 97,325
Finished goods 786,003 575,435
Other 62,131 19,313
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$ 956,137 $ 692,073
------------- -----------------
------------- -----------------
</TABLE>
NOTE 3. ACQUISITION
On April 1, 1998, the Company announced the acquisition of substantially all of
the assets of certain operations of Iowa Mat Company for $600,000 in cash and
66,667 shares of the Company's Common Stock with a value on the date of issuance
of $216,668. In addition, based upon achieving certain revenue goals from Iowa
Mat Company products, the Company is required to issue an additional $200,000 of
the Company's Common Stock to the sellers of Iowa Mat Company based upon the
then current market price of the Company's Common Stock. A majority of the
$600,000 cash payment was financed with the Company's existing bank facilities.
The acquisition was accounted for as a purchase. Pro forma results of
operations are not presented as they are not materially different from
historical results of operations.
NOTE 4. EARNINGS PER SHARE
Beginning December 31, 1997, basic earnings per share (EPS) and diluted EPS are
computed using the methods prescribed by Statement of Financial Accounting
Standard No. 128, EARNINGS PER SHARE (SFAS 128). Basic EPS is calculated using
the weighted average number of common shares outstanding for the period and
diluted EPS is computed using the weighted average number of common shares and
dilutive common equivalent shares outstanding. Prior period amounts have been
restated to conform with the presentation requirements of SFAS 128.
6
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Following is a reconciliation of basic EPS and diluted EPS:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998 1997
-------------------------- ------------------------------------ -----------------------------------
Per Per
Share Share
BASIC EPS Loss Shares Amount Income Shares Amount
--------- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) available to Common
Shareholders $(150,270) 2,238,434 $(0.07) $146,580 2,172,500 $0.07
------ -----
------ -----
DILUTED EPS
-----------
Effect of dilutive stock options - - - 48,115
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Income (loss) available to Common
Shareholders $(150,270) 2,238,434 $(0.07) $146,580 2,220,615 $0.07
------ -----
------ -----
Six Months Ended June 30, 1998 1997
------------------------- -------------------------------------- ------------------------------------
Per Per
Share Share
BASIC EPS Loss Shares Amount Income Shares Amount
--------- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) available to Common
Shareholders $(17,387) 2,205,649 $(0.01) $266,827 2,172,500 $0.12
------ -----
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DILUTED EPS
-----------
Effect of dilutive stock options - - - 41,535
--------------------------- ----------------------
Income (loss) available to Common
Shareholders $(17,387) 2,205,649 $(0.01) $266,827 2,214,035 $0.12
------ -----
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</TABLE>
At June 30, 1998, there were 204,500 shares of the Company's Common Stock
subject to outstanding stock options that were not included in the eps
calculations since they would be antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB, including Management's Discussion and
Analysis or Plan of Operation, contains forward-looking statements that involve
a number of risks and uncertainties. Future market conditions are subject to
supply and demand conditions and decisions of other market participants over
which the Company has no control and which are inherently very difficult to
predict. Accordingly, there can be no assurance that the Company's revenues or
gross margins will improve. In addition, there are other factors that could
cause actual results to differ materially, including competitive pressures,
increased demand for, or diminished supply of, the Company's raw materials,
unanticipated difficulties in integrating acquired technologies or businesses
and the risk factors listed from time to time in the Company's Securities and
Exchange Commission reports, including, but not limited to, the report of Form
10-KSB for the year ended December 31, 1997. The Company wished to caution the
reader that these forward looking statements, such as the statements concerning
new product introductions and future tire chip processing capabilities, are only
predictions and are not statements of historical fact.
RESULTS OF OPERATIONS
Net sales increased 14 percent to $2.0 million for the second quarter of 1998
from $1.7 million for the second quarter of 1997 and increased 16 percent to
$3.9 million for the first half of 1998 compared to $3.4 million for the first
half of 1997. The increases were primarily attributable to the Company's
continued expansion in its primary markets. Sales for the
7
<PAGE>
second quarter and year to date periods for 1998 also include $120,000 of
sales from the Company's new molded product division related to the Iowa Mat
acquisition.
Gross profit decreased to $364,000 and $1.1 million, respectively (18.5
percent and 28.9 percent of net sales, respectively) for the three month and
six month periods ended June 30, 1998 from $716,000 and $1.4 million,
respectively (41.5 percent and 40.8 percent of net sales, respectively) for
the comparable periods of 1997. The decrease in the gross margin as a percent
of net sales is primarily a result of a negative $133,000 margin related to
the molded product sales, an inventory write-down of $70,000 related to
certain mats that will be re-ground and manufactured into new products and
increased maintenance costs of approximately $35,000. The Company expects
maintenance costs to remain at current levels due to the increased amount of
plant and equipment the Company is currently operating. In addition, raw
material costs have increased from the prior year due to an inadequate supply
of truck tire chips, which necessitated supplementing raw materials with
buffings. The Company is currently working to increase its supply of truck
tire chips from its current vendor, but anticipates that its raw material
costs will continue to be higher compared to prior periods until such
increases are sufficient to meet the Company's requirements. The negative
margin generated by the molded products division included several one-time
costs associated with bringing the production processes and quality of
product up to Company standards.
Selling expenses increased to $201,000 and $431,000, respectively (10.2 percent
and 11.1 percent of net sales, respectively) for the three month and six month
periods ended June 30, 1998 from $172,000 and $317,000, respectively (10.0
percent and 9.5 percent of net sales, respectively) for the comparable periods
of 1997. The increase is primarily a result of increased spending on product
promotion and advertising, including costs for the recently acquired molded
products division. In addition, the Company has increased sales personnel.
General and administrative expenses increased to $371,000 and $693,000,
respectively (18.9 percent and 17.8 percent of net sales, respectively) for
the three month and six month periods ended June 30, 1998 from $293,000 and
$597,000, respectively (17.0 percent and 17.8 percent of net sales,
respectively) for the comparable periods of 1997, primarily as a result of
one-time costs related to the Iowa Mat acquisition, partially offset by
efficiencies gained as the Company grows.
Net loss was $150,000 and $17,000, respectively for the three month and six
month periods ended June 30, 1998 compared to net income of $147,000 and
$267,000, respectively (8.5 percent and 8.0 percent of net sales, respectively),
for the comparable periods of 1997, as a result of the individual line item
changes discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 working capital was $0.8 million, including $164,000 of cash
and cash equivalents. In the first six months of 1998, working capital
decreased by $520,000 and the current ratio decreased to 1.6:1 from 3.1:1 at
December 31, 1997.
Cash and cash equivalents decreased $128,000 primarily due to $0.6 million used
for the purchase of property and equipment and $0.6 million used for the
purchase of Iowa Mat Company, offset by $267,000 provided by operations,
$214,000 provided by net short-term borrowings and $0.6 million provided by
long-term borrowings.
8
<PAGE>
Accounts receivable decreased $122,000 to $788,000 at June 30, 1998 compared to
$910,000 at December 31, 1997. Days sales outstanding decreased to 36 days at
June 30, 1998 compared to 37 days at December 31, 1997.
Inventories increased $264,000 to $956,000 at June 30, 1998 from $692,000 at
December 31, 1997 due primarily to building of finished goods inventory in order
to help ensure adequate quantities are available to meet anticipated demand.
Inventory turned approximately seven times on an annualized basis during the
second quarter of 1998 compared to nine times for all of 1997.
Accounts payable increased $206,000 to $610,000 at June 30, 1998 from $404,000
at December 31, 1997 primarily as a result in the build-up of inventory and
amounts related to the Company's building expansion.
Capital expenditures of $571,000 during the first half of 1998 primarily
resulted from the addition of equipment to automate the production and handling
of the Company's mat products as well as continued expansion of the Company's
rubber processing facility. Total capital expenditures are expected to be not
more than $2.0 million during 1998 and will be incurred primarily to purchase
and/or refurbish existing rubber processing equipment in order to further
increase production capacity and to increase the capability to use additional
tire chips instead of buffings, to purchase production equipment to diversify
the Company's product offerings and to construct an addition to the Company's
production facility. The $2.0 million of capital expenditures will be financed
primarily through the use of existing tax credits available to the Company.
The Company is currently working on a $1.2 million tax credit lease that is
scheduled to close by the end of 1998.
On April 1, 1998, the Company announced the acquisition of substantially all of
the assets of certain divisions of Iowa Mat Company for $600,000 in cash and
66,667 shares of the Company's Common Stock. In addition, based upon achieving
certain revenue goals from Iowa Mat Company products, the Company is required to
issue an additional $217,000 of the Company's Common Stock to the sellers of
Iowa Mat Company based upon the then current market price of the Company's
Common Stock. The $600,000 cash payment was financed with the Company's existing
bank facilities.
The Company is currently working on a building expansion to accommodate the
equipment related to the Iowa Mat acquisition and other additional production
equipment. The Company intends to refinance its existing building mortgage to
also include the costs for the expansion. The Company expects to achieve a
better interest rate, and expects the refinancing to close before the end of
August 1998. The Company also intends to decrease its short-term debt with a
portion of the proceeds from the refinancing.
At June 30, 1998, the Company had a $750,000 operating line of credit, which
bore interest at prime plus 0.25 percent, 8.75 percent at June 30, 1998. The
Company had $273,000 outstanding under this line of credit at June 30, 1998 and
was in compliance with all covenants. In August 1998, this line of credit was
amended to increase the available amount to $1.0 million, bearing interest at
prime.
9
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NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS
130 is to report a measure of all changes in equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company adopted SFAS 130 during the first quarter
of 1998. Comprehensive income (loss) did not differ from currently reported net
income (loss) in the periods presented.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for all
derivative instruments. SFAS 133 is effective for fiscal years beginning
after June 15, 1999. The Company does not have any derivative instruments
and, accordingly, the adoption of SFAS 133 will have no impact on the
Company's financial position or results of operations.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on April 29,
1998, at which the following action was taken:
1. The shareholders elected the five nominees for Director to the Board
of Directors of the Company. The five Directors elected, along with
the voting results are as follows:
<TABLE>
<CAPTION>
Name No. of Shares Voting For No. of Shares Withheld Voting
---- ----------------------- -----------------------------
<S> <C> <C>
Ronald L. Bogh 2,121,957 1,200
Jerry K. Brown 2,121,957 1,200
Edward DeRaeve 2,121,957 1,200
Douglas C. Nelson 2,121,957 1,200
James V. Reimann 2,121,957 1,200
</TABLE>
2. The shareholders approved an amendment to the R-B Rubber Products,
Inc. 1995 Stock Option Plan to increase the number of shares of the
Company's Common Stock that may be issued thereunder by 150,000 shares
shares voted against, 3,100 to a total of 300,000 shares (1,378,180
shares voted for, 42,972 shares abstained from voting and there were
698,905 broker non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as a part of this report are listed below and this
list is intended to constitute the exhibit index.
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
2.1 Agreement for Sale and Purchase of Business Assets by and between
Iowa Mat Company and R-B Rubber Products, Inc., dated April 1,
1998.
10.1 $285,000 Business Loan Agreement by and between Key Bank National
Association and R-B Rubber Products, Inc., dated April 1, 1998.
10.2 $315,000 Business Loan Agreement by and between Key Bank National
Association and R-B Rubber Products, Inc., dated April 1, 1998.
10.3 Schedule, dated June 4, 1998, to Master Lease Agreement dated
October 19, 1995, by and between U.S. Bancorp and R-B Rubber
Products, Inc.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended June
30, 1998.
11
<PAGE>
SIGNATURES
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.
Date: August 7, 1998 R-B RUBBER PRODUCTS, INC.
By: /s/ RONALD L. BOGH
--------------------------------
Ronald L. Bogh
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
By: /s/ BRIAN C. ALLEN
--------------------------------
Brian C. Allen
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
12
<PAGE>
EXHIBIT 2.1
AGREEMENT FOR SALE AND PURCHASE
OF BUSINESS ASSETS
EFFECTIVE DATE: April 1, 1998
PARTIES: Iowa Mat Company,
an Iowa corporation
1895 Wendover Avenue
Granger, IA 50109 ("Seller")
R-B Rubber Products, Inc.,
an Oregon corporation
904 E. 10th Avenue
McMinnville, OR 97128 ("Buyer")
RECITALS:
A. Seller is engaged in the business of manufacturing and selling rubber
brick pavers, playground tiles, weight plates, and brick mats ("Business").
B. Seller owns and maintains certain furniture, fixtures, equipment,
supplies, and other assets used in connection with the operation of the
Business.
C. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain of the assets used, useful, or intended to be used in the
operation of the Business, under the terms and conditions set forth herein.
AGREEMENT:
ARTICLE I
SALE OF BUSINESS
1.1 ASSETS SOLD. Seller agrees to sell to Buyer and Buyer agrees
to purchase from Seller, free from all liabilities, claims, and encumbrances,
the following assets owned by Seller and used in connection with the operation
of the Business ("Assets"):
(a) All machinery, equipment, tools, supplies, furniture,
fixtures, and other personal property of Seller used or
useful in the process of manufacturing rubber brick
pavers, playground tiles, and weight plates ("Products"),
including but not limited to the property identified in
Exhibit 1.1(a);
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(b) All patents, know-how, trademarks, and other intellectual
property relating to the Products and Seller's rubber brick
mat product ("Brick Mats") and the processes used or useful
in the manufacture thereof; and
(c) All goodwill (except for Seller's name), manuals, catalogs,
sales literature, files, records, customer lists, and other
intangible personal property of Seller used or useful in
connection with the operation of the Business.
1.2 ASSETS EXCLUDED. Excluded from this sale and purchase are the
following assets of Seller:
(a) Cash on hand;
(b) Business checking, savings, and trust accounts;
(c) Accounts receivable;
(d) Inventories of raw materials and finished goods;
(e) Machinery, equipment, and tools used directly in the
manufacture of Brick Mats;
(f) Advances to employees and prepaid expenses; and
(g) All other tangible assets not specifically identified in
Section 1.1.
1.3 LIABILITIES ASSUMED. Buyer shall assume no obligations or
liabilities of Seller. All such obligations and liabilities shall remain with
and be satisfied by Seller.
1.4 PURCHASE PRICE. The purchase price of the Assets ("Purchase
Price") shall be the sum of $600,000 ("Cash Portion") and unregistered common
stock ("Stock") of Seller worth up to $400,000 ("Stock Portion").
1.5 ALLOCATION OF PURCHASE PRICE. At or prior to the closing,
Seller and Buyer shall cooperate with one another in the preparation of an IRS
Form 8594 or a comparable document reflecting their allocation of the Purchase
Price among the Assets.
2
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ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PAYMENT OF CASH PORTION. The Cash Portion shall be paid as
follows:
(a) The sum of $100,000 shall be paid in cash on the closing date.
(b) Buyer intends to secure financing in order to obtain the
funds required to pay the remainder of the Cash Portion.
Buyer contemplates that such financing shall take the form of
either (i) a loan from a bank or financial institution or
(ii) a sale-leaseback transaction with a bank or other
financial institution. The balance of the Cash Portion shall
be paid in cash within five days after Buyer's receipt of the
proceeds from such financing transaction, but in no event
later than 5 days after the closing.
2.2 PAYMENT OF STOCK PORTION. The Stock Portion shall be paid as
follows:
(a) 66,667 shares of Stock shall be issued to Seller on the
closing date.
(b) In the event that Buyer's revenue from its sale of Products
and New Products (as defined in Section 2.3) equals or
exceeds $5,000,000 during any four consecutive fiscal
quarters of Buyer ending with or before the end of the 42nd
month following the month in which the closing date occurs,
the number of shares of Stock that, when multiplied by the
average quoted closing price of Stock on the final five
trading days of such four fiscal quarter period equals
$100,000, shall be issued to Seller.
(c) In the event that Buyer's revenue from its sale of Products
and New Products (as defined in Section 2.3) equals or
exceeds $7,500,000 during any four consecutive fiscal
quarters of Buyer ending with or before the end of the 42nd
month following the month in which the closing date occurs,
the number of shares of Stock that, when multiplied by the
average quoted closing price of Stock on the final five
trading days of such four fiscal quarter period equals
$100,000, shall be issued to Seller.
2.3 NEW PRODUCTS. For purposes of this Agreement, the term "New
Products" shall mean all compression molded products developed by Douglas Leech
("Leech") pursuant to the Research and Development Agreement referred to in
Section 5.1(e) and manufactured by Buyer primarily from recycled rubber.
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ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS
3.1 REPRESENTATIONS AND WARRANTIES. Seller makes the following
representations and warranties:
(a) Seller is now and on the closing date will be a corporation
duly organized and validly existing under the laws of the
State of Iowa. Seller has all requisite corporate power and
authority to own and operate the Assets and to carry on the
Business as now being conducted.
(b) The execution, delivery, and performance of this Agreement
have been duly authorized and approved by the Board of
Directors and shareholders of Seller, and this Agreement
constitutes a valid and binding agreement of Seller in
accordance with its terms.
(c) Seller holds good and marketable title to the Assets, free
and clear of restrictions on or conditions to transfer or
assignment and free and clear of liens, pledges, charges, or
encumbrances.
(d) Seller is not aware of any labor dispute or labor trouble
involving employees of Seller and represents that there has
not been any such dispute or trouble during the three years
preceding the effective date of this Agreement.
(e) Seller has no knowledge of any claim, litigation, proceeding,
investigation, or governmental action pending or threatened
against Seller which might result in any material change in
the Business or the condition of the Assets.
(f) On the closing date, there will be no material leases,
employment contracts, contracts for services or maintenance,
or other similar contracts relating to or connected with the
Assets.
(g) Seller acknowledges and understands that the Stock which will
be issued to Seller pursuant to Section 2.2 represents a
minority interest in Buyer and that Seller will not be in a
position to exercise voting control over the business and
affairs of Buyer.
(h) The Products, and the processes used in the manufacture
thereof, do not violate or infringe upon any person's patent,
trademark, copyright, or other claim to or right in
intellectual property.
(i) Seller knows of no fact which has resulted or which, in the
reasonable judgment of Seller, will result in a material
change in the Assets or in the
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marketability of the Products other than material changes
resulting from this Agreement and the consummation of the
transaction contemplated thereby.
(j) The execution and delivery of this Agreement by Seller and
the consummation of the transaction contemplated hereunder
will not result in the creation or imposition of any valid
lien, charge, or encumbrance on any of the Assets except as
contemplated by this Agreement and will not require the
authorization, consent, or approval of any third party.
(k) Seller has not employed any broker or finder in connection
with the transaction contemplated by this Agreement or taken
any action that would give rise to a valid claim against any
party for a brokerage commission, finder's fee, or other
similar payment.
(l) None of the representations or warranties of Seller contain
any untrue statement of a material fact or omit or misstate a
material fact necessary in order to make the statements
contained therein not misleading.
(m) All representations and warranties made by Seller shall
survive the closing date.
3.2 GENERAL COVENANTS OF SELLER. Between the effective date of
this Agreement and the closing date, Seller will:
(a) Operate the Business in the usual and ordinary course and in
substantial conformity with the Interim Agreement between the
parties dated March 5, 1998 ("Interim Agreement") and all
applicable laws, ordinances, regulations, rules, and orders
and use its best efforts to preserve the Business and the
continued operation thereof with Seller's customers,
suppliers, and others having relations with Seller;
(b) Not assign, sell, lease, or otherwise transfer or dispose of
any of the Assets, whether now owned or hereafter acquired,
except in the normal and ordinary course of business and in
connection with the normal operation of the Business;
(c) Maintain the Assets in their present condition, reasonable
wear and tear and ordinary usage excepted;
(d) Not distribute cash or other property to its shareholders;
(e) Not pay a bonus to or increase the compensation of any
employee;
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(f) Provide Buyer and its representatives with reasonable access during
business hours to the Assets and the records of the Business and
furnish such additional information concerning the Business as Buyer
from time to time may reasonably request;
(g) Comply with all applicable requirements of the Worker Adjustment
Retraining Notification Act, 29 USC Section 2101, et seq; and
(h) Exercise its best efforts to effect to consummate the transaction
contemplated by this Agreement and satisfy all of Seller's obligations
under this Agreement.
3.3 COVENANT TO COOPERATE. The parties intend to cooperate with one
another with respect to the collection of Seller's accounts receivable in order
to avoid duplication of effort and preserve valuable customer relationships.
Towards that end, Seller will comply with all reasonable requests made by Buyer
as to all aspects of the collection of such accounts receivable.
3.4 COVENANT NOT TO COMPETE. For a period of three years following the
closing date, Seller will not, within the continent of North America, directly
or indirectly (i) own, as a partner, stockholder, or otherwise, an interest in
or (ii) participate in the management, operation, or control of or (iii) perform
services or act in the capacity of an independent contractor, consultant, or
agent of any enterprise directly or indirectly engaged in the manufacture or
sale of any product manufactured or sold by Buyer, including but not limited to
Products and New Products, or other goods or products competitive with any such
product. Further, for a period of three years following the expiration of the
License (as defined in Section 6.1), Seller will not, within the continent of
North America, directly or indirectly (i) own, as a partner, stockholder, or
otherwise, an interest in or (ii) participate in the management, operation, or
control of or (iii) perform services or act in the capacity of an independent
contractor, consultant, or agent of any enterprise directly or indirectly
engaged in the manufacture or sale of Brick Mats, or other goods or products
competitive with Brick Mats. Finally, Seller will not, for a period of three
years following the closing date, directly or indirectly suggest, request, or
encourage any prior suppliers or customers of Seller to curtail, reduce, or
cancel their business done with Buyer. Seller agrees that it would be impossible
to measure the damage to Buyer resulting from a breach of any covenant set forth
in this Section 3.4 by Seller and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Seller agrees that, if Seller breaches
such a covenant, Buyer shall be entitled, in addition to all other remedies it
may have at law or in equity, to an injunction or other appropriate order
restraining any such breach, without showing or proving any actual damage
sustained by Buyer. In the event that a covenant set forth in this Section 3.4
is determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for which
it may be enforceable and/or over the maximum geographical area as to which it
may be enforceable and/or to the maximum extent in all other respects as to
which it may be enforceable, all as determined by such court in such action.
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3.5 COVENANT TO EXTEND INTERIM AGREEMENT. At Buyer's request, Seller will
extend the term of the Interim Agreement for a period of no more than 180 days
following the closing date.
3.6 TAX MATTERS COVENANT. Seller will maintain income tax reporting
positions consistent with the IRS Form 8594 or other document described in
Section 1.5.
ARTICLE IV
BUYER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS
4.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents
and warrants as follows:
(a) Buyer is a corporation duly organized and validly existing under the
laws of the State of Oregon. Buyer has all requisite corporate power
and authority to enter into this Agreement and perform its
obligations hereunder.
(b) The execution, delivery, and performance of this Agreement have been
duly authorized and approved by the Board of Directors of Buyer and
this Agreement constitutes a valid and binding agreement of Buyer in
accordance with its terms.
(c) Upon the issuance to Seller of the Stock described in Section 2.2,
Seller shall receive from Buyer good title thereto, free and clear
of all liens, charges, demands, or adverse claims, or other
restrictions upon the exercise of any of the attributes of
ownership, and Seller shall have full voting power with respect to
such Stock.
(d) The financial statements of Buyer attached to its quarterly report
on SEC Form 10-QSB for the period ended September 30, 1997
("Financial Statements") (i) are true and correct, (ii) have been
prepared in conformity with generally accepted accounting principals
(except as noted otherwise therein), subject to normal recurring
year-end adjustments (the effect of which will not, individually or
in the aggregate, be material) and the absence of notes, and (iii)
present fairly in all material respects the financial condition of
Buyer and the results of operations and changes in cashflow of Buyer
for the periods to which the Financial Statements relate.
(e) Buyer does not have any liabilities or obligations of any nature
with respect to its business that would be required by generally
accepted accounting principals to be reflected in the Financial
Statements (subject to normal year-end audit adjustments) except (i)
such liabilities and obligations that are reflected in the Financial
Statements, (ii) such liabilities or obligations that were incurred
in the ordinary course of business for normal trade or business
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obligations, and (iii) such liabilities or obligations that are not
individually or in the aggregate material to the business and
operations of Buyer.
(f) Buyer has, to the best of its knowledge, complied in all respects
with all laws of applicable governmental authorities, except as
individually or in the aggregate would not have a material adverse
effect.
(g) Since September 30, 1997, Buyer has operated its business in the
ordinary course, consistent with past practices, and there has not
been, except as disclosed in this Agreement, (i) any material
adverse effect with respect to Buyer or its business, (ii) any
material changes in the accounting methods or practices followed by
Buyer, (iii) any agreements or commitments to merge or consolidate
with any other corporation, association, firm, or other business
organization or division thereof, (iv) any other material
transaction other than in the ordinary course of the business of
Buyer and consistent with past practice, or (v) any agreements or
understandings, whether in writing or otherwise, for Buyer to take
any of the actions described in subparagraphs (i) through (iv).
(h) Buyer has not employed any broker or finder in connection with the
transactions contemplated by this Agreement or taken any action that
would give rise to a valid claim against any party for a brokerage
commission, finder's fee, or other similar payment.
(i) None of the representations or warranties of Buyer contain any
untrue statement of a material fact or omit or misstate a material
fact necessary in order to make the statements contained therein not
misleading.
(j) All representations and warranties made by Buyer shall survive the
closing date.
4.2 GENERAL COVENANT OF BUYER. Between the effective date of this
Agreement and the closing date, Buyer will use its best efforts to consummate
the transaction contemplated by this Agreement and satisfy all of Buyer's
obligations under this Agreement.
4.3 TAX MATTERS COVENANT. Buyer will maintain income tax reporting
positions consistent with the IRS Form 8594 or other document described in
Section 1.5.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES
5.1 BUYER'S CONDITIONS PRECEDENT. The obligation of Buyer to consummate
the transaction contemplated by this Agreement is subject to the fulfillment,
before or on the
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closing date, of each of the following conditions, any one or a portion of
which may be waived in writing by Buyer:
(a) All representations and warranties made in this Agreement by Seller
shall be true as of the closing date as fully as though such
representations and warranties had been made on and as of the
closing date, and Seller shall not have violated or failed to
perform in accordance with any covenant set forth in Section 3.2.
(b) Buyer shall have entered into contracts for the sale of Products
with Wright Equipment and Landscape Structures and any other
customer of Seller with respect to which Buyer desires to do
business, which contracts shall, in the sole discretion of Buyer and
its legal counsel, be acceptable in form and substance.
(c) Seller shall have provided to Buyer documents which shall, in the
sole discretion of Buyer and its legal counsel, be acceptable in
form and substance and which evidence the release of all liens
against the Assets possessed by Seller's bank.
(d) Seller shall have provided to Buyer documents and/or information
satisfactory to Buyer and its legal counsel, in their sole
discretion, evidencing that the Assets, and the use thereof by Buyer
in the manufacture and sale of Products, will not infringe upon the
patent, trademark, copyright, or other intellectual property claim
or right of any person.
(e) Buyer and Leech shall have entered into a Research and Development
Agreement ("R&D Agreement") identical in form to that attached as
Exhibit 5.1(e).
(f) The parties shall have prepared the IRS Form 8594 or other document
described in Section 1.5.
5.2 SELLER'S CONDITIONS PRECEDENT. The obligation of Seller to consummate
the transaction contemplated by this Agreement is subject to the fulfillment,
before or on the closing date, of each of the following conditions, any one or a
portion of which may be waived in writing by Seller:
(a) All representations and warranties made in this Agreement by Buyer
shall be true as of the closing date as fully as though such
representations and warranties had been made on and as of the
closing date, and Buyer shall not have violated or failed to perform
in accordance with the covenant set forth in Section 4.2.
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(b) Buyer and Douglas Leech shall have entered into the R&D Agreement.
ARTICLE VI
BRICK MATS
6.1 LICENSE. Effective as of the date of the consummation of the
transaction contemplated by this Agreement and for a period of three years
following such date, Buyer grants to Seller a non-exclusive license ("License")
to use all patents, know-how, trademarks, manufacturing processes, and other
intellectual property relating to the manufacture of Brick Mats ("Licensed
Property").
6.2 USE OF LICENSED PROPERTY. During the term of the License,
Seller may use the Licensed Property solely for the purpose of manufacturing and
selling Brick Mats. Notwithstanding anything to the contrary set forth in this
Agreement, however, Seller shall not, during any period of twelve consecutive
months, manufacture or sell Brick Mats in a quantity greater than the number of
Brick Mats which, when multiplied by Seller's regular selling price of Brick
Mats, equals $1,000,000.
6.3 PURCHASE OF BRICK MATS ASSETS. Upon the expiration of the
License, the Buyer shall purchase from Seller and Seller shall sell to Buyer the
tangible assets described in Exhibit 6.3 attached hereto ("Brick Mats Assets").
Between the date of this Agreement and the expiration of the License, Seller
shall not sell, assign or transfer any of the Brick Mat Assets to any third
party, except in the ordinary course of business. If the parties, within ten
days after the expiration of the License, are unable to agree upon the amount
and manner of payment of the purchase price of the Brick Mats Assets, the fair
market value thereof shall be determined by a qualified appraiser mutually
selected by the parties, and such determined value shall be the purchase price
of the Brick Mats Assets. Such appraiser's fee for determining the fair market
value of the Brick Mats Assets shall be paid in equal portions by the parties.
The purchase price of the Brick Mats Assets shall, at the sole option of Buyer,
be:
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(a) Paid in cash in immediately available funds, by certified or bank
cashier's check or electronic wire transfer to an account designated
by Seller, at the closing of the transaction; or
(b) Paid, together with interest at 8% per annum, in three equal
installments, commencing at the closing of the transaction and
continuing thereafter on the following two anniversaries thereof.
ARTICLE VII
INDEMNIFICATION AND SURVIVAL
7.1 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify
and hold Buyer and its successors and assigns harmless from and against any and
all claims, liabilities, and obligations of every kind and description,
contingent or otherwise, arising out of or related to the operation of the
Business prior to the consummation of the transaction described in this
Agreement and any and all damage or deficiency resulting from any
misrepresentation, breach of warranty or covenant, or nonfulfillment of any
agreement on the part of Seller under this Agreement. Seller further agrees to
permit Buyer to offset any amount owed by Seller to Buyer pursuant to this
Section 7.1 against the amount of any obligation owed by Buyer to Seller under
Section 2.1(b), Section 2.2(b), or Section 2.2(c).
7.2 PERSONAL GUARANTEE OF LEECH. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Leech absolutely and unconditionally guarantees to Buyer and its successors and
assigns the performance by Seller of Seller's indemnification described in
Section 7.1.
7.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
Seller harmless from and against any and all claims, liabilities, and
obligations of every kind and description arising out of or related to the
operation of the Assets following the consummation of the transaction described
in this Agreement and any and all damage or deficiency resulting from any
misrepresentation, breach of warranty or covenant, or nonfulfillment of any
agreement on the part of Buyer under this Agreement.
ARTICLE VIII
CLOSING
8.1 CLOSING DATE. The transaction described in this Agreement
shall be closed at the offices of Davis Wright Tremaine, 1300 SW Fifth Avenue,
Suite 2300, Portland, Oregon 97201 at 10:00 a.m., on April 1, 1998, or at such
other time as the parties may agree in writing.
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8.2 OBLIGATIONS OF SELLER AT CLOSING. At the closing, and
coincidentally with the performance by Buyer of its obligations described in
Section 8.3, Seller shall execute and deliver to Buyer the following:
(a) An Assignment and Bill of Sale substantially identical to
the form attached as Exhibit 8.2(a); and
(b) Such other certificates and documents as may be required by
the provisions of this Agreement.
8.3 OBLIGATIONS OF BUYER AT CLOSING. At the closing, and
coincidentally with the performance by Seller of its obligations described in
Section 8.2, Buyer shall deliver or, as appropriate, execute and deliver to
Seller the following:
(a) Payment of the portion of the Cash Portion described in
Section 2.1(a) in immediately available funds by certified or
bank cashier's check or electronic wire transfer to an
account designated by Seller;
(b) One or more certificates evidencing Seller's ownership of the
shares of Stock described in Section 2.2(a); and
(c) Such other certificates and documents as may be required by
the provisions of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 RISK OF LOSS. The risk of loss, damage, or destruction to any
of the Assets shall borne by Seller to the time of the consummation of the
transaction contemplated by this Agreement, and thereafter by Buyer.
9.2 NOTICES. Any notice required by this Agreement shall be sent
by certified mail, return receipt requested, to the parties at the addresses
listed on Page 1 of this Agreement. Unless written notice of a change of
address is received, notice shall be deemed to have been received five days
after mailing.
9.3 INCORPORATION OF COLLATERAL DOCUMENTS. All exhibits attached
to this Agreement or delivered pursuant to this Agreement shall be deemed a part
of this Agreement and incorporated herein, where applicable, as if fully set
forth herein.
9.4 SEVERABILITY. Any provision of this Agreement that is deemed
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without rendering invalid or unenforceable the remaining
provisions of this Agreement.
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9.5 WAIVER. No provision of this Agreement shall be waived unless
the waiver is in writing and signed by the waiving party. The failure by any
party to insist upon the strict performance of any provision of this Agreement
or to exercise any right or remedy consequent upon a breach thereof shall not
constitute a waiver of any such breach, of such provision, or of any other
provision. No waiver of any provision of this Agreement shall be deemed a
waiver of any other provision of the Agreement or a waiver of such provision
with respect to any subsequent breach, unless expressly provided in writing.
9.6 ATTORNEY'S FEES. In the event of any dispute or litigation
between the parties to declare or enforce any provision of this Agreement, the
prevailing party shall be entitled to recover from the losing party, in addition
to any other recovery and costs, reasonable attorney's fees incurred with
respect to such dispute or in such litigation, in both the trial and in all
appellate courts and in any bankruptcy proceeding.
9.7 MERGER. This Agreement embodies the entire agreement of the
parties hereto. There are no promises, terms, conditions, or obligations other
than those contained herein. This Agreement supersedes all prior
communications, representations, and agreements, verbal or written, between the
parties hereto and shall not be amended except in writing subscribed to by the
parties hereto.
9.8 ASSIGNMENT. This Agreement may not be assigned or transferred
by any party without the prior written consent of the other party.
9.9 SUCCESSORS. This Agreement shall inure to the benefit of the
successors and assigns of the respective parties hereto.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 GOVERNING LAW AND VENUE. This Agreement shall be governed by
and construed according to Oregon law, without regard to conflict of law
principles thereunder. The parties agree that all disputes relating to this
Agreement shall be tried before the courts of Oregon, with venue in Yamhill
County, Oregon, to the exclusion of all other courts that might have
jurisdiction except for this provision.
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Dated and agreed to as of the date first set forth above.
SELLER: BUYER:
Iowa Mat Company R-B Rubber Products, Inc.
By: By:
------------------------------ --------------------------------
Its: Its:
------------------------------ --------------------------------
AGREED UPON AS TO SECTION 7.2:
- --------------------------------
Douglas Leech
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BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$285,000.00 04-01-1998 04-05-2003 5009002 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THIS BUSINESS LOAN AGREEMENT BETWEEN R-B RUBBER PRODUCTS, INC. ("BORROWER") AND
KEYBANK NATIONAL ASSOCIATION ("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 RELYING UPON BORROWER'S
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 APRIL 1, 1998, 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 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 Business Loan Agreement, as 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 R-B RUBBER PRODUCTS, 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.
COLLATERAL. 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.
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.
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, surety, 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 KEYBANK NATIONAL ASSOCIATION, its
successors and assigns.
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 note 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 interests 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 agreements, 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,
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 2
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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.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
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 Interests; (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 authorizations 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 or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT 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 AND 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 binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
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 hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding 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 used, 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, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). 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 no 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 on, under, about or
from the properties by any prior owners or occupants of any of the
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 Environmental Laws. 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 inspections 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 and 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, or as a result of a violation of any
Environmental Laws. 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 this 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, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no 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
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 3
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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 Agreements, 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 binding 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 904 EAST 10TH AVENUE, MCMINNVILLE, OR 97128.
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
furnished 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 relying 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 COVENANTS. 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.
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's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than forty five (45) days after
the end of each fiscal quarter, Borrower's balance sheet and profit and
loss statement for the period ended, prepared and certified as correct to
the best knowledge and belief by Borrower's chief financial officer or
other officer or person acceptable 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.
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 cancelled 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
endorsements 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
name of the insurer; (b) the risks 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.
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 of Borrower's properties,
income, or profits. Provided 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
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 4
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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 Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents 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 at Borrower's
expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and 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 the
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, statutes,
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, on property 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 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
attorneys 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, transfer, 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
from 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 of 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 in 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 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 DEFINITIONS.
ADJUSTED TANGIBLE CAPITAL means Tangible Capital less investments in, advances
to, promissory notes and any receivables from, any affiliate or other related
entity of Borrower.
CAPITAL EXPENDITURES means current period net fixed assets less prior period net
fixed assets, plus current period depreciation.
CASH FLOW means net income after taxes, and exclusive of extraordinary gains and
income, plus depreciation and amortization.
CURRENT ASSETS shall be as defined by GAAP, minus prepaid expenses.
CURRENT LIABILITIES shall be as defined by GAAP
DEBT means all of Borrower's liabilities excluding Subordinated Debt
EBITDA means, calculated for the period of the previous four fiscal quarters,
the net earnings of Borrower plus the aggregate amounts deducted in determining
such net income in respect of interest expenses, taxes, depreciation and
amortization; but not, however, giving effect to extraordinary losses or gains
in calculating net income.
FIXED CHARGES means interest expense plus lease expense, current maturities of
long-term debt and current maturities of capital leases.
FUNDED DEBT means all interest bearing term loan Debt or capital lease payments
of Borrower having a maturity of greater than one year.
LIQUID ASSETS means Borrower's cash on hand plus Borrower's readily marketable
securities.
OPERATING CASH FLOW means net income after taxes, and exclusive of extraordinary
gains, gains on asset sales, and other income, plus depreciation and
amortization, plus interest expense, plus lease expense, less dividends, and
distributions.
SUBORDINATED DEBT means 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 CAPITAL means Tangible Net Worth plus Subordinated Debt
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TANGIBLE NET WORTH means 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.
TOTAL FIXED CHARGES means interest expense, plus current maturities of long-term
debt and current maturities of capital leases, plus lease expenses, plus
preferred stock dividends, plus Capital Expenditures.
TOTAL LIQUID ASSETS means Borrower's cash on hand plus Borrower's readily
marketable securities, plus Borrower's net trade accounts receivable.
TOTAL SENIOR LIABILITIES means total liabilities less Subordinated Debt.
UNENCUMBERED LIQUIDITY means the sum of unpledged cash, stocks, bonds, and other
near cash investments held in a person's name and immediately available with
unimpaired value; but not including pledged assets, IRA, 401(k), annuity or
trust accounts.
WORKING CAPITAL means Borrower's current assets, excluding prepaid expenses,
less Borrower's current liabilities.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
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 may 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 by 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
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, 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 a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to 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. Lender, at its option, may, but
shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
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.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under 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 the 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 the rights and
remedies provided in the Related Documents or available at 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 of 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 a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire and final 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 the
alteration or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF OREGON. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MULTNOMAH
COUNTY, THE STATE OF OREGON. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO
ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
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 Lender. Lender may provide, without any 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
<PAGE>
04-01-1998 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO 5009002 (CONTINUED)
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- --------------------------------------------------------------------------------
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
unconditionally 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 any 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 under 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 also will 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 (unless otherwise required
by law), 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 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 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.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any 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 assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written 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 or on Lender's behalf.
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 Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of 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.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3,1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL
1, 1998.
BORROWER:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
LENDER:
KEYBANK NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$285,000.00 04-01-1998 04-05-2003 5009002 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $285,000.00 INTEREST RATE: 8.420% DATE OF NOTE: APRIL 1, 1998
</TABLE>
PROMISE TO PAY. R-B RUBBER PRODUCTS, INC. ("BORROWER") PROMISES TO PAY TO
KEYBANK NATIONAL ASSOCIATION ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA, THE PRINCIPAL AMOUNT OF TWO HUNDRED EIGHTY FIVE THOUSAND &
00/100 DOLLARS ($285,000.00), TOGETHER WITH INTEREST AT THE RATE OF 8.420% PER
ANNUM ON THE UNPAID PRINCIPAL BALANCE FROM APRIL 1, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN IN 60 PAYMENTS OF $5,859.13 EACH PAYMENT.
BORROWER'S FIRST PAYMENT IS DUE MAY 5, 1998, AND ALL SUBSEQUENT PAYMENTS ARE DUE
ON THE SAME DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL PAYMENT WILL BE DUE
ON APRIL 5, 2003, AND WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET
PAID. 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, times the outstanding principal balance,
times 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. 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. Except for the foregoing, 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 and may result in Borrower
making fewer payments.
LATE CHARGE. If a payment is 16 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT.
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 defaults 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 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.
(g) Any 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.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
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 default, 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.
The interest rate will not exceed the maximum rate permitted by applicable law.
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. If not prohibited by applicable law, 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 OREGON. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF MULTNOMAH COUNTY, THE STATE OF OREGON. LENDER AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
OREGON.
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
signs, guarantees or endorses this Note, to the extent allowed by law, waive
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.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
<PAGE>
04-01-1998 PROMISSORY NOTE PAGE 2
LOAN NO 5009003 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
$285,000.00 04-01-1998 04-05-2003 5009002 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER,
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN R-B RUBBER PRODUCTS,
INC. (REFERRED TO BELOW AS "GRANTOR"); AND KEYBANK NATIONAL 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, 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 EQUIPMENT
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 R-B RUBBER PRODUCTS, 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. 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 KEYBANK NATIONAL ASSOCIATION, its successors
and assigns.
NOTE. The word "Note" means the note or credit agreement dated April 1, 1998,
in the principal amount of $285,000.00 from R-B RUBBER PRODUCTS, 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.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements 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. 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 a 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 THOUGH ALL OR ANY PART OF THE
INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY
NOT BE INDEBTED TO LENDER.
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 2
LOAN NO 5009002 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
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 Oregon, 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.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the 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. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
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 representatives 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 or 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, 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 or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold 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 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 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, et 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 1801, et seq., the Resource
Conservation and Recovery Act. 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing or intended to protect human health or the environment
("Environmental Laws"). 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
Environmental 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, or as a result of a violation of any
Environmental Laws. 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
cancelled or diminished without at least ten (10) 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 (15) 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.
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 3
LOAN NO 5009002 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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 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 (15) 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; (e) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (i) 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. Until default, 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. 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 (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.
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.
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 may 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 by or on behalf of Grantor under this Agreement, the 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 or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, 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.
However, this Event of Default shall not apply if there is a good faith
dispute by Grantor as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Grantor gives
Lender written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as
being an adequate reserve or bond for the dispute.
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. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
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.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within fifteen (15) days; or (b),
if the cure requires more than fifteen (15) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
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 Oregon 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 and any and all certificates of title and
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 4
LOAN NO 5009002 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
other documents relating 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 also shall 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 makes 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 unless Grantor has
signed, after an Event of Default occurs, a statement renouncing or modifying
Grantor's right to notification of sale. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days 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 an demand, with
interest at the Note rate from 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 or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses 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 then 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 pertaining 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 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 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 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 and final 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 the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of Multnomah
County, the State of Oregon. Lender and Grantor hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by either
Lender or Grantor against the other. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon.
ATTORNEYS' FEES; EXPENSES. Grantor 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 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 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. 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.
NOTICES. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile (unless otherwise required by law),
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 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 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 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
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 5009002 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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 APRIL 1,
1998.
GRANTOR:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$285,000.00 04-01-1998 04-05-2003 5009002 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
INSURANCE REQUIREMENTS. R-B RUBBER PRODUCTS, INC. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
COLLATERAL: ALL EQUIPMENT.
TYPE. All risks, including fire, theft and liability.
AMOUNT. Full insurable value.
BASIS. Actual cash value.
ENDORSEMENTS. Lender's loss payable clause with stipulation that
coverage will not be canceled or diminished without a minimum of
ten (10) days' prior written notice to Lender.
DEDUCTIBLES. $500.00.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender.
INSURANCE MAILING ADDRESS. All documents and other materials relating to
insurance for this loan should be mailed, delivered or directed to the following
address:
KEYBANK NATIONAL ASSOCIATION
COMMERCIAL LOAN SERVICES
P.O. BOX 5278
BOISE, ID 83705-5278
(800) 539-2191
PROVISION OF INSURANCE. Grantor agrees to deliver to Lender, thirty (30) days
from the date of this Agreement, evidence of the required insurance as provided
above, with an effective date of April 1, 1998, or earlier.
- --------------------------------------------------------------------------------
WARNING
Unless Grantor provides Lender with evidence of the insurance coverage as
required by Grantor's security documents, Lender may purchase insurance at
Grantor's expense to protect Lender's interest. This insurance may, but need
not, also protect Grantor's interest. If the collateral becomes damaged, the
coverage Lender purchases may not pay any claim Grantor makes or any claim
made against Grantor. Grantor may later cancel this coverage by providing
evidence that Grantor has obtained property coverage elsewhere. Grantor will
be responsible for the cost of any insurance purchased by Lender. The cost of
this insurance may be added to Grantor's Indebtedness. If the cost is added
to Grantor's Indebtedness, the interest rate on the underlying Indebtedness
will apply to this added amount. The effective date of coverage may be the
date Grantor's prior coverage lapsed or the date Grantor failed to provide
proof of coverage. The coverage Lender purchases may be considerably more
expensive than insurance Grantor can obtain on Grantor's own and may not
satisfy any need for property damage coverage or any mandatory liability
insurance requirements imposed by applicable law.
- --------------------------------------------------------------------------------
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance
agent or company) all information Lender deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 1, 1998.
GRANTOR:
R-B RUBBER PRODUCTS, INC.
By /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
- --------------------------------------------------------------------------------
FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE:______________ PHONE:______________
AGENT'S NAME:________________________________________
INSURANCE COMPANY:____________________________________________________
POLICY NUMBER:________________________________________________________
EFFECTIVE DATES:______________________________________________________
COMMENTS:_____________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$315,000.00 04-01-1998 04-05-2003 9003 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER,
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THIS BUSINESS LOAN AGREEMENT BETWEEN R-B RUBBER PRODUCTS, INC. ("BORROWER") AND
KEYBANK NATIONAL ASSOCIATION ("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 RELYING UPON BORROWER'S
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 APRIL 1, 1998, 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 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 Business Loan Agreement, as 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 R-B RUBBER PRODUCTS, 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.
COLLATERAL. 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.
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.
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, surety, 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 KEYBANK NATIONAL ASSOCIATION, its
successors and assigns.
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 note 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 interests 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 agreements, 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,
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 2
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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.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
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 Interests; (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 authorizations 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 or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT 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 AND 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 binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
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 hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding 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 used, 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, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). 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 no 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 on, under, about or
from the properties by any prior owners or occupants of any of the
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 Environmental Laws. 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 inspections 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 and 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, or as a result of a violation of any
Environmental Laws. 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 this 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, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no 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
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 3
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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 Agreements, 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 binding 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 904 EAST 10TH AVENUE, MCMINNVILLE, OR 97128.
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
furnished 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 relying 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 COVENANTS. 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.
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's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than forty five (45) days after
the end of each fiscal quarter, Borrower's balance sheet and profit and
loss statement for the period ended, prepared and certified as correct to
the best knowledge and belief by Borrower's chief financial officer or
other officer or person acceptable 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.
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 cancelled 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
endorsements 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
name of the insurer; (b) the risks 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.
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 of Borrower's properties,
income, or profits. Provided 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
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04-01-1998 BUSINESS LOAN AGREEMENT PAGE 4
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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 Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents 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 at Borrower's
expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and 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 the
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, statutes,
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, on property 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 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
attorneys 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, transfer, 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
from 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 of 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 in 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 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 DEFINITIONS.
ADJUSTED TANGIBLE CAPITAL means Tangible Capital less investments in, advances
to, promissory notes and any receivables from, any affiliate or other related
entity of Borrower.
CAPITAL EXPENDITURES means current period net fixed assets less prior period net
fixed assets, plus current period depreciation.
CASH FLOW means net income after taxes, and exclusive of extraordinary gains and
income, plus depreciation and amortization.
CURRENT ASSETS shall be as defined by GAAP, minus prepaid expenses.
CURRENT LIABILITIES shall be as defined by GAAP
DEBT means all of Borrower's liabilities excluding Subordinated Debt
EBITDA means, calculated for the period of the previous four fiscal quarters,
the net earnings of Borrower plus the aggregate amounts deducted in determining
such net income in respect of interest expenses, taxes, depreciation and
amortization; but not, however, giving effect to extraordinary losses or gains
in calculating net income.
FIXED CHARGES means interest expense plus lease expense, current maturities of
long-term debt and current maturities of capital leases.
FUNDED DEBT means all interest bearing term loan Debt or capital lease payments
of Borrower having a maturity of greater than one year.
LIQUID ASSETS means Borrower's cash on hand plus Borrower's readily marketable
securities.
OPERATING CASH FLOW means net income after taxes, and exclusive of extraordinary
gains, gains on asset sales, and other income, plus depreciation and
amortization, plus interest expense, plus lease expense, less dividends, and
distributions.
SUBORDINATED DEBT means 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 CAPITAL means Tangible Net Worth plus Subordinated Debt
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TANGIBLE NET WORTH means 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.
TOTAL FIXED CHARGES means interest expense, plus current maturities of long-term
debt and current maturities of capital leases, plus lease expenses. plus
preferred stock dividends, plus Capital Expenditures.
TOTAL LIQUID ASSETS means Borrower's cash on hand plus Borrower's readily
marketable securities, plus Borrower's net trade accounts receivable.
TOTAL SENIOR LIABILITIES means total liabilities less Subordinated Debt.
UNENCUMBERED LIQUIDITY means the sum of unpledged cash, stocks, bonds, and other
near cash investments held in a person's name and immediately available with
unimpaired value; but not including pledged assets, IRA, 401(k), annuity or
trust accounts.
WORKING CAPITAL means Borrower's current assets, excluding prepaid expenses,
less Borrower's current liabilities.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
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 may 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 by 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
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, 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 a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to 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. Lender, at its option, may, but
shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
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.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under 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 the 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 the rights and
remedies provided in the Related Documents or available at 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 of 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 a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire and final 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 the
alteration or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF OREGON. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MULTNOMAH
COUNTY, THE STATE OF OREGON. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO
ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
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 Lender. Lender may provide, without any 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
<PAGE>
04-01-1998 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO 9003 (CONTINUED)
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- --------------------------------------------------------------------------------
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
unconditionally 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 any 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 under 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 also will 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 (unless otherwise required;
by law), 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 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 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.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any 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 assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written 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 or on Lender's behalf.
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 Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of 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.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL
1, 1998.
BORROWER:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
LENDER:
KEYBANK NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$315,000.00 04-01-1998 04-05-2003 9003 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $315,000.00 INTEREST RATE: 7.920% DATE OF NOTE: APRIL 1, 1998
</TABLE>
PROMISE TO PAY. R-B RUBBER PRODUCTS, INC. ("BORROWER") PROMISES TO PAY TO
KEYBANK NATIONAL ASSOCIATION ("LENDER"), OR ORDER. IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA, THE PRINCIPAL AMOUNT OF THREE HUNDRED FIFTEEN THOUSAND &
00/100 DOLLARS ($315,000.00), TOGETHER WITH INTEREST AT THE RATE OF 7.920% PER
ANNUM ON THE UNPAID PRINCIPAL BALANCE FROM APRIL 1, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN IN 60 PAYMENTS OF $6,398.63 EACH PAYMENT.
BORROWER'S FIRST PAYMENT IS DUE MAY 5, 1998, AND ALL SUBSEQUENT PAYMENTS ARE DUE
ON THE SAME DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL PAYMENT WILL BE DUE
ON APRIL 5, 2003, AND WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET
PAID. 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, times the outstanding principal balance,
times 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. 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. Except for the foregoing, 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 and may result in Borrower
making fewer payments.
LATE CHARGE. If a payment is 16 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT.
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 defaults 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 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.
(g) Any 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.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
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 default, 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.
The interest rate will not exceed the maximum rate permitted by applicable law.
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. If not prohibited by applicable law, 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 OREGON. IF THERE
IS A LAWSUIT. BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF MULTNOMAH COUNTY, THE STATE OF OREGON. LENDER AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
OREGON.
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
signs, guarantees or endorses this Note, to the extent allowed by law, waive
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.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3,1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
<PAGE>
04-01-1998 PROMISSORY NOTE PAGE 2
LOAN NO 9003 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
$315,000.00 04-01-1998 04-05-2003 9003 305 E 121729 TLH12
- ----------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN R-B RUBBER PRODUCTS,
INC. (REFERRED TO BELOW AS "GRANTOR"); AND KEYBANK NATIONAL 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, 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 EQUIPMENT
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 R-B RUBBER PRODUCTS, 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. 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 KEYBANK NATIONAL ASSOCIATION, its successors
and assigns.
NOTE. The word "Note" means the note or credit agreement dated April 1, 1998,
in the principal amount of $315,000.00 from R-B RUBBER PRODUCTS, 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.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements 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. 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 a 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 THOUGH ALL OR ANY PART OF THE
INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY
NOT BE INDEBTED TO LENDER.
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 2
LOAN NO 9003 (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
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 Oregon, 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.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the 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. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
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 representatives 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 or 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, 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 or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold 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 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 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, et 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 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing or intended to protect human health or the environment
("Environmental Laws"). 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
Environmental 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, or as a result of a violation of any
Environmental Laws. 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 ten (10) 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 (15) 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.
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 3
LOAN NO 9003 (CONTINUED)
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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 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 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 (15) 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; (e) 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. Until default, 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. 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 (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.
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.
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 may 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 by or on behalf of Grantor under this Agreement, the 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 or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, 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.
However, this Event of Default shall not apply if there is a good faith
dispute by Grantor as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Grantor gives
Lender written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as
being an adequate reserve or bond for the dispute.
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. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
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.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within fifteen (15) days; or (b),
if the cure requires more than fifteen (15) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
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 Oregon 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 and any and all certificates of title and
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 4
LOAN NO 9003 (CONTINUED)
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other documents relating 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 also shall 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 makes 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 unless Grantor has
signed, after an Event of Default occurs, a statement renouncing or modifying
Grantor's right to notification of sale. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days 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 from 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 or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses 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 then 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 pertaining 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 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 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 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 and final 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 the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of Multnomah
County, the State of Oregon. Lender and Grantor hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by either
Lender or Grantor against the other. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon.
ATTORNEYS' FEES; EXPENSES. Grantor 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 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 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. 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.
NOTICES. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile (unless otherwise required by law),
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 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 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 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
<PAGE>
04-01-1998 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 9003 (CONTINUED)
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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 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 APRIL 1,
1998.
GRANTOR:
R-B RUBBER PRODUCTS, INC.
By: /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
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<PAGE>
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
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PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$315,000.00 04-01-1998 04-05-2003 9003 305 E 121729 TLH12
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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.
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</TABLE>
<TABLE>
<S> <C> <C> <C>
BORROWER: R-B RUBBER PRODUCTS, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
904 EAST 10TH AVENUE WILLAMETTE VALLEY COMMERCIAL BANKING CENTER.
MCMINNVILLE, OR 97128 SALEM
416 STATE STREET
P.O. BOX 2246 OR-20-96-0158
SALEM, OR 97308
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- ----------------------------------------------------------------------------------------------------
</TABLE>
INSURANCE REQUIREMENTS. R-B RUBBER PRODUCTS, INC. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
COLLATERAL: ALL EQUIPMENT.
TYPE. All risks, including fire, theft and liability.
AMOUNT. Full insurable value.
BASIS. Actual cash value.
ENDORSEMENTS. Lender's loss payable clause with stipulation that
coverage will not be canceled or diminished without a minimum of
ten (10) days' prior written notice to Lender.
DEDUCTIBLES. $500.00.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender.
INSURANCE MAILING ADDRESS. All documents and other materials relating to
insurance for this loan should be mailed, delivered or directed to the following
address:
KEYBANK NATIONAL ASSOCIATION
COMMERCIAL LOAN SERVICES
P.O. BOX 5278
BOISE, ID 83705-5278
(800) 539-2191
PROVISION OF INSURANCE. Grantor agrees to deliver to Lender, thirty (30) days
from the date of this Agreement, evidence of the required insurance as provided
above, with an effective date of April 1, 1998, or earlier.
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WARNING
Unless Grantor provides Lender with evidence of the insurance coverage as
required by Grantor's security documents, Lender may purchase insurance at
Grantor's expense to protect Lender's interest. This insurance may, but need
not, also protect Grantor's interest. If the collateral becomes damaged, the
coverage Lender purchases may not pay any claim Grantor makes or any claim
made against Grantor. Grantor may later cancel this coverage by providing
evidence that Grantor has obtained property coverage elsewhere. Grantor will
be responsible for the cost of any insurance purchased by Lender. The cost of
this insurance may be added to Grantor's Indebtedness. If the cost is added
to Grantor's Indebtedness, the interest rate on the underlying Indebtedness
will apply to this added amount. The effective date of coverage may be the
date Grantor's prior coverage lapsed or the date Grantor failed to provide
proof of coverage. The coverage Lender purchases may be considerably more
expensive than insurance Grantor can obtain on Grantor's own and may not
satisfy any need for property damage coverage or any mandatory liability
insurance requirements imposed by applicable law.
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AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance
agent or company) all information Lender deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 1, 1998.
GRANTOR:
R-B RUBBER PRODUCTS, INC.
By /s/ Ronald L. Bogh
-------------------------
RONALD L. BOGH, PRESIDENT
- --------------------------------------------------------------------------------
FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE:______________ PHONE:______________
AGENT'S NAME:________________________________________
INSURANCE COMPANY:____________________________________________________
POLICY NUMBER:________________________________________________________
EFFECTIVE DATES:______________________________________________________
COMMENTS:_____________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.3
SCHEDULE TO MASTER LEASE AGREEMENT
Schedule Number 10809.002
THIS SCHEDULE made as of JUNE 4, 1998, by and between U.S. BANCORP LEASING
& FINANCIAL ("Lessor"), having its principal place of business at P.O. Box
2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177, and R. B. RUBBER
PRODUCTS, INC. ("Lessee"), having its principal place of business at 904 EAST
TENTH AVENUE, MCMINNVILLE, OREGON 97128, to the Master Lease Agreement dated as
of OCTOBER 19, 1995 between the Lessee and the Lessor (the "Lease").
Capitalized terms used but not defined herein are used with the respective
meanings specified in the Lease.
LESSOR AND LESSEE HEREBY CONVENANT AND AGREE AS FOLLOWS:
(a) The following specified equipment (the "Property") is hereby made and
constituted Property for all purposes pursuant to the Lease:
One (1) US-15 Ultrasonic Cutting Systems #6358,
One (1) Compiling Station #5039,
Ten (10) US Knife Complete UK55C0.95 Matl #953393,
Ten (10) 1/2 x 41/4 Parabolt,
Two (2) 4x6 12ft. GR #2 & BTR Fir,
Three (3) 3/4 4x8 CDX Exterior Sheathing,
Two (2) 1/4" 4ft x 10ft Repro Ployrite,
One (1) Scissor Lift For Pallets-Lift Table,
Two (2) Presto Lift Table Model #X4W48-40, 4,000 lb. Capacity, Base Frame 48" x
64", Platform; 60" x 88" Push Button Controls 230/3P/60Hz Motor/Power,
One (1) 2YD Self-Dumping Hopper Standard No Casters Model 220NC,
One (1) Vacu-Hoist #VH-180 Standard Unit W/5 Pad, H Frame Adjustable to 72'
Long with 2'-6' Long Extension Handle,
One (1) Ergo-Sys Floor Standing Bridge Crane Model #ESRFS250-15-43-12,
Each of the above items are complete as equipped including, but not limited to
all attachments, accessories, and replacements relating thereto.
(b) The cost of the Property is $247,118..35;
Please Initial Here:____
<PAGE>
(c) The Schedule shall commence on June 10, 1998 and shall continue for
ninety-five (95) months thereafter.
(d) Lessee shall owe ninety-five (95) basic monthly rental payments in
arrears each in the amount of $2,224.00 (plus applicable sales/use
taxes). The first such payment shall be due on July 10, 1998 and shall
continue on the same day of each month thereafter until the end of the
term of this Schedule. In addition, Lessee shall pay daily pro rata
rental in the amount of $74.13 per day (plus applicable sales/use taxes)
from the date on which Lessee executes a Delivery and Acceptance
Certificate for the Property through June 9, 1998. Such daily pro rata
rental shall be due and payable upon execution by Lessee of a Delivery
and Acceptance Certificate with regard to the Property.
(e) The property will be installed or stored at the following address: 904
East Tenth Avenue, McMinnville, Oregon 97128, COUNTY: Yamhill;
(f) The record owner of the premises at which the Property will be installed
or stored is:;
1. LATE CHARGE. If any installment of Rent shall not be received by
Lessor or Lessor's Assignee within ten (10) days after such amount is due,
Lessee shall pay to Lessor a late charge equal to five percent (5.0%) of such
overdue amount.
2. TITLE PASSAGE. a. As long as no event of default has occurred under the
Lease, Lessee shall have the options, to purchase all, but not part, of the
Property at the end of sixty (60) months hereinafter called the "Mid-Term Option
Date", and "Mid-Term Option" or at the end of the Term or any renewal
thereof (hereinafter called the "End of Term Option Date" and "End
of Term Option").
b. The above Options may only be exercised by Lessee by written notice of
such exercise to Lessor, which notice must be received by Lessor not later
than one hundred eighty (180) days prior to: 1) the Mid-Term Option date
to exercise the Mid-Term Option; or 2) the End of Term Option Date to
exercise the End of Term Option. Payment of the purchase price must be
received by Lessor on or before the Mid-Term Option Date or the End of Term
Option Date as appropriate.
c. The Mid-Term Option purchase price for the Property shall be
$74,135.35. The End of Term purchase price for the Property shall be the fair
market value of the Property at the time of such exercise as mutually agreed
upon by Lessor and Lessee. If such parties cannot agree thereon after good
faith negotiation, the purchase price of the Property shall be the value
determined by an appraisal of the Property made by a reputable independent
equipment appraiser certified for the type of Property being appraised. The
appraiser shall be selected by Lessor and the cost of the appraisal shall be
paid by Lessee.
d. The Mid-Term Option purchase price shall only be applicable in the
event that the Mid-Term Option is exercised in accordance with its Terms.
Such purchase price shall not be deemed to be equal to the "anticipated
residual value" as such phrase is used in the Lease.
e. Upon receipt of payment of the purchase price together with any and
all applicable sales or other taxes due in connection therewith, and any and
all remaining sums or other amounts payable under this Schedule, Lessor shall
transfer all its right, title and interest in and to the Property to Lessee.
The Property shall be transferred "As Is" and "Where Is" without any express
or implied representations or warranties.
f. Should Lessee fail to either return the Property in accordance with
the Lease or exercise the End of Term Option in accordance with its terms, then
Lessor, at its sole option, shall have the right to: a) declare the End of Term
Option terminated and demand immediate return of the Property; or, b) extend the
Term for an additional six (6) months (the "Extended Term)". Should Lessor
elect to extend the Term, Lessee shall be irrevocably obligated to remit basic
monthly rent for the period beginning on the day immediately succeeding the last
day of the original Term (the "Holdover Date" ) and ending at the end of the
sixth (6) month thereafter. A payment of such rent being due on the Holdover
Date and on the same day of each consecutive month thereafter. Each payment of
such rent shall be in the amount of the basic
<PAGE>
monthly rent for the last month of the Term in accordance with the provisions
of this Schedule. All Lessee's other obligations under the Lease shall
remain in full force and effect for so long as Lessee shall continue to
possess the Property. Upon the expiration of each Extended Term, Lessor, at
its sole option, shall have the right to: a) permit Lessee to exercise the
End of Term Option in accordance with its Terms; b) declare the End of Term
Option terminated and demand immediate return of the Property; or, c) extend
the Term for an additional six (6) month Extended Term). Any and all rental
payments pursuant to this Paragraph shall be deemed for all intents and
purposes to be payments for possession and use of the Property after the
expiration of the Term, and shall not be credited to any other obligation of
Lessee to Lessor. Lessor's invoicing and/or accepting any such payment shall
not give rise to any right, title or interest of Lessee other than to
possession and use of the Property during the period to which such rent
applies in accordance with this Paragraph. The aforsaid right to charge
Lessee rent for possession and use of the Property is not in limitation or
derogation of any of Lessor's rights pursuant to the Lease.
3. MAINTENANCE, USE, AND RETURN PROVISIONS. One hundred eighty (180) days
prior to return of the Property, and at any other time, in Lessor's discretion,
Lessee must be able to demonstrate that the Property can perform at its
performance specifications according to the manufacturer's standards. An
independent certified technician chose by Lessor shall demonstrate the
performance of the property and the Property's physical condition. If it is
determined that improvements are needed in order to meet the manufacturer's
performance standards, Lessee shall cause such improvements to be made at
Lessee's expense. A certification letter from such technician as to the working
condition and performance of the Property shall be provided to Lessor. The cost
of the technical inspection, assessment and certification shall be borne by
Lessee.
Any special transportation devices, such as metal skids, lifting slings,
brackets, etc., which were with the Property when it originally arrived must be
used to assist with deinstallation and delivery. Blocking of sliding members,
securing of swinging doors, pendants, and their swinging components, wrapping,
boxing, bending and labeling of all components and documents must be done in a
conscientious and meticulous manner to facilitate the efficient reinstallation.
At no time are materials which would be considered "Hazardous Waste" by any
regulatory authority to be shipped with the machinery. Replacement parts must
be purchased from sources approved by the original manufacturer. No components,
tools or attachments are to be removed from the Property.
4. DEPRECIATION. Lessor will be entitled to modified accelerated cost
recovery depreciation based on 100% of Property Cost using the 200% declining
balance method, switching to straight line, for five (5) year Property, and
zero salvage value.
5. TAX INDEMNITY. Lessee hereby represents, warrants, and covenants to Lessor
as follows:
(a) This Lease will be a lease for purposes of Oregon Revised Statutes
("ORS") 469.185-225. Lessor will be treated as the purchaser, owner, lessor,
and original user of the Property and Lessee will be treated as the Lessee of
the Property for such purposes.
(b) Lessor Shall be entitled to the Business Energy Tax Credit ("BETC")
with respect to each item of Property as provided by ORS 469.185-225. The
applicable BETC available to Lessor in connection with this Schedule is
$86,491.42.
(c) In the event that, pursuant to ORS 469.185-225, Lessee is deemed to
be the party eligible to receive the BETC, then Lessee irrevocably transfers
to Lessor all right, title and interest which Lessee has or may have to such
BETC and agrees to cooperate with Lessor in any manner necessary to ensure
that Lessor continue to receive the benefit of such BETC.
If for any reason whatsoever any of the representations, warranties, or
covenants of Lessee contained in any other agreement relating to the Property
shall prove to be incorrect and (i) Lessor shall determine that it is not
entitled to claim all or any portion of the BETC in the amount specified (b)
above, or (ii) such BETC is disallowed, adjusted, recomputed, reduced, or
recaptured, in whole or in part, by the
<PAGE>
Director of the Oregon Department of Energy or his designee (such
determination, disallowance, adjustment, recomputation, reduction, or
recapture being herein called a "Loss"), then Lessee shall pay to Lessor as
an indemnity and as additional rent such amount as shall, in the reasonable
opinion of Lessor, cause Lessor's after-tax economic yield (the "Net Economic
Return") to equal the Net Economic Return that would have been realized by
Lessor if such Loss had not occurred. The amount payable to Lessor pursuant
to this section shall be payable on the next succeeding rental payment date
after written demand therefor from Lessor, accompanied by a written statement
describing in reasonable detail such Loss and the computation of the amount
so payable.
Further, in the event (i) there shall be any change, amendment, addition,
or modification of any provision of Oregon law or regulations thereunder or
interpretation thereof with respect to the matters set forth in this section
effective prior to the commencement date of the term of this Lease with respect
to any Property or (ii) if at any time there shall be any change, to the maximum
applicable BETC which results in a decrease in lessor's Net Economic Return,
then Lessor shall recalculate and submit to Lessee the modified rental rate
required to provide Lessor with the same net Economic Return as it would have
realized absent such change and the lease shall thereupon automatically be
deemed to be amended to adopt such rental rate and values.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Schedule to be duly executed as of the day and year first above written.
R-B RUBBER PRODUCTS, INC.
By:
-----------------------------
RONALD L. BOGH
PRESIDENT
U.S. BANCORP LEASING & FINANCIAL
By:
-----------------------------
An Authorized Officer Thereof
ADDRESS FOR ALL NOTICES
U.S. BANCORP LEASING & FINANCIAL
P.O. BOX 2177, 7659 S.W. MOHAWK STREET
TUALATIN, OREGON 97062-2177
MACHINE TOOL FINANCE GROUP GENERAL EQUIPMENT GROUP
(800)225-8029 (503)797-0222 (800)253-3468 (503)797-0200
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 163,922
<SECURITIES> 0
<RECEIVABLES> 791,443
<ALLOWANCES> 3,425
<INVENTORY> 956,137
<CURRENT-ASSETS> 2,012,341
<PP&E> 6,924,674
<DEPRECIATION> 1,944,498
<TOTAL-ASSETS> 7,500,624
<CURRENT-LIABILITIES> 1,231,513
<BONDS> 1,721,384
0
0
<COMMON> 4,014,110
<OTHER-SE> 818,800
<TOTAL-LIABILITY-AND-EQUITY> 7,500,624
<SALES> 3,891,559
<TOTAL-REVENUES> 3,891,559
<CGS> 2,767,760
<TOTAL-COSTS> 2,767,760
<OTHER-EXPENSES> 1,123,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,281
<INCOME-PRETAX> (26,345)
<INCOME-TAX> (8,957)
<INCOME-CONTINUING> (17,387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,387)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
