U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGEACT OF 1934
For the quarterly period ended December 26, 1999,
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-25866
PHOENIX GOLD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-1066325
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9300 NORTH DECATUR STREET, PORTLAND, OREGON 97203
(Address of principal executive offices) (Zip code)
(503) 286-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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 [ ]
There were 3,049,445 shares of the issuer's common stock outstanding as of
January 31, 2000.
1
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1999
INDEX
-----
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets at December 31, 1999
and September 30, 1999 (unaudited) 3
Statements of Earnings for the Three Months Ended
December 31, 1999 and 1998 (unaudited) 4
Statements of Cash Flows for the Three Months Ended
December 31, 1999 and 1998 (unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
INDEX TO EXHIBITS 13
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PHOENIX GOLD INTERNATIONAL, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
-------------------- --------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 677,002 $ 868,458
Accounts receivable, net 4,342,707 4,794,799
Inventories 6,283,774 5,620,835
Prepaid expenses 274,676 213,677
Deferred taxes 315,000 315,000
-------------------- --------------------
Total current assets 11,893,159 11,812,769
Property and equipment, net 948,555 1,055,531
Goodwill, net 168,176 178,081
Deferred taxes 585,000 600,000
Other assets 266,002 242,058
-------------------- --------------------
Total assets $ 13,860,892 $ 13,888,439
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,485,439 $ 1,074,881
Accrued payroll and benefits 312,933 436,970
Other accrued expenses 284,667 379,782
Income taxes payable 135,644 81,644
-------------------- --------------------
Total current liabilities 2,218,683 1,973,277
Deferred gain on sale of facility 931,737 956,256
Shareholders' equity:
Preferred stock;
Authorized - 5,000,000 shares; none outstanding - -
Common stock, no par value;
Authorized - 20,000,000 shares
Issued and outstanding - 3,078,445 and 3,234,345 shares 6,695,590 7,155,997
Retained earnings 4,014,882 3,802,909
-------------------- --------------------
Total shareholders' equity 10,710,472 10,958,906
-------------------- --------------------
Total liabilities and shareholders' equity $ 13,860,892 $ 13,888,439
==================== ====================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Net sales $ 6,893,627 $ 6,665,935
Cost of sales 5,092,858 4,944,883
------------------ ------------------
Gross profit 1,800,769 1,721,052
Operating expenses:
Selling 926,769 781,681
General and administrative 531,387 542,177
------------------ ------------------
Total operating expenses 1,458,156 1,328,858
------------------ ------------------
Income from operations 342,613 392,194
Other income (expense):
Interest expense - (48,858)
Other income, net 8,360 -
------------------ ------------------
Total other income (expense) 8,360 (48,858)
------------------ ------------------
Earnings before income taxes 350,973 343,336
Income tax expense (139,000) (137,000)
------------------ ------------------
Net earnings $ 211,973 $ 206,336
================== ==================
Earnings per share - basic and diluted $ 0.07 $ 0.06
================== ==================
Average shares outstanding - basic and diluted 3,156,721 3,436,261
================== ==================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 211,973 $ 206,336
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization 160,981 245,825
Deferred taxes 15,000 10,000
Changes in operating assets and liabilities:
Accounts receivable 452,092 (306,495)
Inventories (662,939) 565,208
Prepaid expenses (60,999) (84,817)
Other assets (36,944) -
Accounts payable 410,558 (583,986)
Accrued expenses (165,152) (226,414)
-------------- ---------------
Net cash provided by (used in) operating activities 324,570 (174,343)
Cash flows from investing activities:
Capital expenditures, net (55,619) (22,240)
--------------- ---------------
Net cash used in investing activities (55,619) (22,240)
Cash flows from financing activities:
Line of credit, net - 608,189
Repayment of long-term obligations - (55,209)
Purchase of common stock (460,407) (356,400)
--------------- ---------------
Net cash provided by (used in) financing activities (460,407) 196,580
--------------- ---------------
Decrease in cash and cash equivalents (191,456) (3)
Cash and cash equivalents, beginning of period 868,458 2,602
--------------- ---------------
Cash and cash equivalents, end of period $ 677,002 $ 2,599
=============== ===============
Supplemental disclosure:
Cash paid for interest $ - $ 50,000
Cash paid for income taxes
70,000 -
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from these unaudited financial statements. These unaudited
financial statements should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 filed with the Securities and Exchange Commission. The
results of operations for the three-month period ended December 31, 1999 are not
necessarily indicative of the operating results for the full year. In the
opinion of management, all adjustments, consisting only of normal recurring
accruals, have been made to present fairly the Company's financial position at
December 31, 1999 and the results of its operations and its cash flows for the
three-month periods ended December 31, 1999 and 1998.
NOTE 2 - REPORTING PERIODS
The Company's fiscal year is the 52-week or 53-week period ending the last
Sunday in September. Fiscal 2000 and fiscal 1999 are 52-week years and all
quarters are 13-week periods. For presentation convenience, the Company has
indicated in these financial statements that its fiscal year ended on September
30 and that the three months presented ended on December 31.
NOTE 3 - PROSPECTIVE ACCOUNTING CHANGE
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The new statement will require recognition of all
derivatives as either assets or liabilities on the balance sheet at fair value.
The new statement is effective for the year ending September 30, 2001.
Management has not yet completed an evaluation of the effect this standard will
have on the Company's financial statements.
NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
--------------------- ---------------------
<S> <C> <C>
Raw materials and work-in-process $ 2,700,594 $ 2,531,260
Finished goods and supplies 3,583,180 3,089,575
--------------------- ---------------------
Total inventories $ 6,283,774 $ 5,620,835
===================== =====================
</TABLE>
6
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
--------------------- ---------------------
<S> <C> <C>
Machinery, equipment and vehicles $ 4,748,414 $ 4,717,198
Leasehold improvements 28,232 3,829
--------------------- ---------------------
4,776,646 4,721,027
Less accumulated depreciation
and amortization (3,828,091) (3,665,496)
--------------------- ---------------------
Total property and equipment, net $ 948,555 $ 1,055,531
===================== =====================
</TABLE>
NOTE 6 - LINE OF CREDIT
During December 1999, the Company renewed its revolving operating line of
credit through December 2000. The new agreement provides for borrowings of up to
$5.0 million subject to eligible accounts receivable and inventories and certain
additional limits. Interest on the borrowings is equal to the bank's prime
lending rate (8.5% at December 31, 1999) or LIBOR plus 1.75%. Borrowings under
the line of credit are secured by cash and cash equivalents, accounts receivable
and inventories. The line of credit contains covenants which require a minimum
level of tangible net worth, a minimum ratio of current assets to current
liabilities and a maximum ratio of interest bearing debt to tangible net worth.
As of December 31, 1999, the Company was eligible to borrow $5.0 million under
the line of credit. No borrowings were outstanding under the line of credit as
of that date.
NOTE 7 - SHAREHOLDERS' EQUITY
The Board of Directors has authorized the Company to purchase up to $1.0
million of Company common stock. During the three months ended December 31,
1999, the Company acquired 155,900 shares of its common stock for $460,000. From
the inception of the stock repurchase program, the Company has acquired $850,000
of Company common stock.
7
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net sales increased $228,000, or 3.4%, to $6.9 million for the three
months ended December 31, 1999 compared to $6.7 million for the three months
ended December 31, 1998 due principally to increased domestic sales. Domestic
sales increased $310,000, or 6.4%, to $5.1 million for the three months ended
December 31, 1999 compared to $4.8 million for the three months ended December
31, 1998. International sales decreased 4.5% to $1,762,000 for the three months
ended December 31, 1999, from $1,845,000 in the comparable 1998 period.
International sales represented 25.6% and 27.7% of net sales for the three
months ended December 31, 1999 and 1998, respectively. Sales of electronics and
speakers increased 9.3% and 60.0%, respectively for the three months ended
December 31, 1999 compared to the corresponding quarter in fiscal 1999. Sales of
accessories decreased 23.3% for the three months ended December 31, 1999
compared to the three months ended December 31, 1998. The Company expects
international sales for fiscal 2000 to remain at levels lower than historically
achieved.
Gross profit increased to 26.1% from 25.8% of net sales for the three
months ended December 31, 1999 and 1998, respectively, primarily due to
increased sales volume which caused manufacturing overhead to decrease as a
percentage of sales.
Operating expenses consist of selling, general and administrative
expenses. Total operating expenses increased $129,000, or 9.7%, to $1,458,000
for the three months ended December 31, 1999 compared to $1,329,000 for the
three months ended December 31, 1998. Operating expenses were 21.2% and 19.9% of
net sales in the respective three-month periods.
Selling expenses increased $140,000, or 17.8%, to $927,000 for the three
months ended December 31, 1999 compared to $787,000 for the comparable 1998
period. Selling expenses were 13.4% and 11.8% of net sales in the respective
three-month periods. The increased selling expenses in dollar amount were due to
higher payroll costs as a result of additional sales and marketing personnel,
increased salaries and wages and increased sales incentive programs.
General and administrative expenses decreased $11,000, or 2.0%, to
$531,000 for the three months ended December 31, 1999 compared to $542,000 for
the comparable fiscal 1999 period. General and administrative expenses were 7.7%
and 8.1% of net sales in the respective three-month periods. The decreased
general and administrative expenses were due to decreased engineering expenses
offset in part by higher payroll costs as a result of increased salaries and
wages.
Interest expense decreased by $49,000 to $0 for the three months ended
December 31, 1999 compared to $49,000 for the three months ended December 31,
1998. The decrease in interest expense was due to repayment of short and
long-term borrowings in fiscal 1999.
Net earnings were $212,000, or $0.07 per share - basic and diluted (based
on 3.16 million shares outstanding), for the three months ended December 31,
1999, compared to net earnings of $206,000, or $0.06 per share - basic and
diluted (based on 3.44 million shares outstanding) for the three months ended
December 31, 1998. The increase in net earnings in the first quarter
8
<PAGE>
of fiscal 2000 compared to the corresponding quarter in fiscal 1999 was due to
increased sales, improved gross margin and reduced interest expense.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary needs for funds are for working capital and, to a
lesser extent, for capital expenditures. The Company financed its operations
during the first quarter of fiscal 2000 from cash generated from operating
activities. Net cash provided by operating activities was $325,000 for the three
months ended December 31, 1999. When cash flow from operations was less than
current needs, the Company increased the balance owing on its operating line of
credit. When cash flow from operations exceeded current needs, the Company paid
down in part the balance owing on its operating line of credit rather than
investing and accumulating excess cash which resulted in low reported cash
balances in periods prior to September 30, 1999.
Cash and cash equivalents decreased by $191,000 during the three months
ended December 31, 1999 due principally to purchases of Company common stock.
Accounts receivable decreased by $452,000 during the first quarter of fiscal
2000 due to a decrease in sales in the first quarter of fiscal 2000 as compared
to the fourth quarter of fiscal 1999. Inventories increased by $663,000 and
accounts payable increased $411,000 during the first quarter of fiscal 2000 due
to management's efforts to increase certain electronics, speakers and
accessories inventories. Prepaid expenses increased $61,000 during the three
months ended December 31, 1999 primarily due to trade show deposits and
insurance costs incurred at the beginning of the Company's fiscal year. Accrued
expenses decreased $165,000 due to lower accrued payroll and benefits at
December 31, 1999. Overall, net working capital decreased $165,000 during the
first quarter of fiscal 1999 due to the Company acquiring 155,900 shares of its
common stock for $460,000.
The Company made capital expenditures of $56,000 in the three months ended
December 31, 1999. Management anticipates that discretionary capital
expenditures for the remainder of fiscal 2000 will not exceed $400,000. These
anticipated expenditures will be financed from available cash, cash provided
from operations and, if necessary, proceeds from the line of credit.
During December 1999, the Company renewed its revolving operating line of
credit through December 2000. The new agreement provides for borrowings of up to
$5.0 million subject to eligible accounts receivable and inventories and certain
additional limits. Interest on the borrowings is equal to the bank's prime
lending rate (8.5% at December 31, 1999) or LIBOR plus 1.75%. Borrowings under
the line of credit are secured by cash and cash equivalents, accounts receivable
and inventories. The line of credit contains covenants which require a minimum
level of tangible net worth, a minimum ratio of current assets to current
liabilities and a maximum ratio of interest bearing debt to tangible net worth.
As of December 31, 1999, the Company was eligible to borrow $5.0 million under
the line of credit. No borrowings were outstanding under the line of credit as
of that date.
The Company has assessed its exposure to market risks for its financial
instruments and has determined that its exposures to such risks are not
material. As of December 31, 1999, the Company had cash and cash equivalents of
$677,000 compared to $868,000 as of September 30, 1999. The Company invests its
excess cash in highly liquid marketable securities with maturities of three
months or less at date of purchase. The Company does not invest in derivative
securities.
9
<PAGE>
YEAR 2000 CONVERSION
- --------------------
The Company has completed the process of preparing its computer systems
and applications for the Year 2000 date conversion. Information systems
determined not to be Year 2000 compliant were modified, upgraded or replaced
through acquisition and implementation of "off the shelf" upgrades to existing
information systems software. The upgrades were acquired from third party
vendors at a cost of less than $20,000. As of the date of filing of this
Quarterly Report on Form 10-Q, the Company believes the effect of the Year 2000
conversion on its business was not and will not be material.
There can be no assurance, however, because of the existence of numerous
systems and related components within the Company and the interdependency of
these systems, that undetected Year 2000 issues could not materially adversely
affect our business in the future.
FORWARD-LOOKING STATEMENTS
- --------------------------
All statements in this report that are not statements of historical results
should be considered "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including, without limitation,
statements as to expectations, beliefs and future financial performance, and are
based on current expectations and are subject to certain risks, trends and
uncertainties that could cause actual results to vary from those projected,
which variances may have a material adverse effect on the Company. Among the
factors that could cause actual results to differ materially are the following:
competitive factors; potential fluctuations in quarterly results and
seasonality; the adverse effect of reduced discretionary consumer spending; the
need for the introduction of new products and product enhancements; dependence
on suppliers; control by current shareholders; high inventory requirements;
business conditions in international markets; the Company's dependence on key
employees; the need to protect intellectual property; costs or expenditures
associated with remediating potential Year 2000 issues; and, environmental
regulation as well as other factors discussed in Exhibit 99.1 to the Company's
1999 Annual Report on Form 10-K which is hereby incorporated by reference. Given
these uncertainties, readers are cautioned not to place undue reliance on the
forward-looking statements. The Company does not intend to update its
forward-looking statements.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(ii)(a) Amended Restated Bylaws dated December 1, 1999
10.18 Loan Agreement dated December 1, 1999 between the
Company and U.S. National Bank Association
10.19 Promissory Note dated December 1, 1999 made by the
Company in favor of U.S. National Bank Association
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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.
PHOENIX GOLD INTERNATIONAL, INC.
/s/ Joseph K. O'Brien
-------------------------------------
Joseph K. O'Brien
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: February 7, 2000
12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
EXHIBIT PAGE
------- ----
3(ii)(a) Amended Restated Bylaws dated December 1, 1999 14
10.18 Loan Agreement dated December 1, 1999 between the Company
and U.S. National Bank Association 38
10.19 Promissory Note dated December 1, 1999 made by the Company
in favor of U.S. National Bank Association 44
27 Financial Data Schedule 53
</TABLE>
13
PHOENIX GOLD INTERNATIONAL, INC.
AMENDMENT TO
RESTATED BYLAWS
ARTICLE I, SECTION 2, SUBSECTION (C) OF THE RESTATED BYLAWS OF PHOENIX
GOLD INTERNATIONAL, INC., AN OREGON CORPORATION (THE "CORPORATION"), IS AMENDED
IN ITS ENTIRETY TO READ AS FOLLOWS:
ARTICLE I
SHAREHOLDERS: MEETINGS AND VOTING
* * *
Section 2. ANNUAL MEETINGS
---------------
* * *
"(c) At the annual meeting of shareholders, only such matters as shall
have been properly brought before the meeting shall be considered and acted
upon. To be properly brought before an annual meeting, a matter must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the discretion of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (iii) properly
brought before the meeting by a shareholder. For any matter to be properly
brought before the annual meeting by a shareholder, the shareholder must have
given prior written notice to the Secretary of the Corporation at its principal
executive offices not less than 120 days nor more than 150 days before the date
of the Corporation's proxy statement released to shareholders in connection with
the previous year's annual meeting of shareholders, except as provided in the
next sentence. If the Corporation did not hold an annual meeting of shareholders
the previous year, or if the date of the Corporation's annual meeting of
shareholders has been changed by more than 30 days from the date of the previous
year's meeting, the shareholder must have given prior written notice to the
Secretary of the Corporation at its principal executive offices on or before a
date which is a reasonable time before the date on which the Corporation will
begin to print and mail the proxy materials prepared for the meeting, as
determined by the Corporation's Board of Directors and disclosed in the
Corporation's earliest possible quarterly report filed under the Securities
Exchange Act of 1934, as amended. A shareholder's notice to the Secretary in
order to be valid must set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief description of the matter proposed
to be brought before the annual meeting, (ii) the name and address, as they
appear on the Corporation's books, of the shareholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the shareholder, and (iv) any material interest of the shareholder in
the matter. No matter shall be considered or acted upon at an annual meeting
except in accordance with the procedures set forth in this Section 2. The
presiding officer at any annual meeting shall determine whether any matter was
properly brought before the meeting in accordance with the provisions of this
section. If such presiding officer determines that any matter has not been
properly brought before the meeting, he or she shall so declare at the meeting
and any such matter shall not be considered or acted upon."
1
<PAGE>
ARTICLE II, SECTION 11, SUBSECTION (B) OF THE CORPORATION'S RESTATED
BYLAWS IS AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:
ARTICLE II
DIRECTORS: MANAGEMENT
* * *
Section 11. NOMINATION OF DIRECTORS
-----------------------
* * *
"(b) To be timely, the shareholder must have given prior written notice to
the Secretary of the Corporation at its principal executive offices not less
than 120 days nor more than 150 days before the date of the Corporation's proxy
statement released to shareholders in connection with the previous year's annual
meeting of shareholders, except as provided in the next sentence. If the
Corporation did not hold an annual meeting of shareholders the previous year, or
if the date of the Corporation's annual meeting of shareholders has been changed
by more than 30 days from the date of the previous year's meeting, the
shareholder must have given prior written notice to the Secretary of the
Corporation at its principal executive offices on or before a date which is a
reasonable time before the date on which the Corporation will begin to print and
mail the proxy materials prepared for the meeting, as determined by the
Corporation's Board of Directors and disclosed in the Corporation's earliest
possible quarterly report filed under the Securities Exchange Act of 1934, as
amended."
2
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
RESTATED BYLAWS
As amended through December 1, 1999
ARTICLE 1
SHAREHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS
-----------------
Meetings of the shareholders of Phoenix Gold International,
Inc. (the "Corporation") shall be held at the principal office of the
Corporation, or any other place, either within or without the state of Oregon,
selected by the Board of Directors.
Section 2. ANNUAL MEETINGS
---------------
(a) The annual meeting of the shareholders shall be held on
the third Monday in January of each year, if not a legal holiday, and if a legal
holiday then on the next succeeding business day, at such time as may be
prescribed by the Board of Directors and specified in the notice of the meeting.
The Board of Directors shall have the discretion to designate a different annual
meeting date for any year provided that the date so designated is within 60 days
of the date specified in the preceding sentence. At the annual meeting, the
shareholders shall elect by vote a Board of Directors, consider reports of the
affairs of the Corporation and transact such other business as may properly be
brought before the meeting.
(b) If the annual meeting is not held within the earlier of
six months after the end of the Corporation's fiscal year or 15 months after its
last annual meeting, the circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a meeting to be held upon the application of any shareholder of the
Corporation entitled to participate in an annual meeting.
(c) At the annual meeting of shareholders, only such matters
as shall have been properly brought before the meeting shall be considered and
acted upon. To be properly brought before an annual meeting, a matter must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (iii) properly
brought before the meeting by a shareholder. For any matter to be properly
brought before the annual meeting by a shareholder, the shareholder must have
given prior written notice to the Secretary of the Corporation at its principal
executive offices not less than 120 days nor more than 150 days before the date
of the Corporation's proxy statement released to shareholders in connection with
the previous year's annual meeting of shareholders, except as provided in the
next sentence. If the Corporation did not hold an annual meeting of shareholders
the previous year, or if the
<PAGE>
date of the Corporation's annual meeting of shareholders has been changed by
more than 30 days from the date of the previous year's meeting, the shareholder
must have given prior written notice to the Secretary of the Corporation at its
principal executive offices on or before a date which is a reasonable time
before the date on which the Corporation will begin to print and mail the proxy
materials prepared for the meeting, as determined by the Corporation's Board of
Directors and disclosed in the Corporation's earliest possible quarterly report
filed under the Securities Exchange Act of 1934, as amended. A shareholder's
notice to the Secretary in order to be valid must set forth as to each matter
the shareholder proposes to bring before the annual meeting (i) a brief
description of the matter proposed to be brought before the annual meeting, (ii)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the shareholder, and (iv) any
material interest of the shareholder in the matter. No matter shall be
considered or acted upon at an annual meeting except in accordance with the
procedures set forth in this Section 2. The presiding officer at any annual
meeting shall determine whether any matter was properly brought before the
meeting in accordance with the provisions of this section. If such presiding
officer determines that any matter has not been properly brought before the
meeting, he or she shall so declare at the meeting and any such matter shall not
be considered or acted upon.
Section 3. SPECIAL MEETINGS
----------------
(a) The Corporation shall hold a special meeting of
shareholders upon the call of the Corporation's chief executive officer or the
Board of Directors, or if the holders of at least 10 percent of all votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting sign, date and deliver to the Secretary of the Corporation one
or more written demands for the meeting describing the purpose or purposes for
which it is to be held.
(b) The circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a special meeting to be held upon the application of a shareholder of the
Corporation who signed a valid demand for a special meeting if notice of the
special meeting was not given within 30 days after the date the demand was
delivered to the Corporation's Secretary or if the special meeting was not held
in accordance with the notice.
Section 4. NOTICE OF MEETINGS
------------------
(a) The Corporation shall notify shareholders in writing of
the date, time and place of each annual and special shareholders meeting not
earlier than 60 days nor less than 10 days before the meeting date. Unless
Oregon law or the Restated Articles of Incorporation require otherwise, the
Corporation is required to give notice only to shareholders entitled to vote at
the meeting. Such notice is effective when mailed if it is mailed postage
prepaid and is correctly addressed to the shareholder's address shown in the
Corporation's current record of shareholders. Unless required by law or by the
Restated Articles of Incorporation, notice of an annual meeting need not include
a description of the purpose or purposes for which the meeting is called. Notice
of a special meeting shall include a description of the purpose or purposes for
which the meeting is called.
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(b) If an annual or special shareholders meeting is adjourned
to a different date, time or place, notice need not be given of the new date,
time or place if the new date, time or place is announced at the meeting before
adjournment. If a new record date for the adjourned meeting is fixed, or is
required by law to be fixed, notice of the adjourned meeting shall be given to
persons who are shareholders as of the new record date. A determination of
shareholders entitled to notice of or to vote at a shareholders meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
(c) A shareholder's attendance at a meeting waives objection
to (i) lack of notice or defective notice of the meeting, unless the shareholder
at the beginning of the meeting objects to holding the meeting or transacting
business at the meeting; and (ii) consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS
------------------------------------------------
(a) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless otherwise required by law or the Restated
Articles of Incorporation, a majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(b) In the absence of a quorum, a majority of those present in
person or represented by proxy may adjourn the meeting from time to time until a
quorum exists. Any business that might have been transacted at the original
meeting may be transacted at the adjourned meeting if a quorum exists.
Section 6. VOTING RIGHTS
-------------
(a) The persons entitled to receive notice of and to vote at
any shareholders meeting shall be determined from the records of the Corporation
on the close of business on the day before the mailing of the notice or on such
other date not more than 70 nor less than 10 days before such meeting as may be
fixed in advance by the Board of Directors.
(b) Except as otherwise provided in the Restated Articles of
Incorporation or by law, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a shareholders meeting. Only
shares are entitled to vote.
(c) Unless otherwise provided in the Restated Articles of
Incorporation or by law, if a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast within the voting
group opposing the action.
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(d) Unless otherwise provided in the Restated Articles of
Incorporation, directors are elected by a plurality of the votes cast by holders
of the shares entitled to vote in the election at a meeting at which a quorum is
present.
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS
-----------------------------------
(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the Corporation, if acting
in good faith, is entitled to accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder. If the name signed
on a vote, consent, waiver or proxy appointment does not correspond to the name
of its shareholder, the Corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver or proxy appointment and give it
effect as the act of the shareholder if:
(i) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an
administrator, executor, guardian or conservator representing
the shareholder and, if the Corporation requests, evidence of
fiduciary status acceptable to the Corporation has been
presented with respect to the vote, consent, waiver or proxy
appointment;
(iii) The name signed purports to be that of a
receiver or trustee in bankruptcy of the shareholder and, if
the Corporation requests, evidence of this status acceptable
to the Corporation has been presented with respect to the
vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a
pledgee, beneficial owner or attorney-in-fact of the
shareholder and, if the Corporation requests, evidence
acceptable to the Corporation of the signatory's authority to
sign for the shareholder has been presented with respect to
the vote, consent, waiver or proxy appointment; or
(v) Two or more persons are the shareholder as
co-tenants or fiduciaries and the name signed purports to be
the name of at least one of the co-owners and the person
signing appears to be acting on behalf of all co-owners.
(b) Shares of the Corporation are not entitled to be voted if
(i) they are owned, directly or indirectly, by another domestic or foreign
corporation, and (ii) the Corporation owns, directly or indirectly, a majority
of the shares entitled to be voted for directors of such other corporation. This
paragraph does not limit the power of a corporation to vote any shares,
including its own shares, held by it in a fiduciary capacity.
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(c) Any redeemable shares which the Corporation may issue are
not entitled to be voted after notice of redemption is mailed to the holders and
a sum sufficient to redeem the shares has been deposited with a bank, trust
company or other financial institution under an irrevocable obligation to pay
the holders the redemption price on surrender of the shares.
Section 8. PROXIES
-------
A shareholder may vote shares either in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the shareholder by
signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. An appointment is valid for 11 months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy is revocable by the
shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
Section 9. SHAREHOLDER LISTS
-----------------
(a) After fixing a record date for a meeting, the Corporation
shall prepare an alphabetical list of the names of all of its shareholders who
are entitled to notice of the meeting. The list must be arranged by voting
group, and within each voting group, by class or series of shares and show the
address of and the number of shares held by each shareholder.
(b) The shareholder list shall be available for inspection by
any shareholder, beginning two business days after notice of the meeting for
which the list was prepared is given and continuing through the meeting. Such
list shall be kept on file at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or the shareholder's agent or attorney, shall be entitled on
written demand to inspect and, subject to the requirements of law, to copy the
list during regular business hours and at the shareholder's expense during the
period it is available for inspection.
(c) The Corporation shall make the shareholder list available
at the meeting, and any shareholder, or the shareholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
(d) Refusal or failure to prepare or make available the
shareholder list does not affect the validity of action taken at the meeting.
ARTICLE 2
DIRECTORS: MANAGEMENT
Section 1. POWERS
------
The Corporation shall have a Board of Directors. All corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the Corporation managed under the direction of, the Board of
Directors, subject to any limitation set forth in the Restated Articles of
Incorporation.
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Section 2. NUMBER AND QUALIFICATIONS
-------------------------
The Board of Directors shall consist of not less than one nor
more than seven members. The Board of Directors may change the number of
directors from time to time. Until increased or decreased by a resolution of the
Board of Directors, the number of directors shall be two. Any decrease in the
number of directors implemented by the Board of Directors does not shorten an
incumbent director's term. Directors need not be residents of the state of
Oregon or shareholders of the Corporation, unless required by the Restated
Articles of Incorporation.
Section 3. ELECTION AND TENURE OF OFFICE
-----------------------------
The directors shall be elected by ballot at the annual meeting
of the shareholders. To the extent and in the manner provided in the
Corporation's Restated Articles of Incorporation, the Board of Directors shall
be divided into classes, and elected as therein provided. At any time that the
division into classes is not in effect, directors shall hold office until the
next annual shareholders meeting following their election. The term of a
director elected to fill a vacancy expires at the next shareholders meeting at
which directors are elected, or if the Board of Directors is then divided into
classes, pursuant to the terms of the class of director to which such director
is elected. Despite the expiration of a director's term, the director continues
to serve until the director's successor is elected or until there is a decrease
in the number of directors. Subject to paragraph (c) of Section 4 of Article 2,
a director's term of office will begin immediately after election.
Section 4. VACANCIES
---------
(a) A vacancy in the Board of Directors will exist upon the
death, resignation or removal of any director or upon an increase in the number
of directors.
(b) Unless the Restated Articles of Incorporation provide
otherwise, if a vacancy occurs on the Board of Directors the Board of Directors
may fill the vacancy. If the directors remaining in office constitute fewer than
a quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
(c) A vacancy that will occur at a specific later date, by
reason of a resignation effective at the later date or otherwise, may be filled
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
(d) If the vacancy has not been filled by action of the Board
of Directors prior to the next meeting of the shareholders occurring after the
vacancy was created, the shareholders may fill the vacancy.
Section 5. RESIGNATION OF DIRECTORS
------------------------
A director may resign at any time by delivering written notice
to the Board of Directors, its chairperson or the Corporation. Unless the notice
specifies a later effective date, a resignation is effective at the earliest of
the following: (a) when received; (b) five days after its deposit in the United
States mail, as evidenced by the postmark, if mailed postage prepaid and
correctly addressed; or (c) on the date shown on the return receipt, if sent by
registered or certified
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mail, return receipt requested and the receipt is signed by or on behalf of the
addressee. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors.
Section 6. REMOVAL OF DIRECTORS
--------------------
The shareholders may remove one or more directors only for
cause unless the Restated Articles of Incorporation provide that the directors
may be removed with or without cause. A director may be removed by the
shareholders only at a meeting called for the purpose of removing the director,
and the meeting notice must state that the purpose, or one of the purposes, of
the meeting is removal of the director.
Section 7. MEETINGS
--------
(a) The Board of Directors may hold regular or special
meetings in or out of the state of Oregon.
(b) Annual meetings of the Board of Directors shall be held
without notice immediately following the adjournment of the annual meetings of
the shareholders.
(c) Unless the Restated Articles of Incorporation provide
otherwise, regular meetings of the Board of Directors may be held without notice
of the date, time, place or purpose of the meeting. The Board of Directors may
fix, by resolution, the time and place for the holding of regular meetings.
(d) Special meetings of the Board of Directors for any purpose
or purposes may be called at any time by the Corporation's chief executive
officer. The person calling a special meeting of the Board of Directors may fix
the time and place of the special meeting.
Section 8. NOTICE OF SPECIAL MEETINGS
--------------------------
(a) Special meetings of the Board of Directors shall be
preceded by at least 24 hours' notice of the date, time and place of the
meeting. The notice need not describe the purpose of the special meeting unless
required by the Restated Articles of Incorporation. The notice may be given
orally, in person or by telephone, or delivered in writing either personally, by
mail or by telegram. If in writing, such notice is effective at the earliest of
the following: (i) when received; (ii) five days after its deposit in the United
States mail, as evidenced by the postmark, if it is mailed postage prepaid and
is correctly addressed to the director's address shown in the Corporation's
records; or (iii) on the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee. If given orally, such notice is effective when
communicated.
(b) A director's attendance at or participation in a meeting
waives any required notice to the director of the meeting unless the director at
the beginning of the meeting, or promptly upon the director's arrival, objects
to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
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(c) Notice of the time and place of holding an adjourned
meeting need not be given if such time and place are fixed at the meeting
adjourned.
Section 9. QUORUM AND VOTE
---------------
(a) Unless the Restated Articles of Incorporation provide
otherwise, a majority of the directors in office shall constitute a quorum for
the transaction of business. A majority of the directors present, in the absence
of a quorum, may adjourn from time to time but may not transact any business.
(b) If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act of the Board of
Directors unless the Restated Articles of Incorporation require the vote of a
greater number of directors.
(c) A director of the Corporation who is present at a meeting
of the Board of Directors, or is present at a meeting of a committee of the
Board of Directors, when corporate action is taken is deemed to have assented to
the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon the director's arrival, to holding the meeting or
transacting business at the meeting, (ii) the director's dissent or abstention
from the action taken is entered in the minutes of the meeting, or (iii) the
director delivers written notice of dissent or abstention to the presiding
officer of the meeting before its adjournment or to the Corporation immediately
after adjournment of the meeting. The right of dissent or abstention is not
available to a director who votes in favor of the action taken.
Section 10. COMPENSATION
------------
The Board of Directors may, by resolution, provide that
the directors be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and provide that directors be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation for that service.
Section 11. NOMINATION OF DIRECTORS
-----------------------
(a) Only persons who are nominated in accordance with the
procedures in this Section 11 shall be eligible for election as directors. If
the presiding officer at an annual meeting of the shareholders determines that a
nomination was not made in accordance with the procedures set forth in this
Section 11, the presiding officer shall declare to the meeting that the
nomination was defective and such defective nomination shall be disregarded.
Nominations of persons for election to the Board of Directors may be made at any
annual meeting of shareholders (i) by or at the direction of the Board of
Directors or (ii) by any shareholder of the Corporation (A) who is a shareholder
of record on the date of the giving of notice provided for in this Section 11
and on the record date for the determination of shareholders entitled to vote at
such meeting and (B) who complies with the notice procedures in this Section 11.
In addition to any other applicable requirements, for a nomination to be made by
a shareholder, such shareholder must have given timely notice thereof in proper
written form to the Secretary.
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(b) To be timely, the shareholder must have given prior
written notice to the Secretary of the Corporation at its principal executive
offices not less than 120 days nor more than 150 days before the date of the
Corporation's proxy statement released to shareholders in connection with the
previous year's annual meeting of shareholders, except as provided in the next
sentence. If the Corporation did not hold an annual meeting of shareholders the
previous year, or if the date of the Corporation's annual meeting of
shareholders has been changed by more than 30 days from the date of the previous
year's meeting, the shareholder must have given prior written notice to the
Secretary of the Corporation, at its principal executive offices, on or before a
date which is a reasonable time before the date on which the Corporation will
begin to print and mail the proxy materials prepared for the meeting, as
determined by the Corporation's Board of Directors and disclosed in the
Corporation's earliest possible quarterly report filed under the Securities
Exchange Act of 1934, as amended.
(c) To be in proper written form, a shareholder's notice to
the Secretary must (i) set forth as to each person whom the shareholder proposes
to nominate for election as a director (A) the name, age, business address and
residence address of the nominee, (B) the principal occupation or employment of
the nominee, (C) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the nominee, and
(D) any other information relating to the nominee that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (ii) set forth
as to the shareholder giving the notice (A) the name and address, as they appear
on the Corporation's books, of such shareholder, (B) the class and number of
shares of the Corporation which are beneficially owned by such shareholder, (C)
a description of all arrangements or understandings between such shareholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination or nominations are to be made by such
shareholder, (D) a representation that such shareholder intends to appear in
person or by proxy at the annual meeting to nominate the persons named in the
notice and (E) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a signed written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
ARTICLE 3
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. GENERAL AUTHORITY
-----------------
Subject to law, the provisions of the Restated Articles of
Incorporation and these Restated Bylaws, the Board of Directors may appoint such
committees as may be necessary from time to time, consisting of such number of
its members and having such powers as it may designate. Each such committee
shall have two or more members, who shall serve at the pleasure of the Board of
Directors.
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Section 2. ACTION OF COMMITTEES
--------------------
All actions of a committee shall be reflected in minutes to be
kept of such meetings and reported to the Board of Directors at the next
succeeding meeting thereof. The provisions of Article 2 of these Restated Bylaws
governing meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well.
Section 3. EXECUTIVE COMMITTEE
-------------------
Subject to the Oregon Business Corporation Act, the Restated
Articles of Incorporation and contrary provisions as may be contained in the
Restated Bylaws as amended from time to time, the Board of Directors may appoint
an Executive Committee of at least three persons from among its members. When
appointed, the Executive Committee shall have such powers as may be designated
by the Board of Directors. Committee members shall hold office at the pleasure
of the Board of Directors. All action of the Executive Committee shall be
reported to the Board of Directors at the next succeeding meeting thereof.
Meetings of the Executive Committee shall be called upon the request of any
member thereof upon giving one day's notice to the other members of the
committee. No action shall be taken by the committee except upon the affirmative
vote of not less than two of its members.
Section 4. AUDIT COMMITTEE
---------------
(a) An Audit Committee of the Board of Directors of the
Corporation, composed of at least two members of the Board of Directors, shall
be appointed at the annual meeting of the Board of Directors. At least a
majority of the members of the Audit Committee shall be independent directors.
For purposes of these Restated Bylaws, an "independent director" shall mean a
person other than an officer or employee of the Corporation or its subsidiaries
or any other individual having a relationship which, in the opinion of the Board
of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Each member of the Audit
Committee shall serve until the next annual meeting of the Board of Directors
and the due appointment and qualification of his or her successor. Any vacancy
in the Audit Committee shall be filled by a majority vote of the Board of
Directors. A majority of the members shall constitute a quorum and a majority of
the quorum shall be required to adopt or approve any matters.
(b) The duties of the Audit Committee shall include, in
addition to such other duties as may be specified by resolution of the Board of
Directors from time to time, the following:
(i) review and make recommendations to the Board of
Directors with respect to the engagement or discharge of the
Corporation's independent auditors and the terms of the engagement;
(ii) review the policies and procedures of the Corporation
and management with respect tomaintaining the Corporation's books and
records; and
(iii) review with the independent auditors, upon
completion of their audit, the results of the auditing engagement and
any other recommendations the auditors may have with respect to the
Corporation's financial, accounting or auditing systems.
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(c) The Audit Committee is authorized to employ such experts
and personnel, including those who are already employed or engaged by the
Corporation, as the committee may deem to be reasonably necessary to enable it
to ably perform its duties and satisfy its responsibilities.
Section 5. COMPENSATION COMMITTEE
----------------------
A Compensation Committee of the Board of Directors of the
Corporation, composed of at least two members of the Board of Directors, shall
be appointed at the annual meeting of the Board of Directors. Directors who are
appointed to the Compensation Committee may not be active or retired officers or
employees of the Corporation or of any of its subsidiaries. Each member of the
Compensation Committee shall serve until the next annual meeting of the Board of
Directors and the due appointment and qualification of his or her successor. Any
vacancy in the Compensation Committee shall be filled by a majority vote of the
Board of Directors. A majority of the members of the Compensation Committee
shall constitute a quorum, and a majority of the quorum shall be required to
adopt or approve any matters. The duties of the Compensation Committee shall
include, in addition to such other duties as may be specified by resolution of
the Board of Directors from time to time, the following:
(i) consider and make recommendations to the Board of
Directors regarding salaries and bonuses for elected officers of the
Corporation, and prepare such reports with respect thereto as may be
required by law;
(ii) consider, review and grant stock options, stock
appreciation rights and other securities under the Corporation's stock
option and stock incentive plans, and administer such plans; and
(iii) consider matters of director compensation,
benefits and other forms of remuneration.
The Compensation Committee is authorized to employ such experts and consultants,
including those already employed or engaged by the Corporation, as the committee
may deem to be reasonably necessary to enable it to perform its duties and
satisfy its responsibilities.
ARTICLE 4
OFFICERS
Section 1. DESIGNATION; ELECTION
---------------------
(a) The officers of the Corporation shall be a President, a
Secretary and such other officers and assistant officers as the Board of
Directors may from time to time appoint, none of whom need be members of the
Board of Directors. The officers shall be elected by, and hold office at the
pleasure of, the Board of Directors. A duly appointed officer may appoint one or
more officers or assistant officers if such appointment is authorized by the
Board of Directors. The same individual may simultaneously hold more than one
office in the Corporation.
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(b) A vacancy in any office because of death, resignation,
removal or any other cause shall be filled in the manner prescribed in these
Restated Bylaws for regular appointments to such office.
Section 2. COMPENSATION AND TERM OF OFFICE
-------------------------------
(a) The compensation and term of office of all the
officers of the Corporation shall be fixed by the Board of Directors.
(b) The Board of Directors may remove any officer at
any time, either with or without cause.
(c) Any officer may resign at any time by giving written
notice to the Board of Directors, the Corporation's chief executive officer or
the Secretary of the Corporation. Unless the notice specifies a later effective
date, a resignation is effective at the earliest of the following: (a) when
received; (b) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postage prepaid and correctly addressed; or
(c) on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested and the receipt is signed by or on behalf of the
addressee. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors. If a resignation is made
effective at a later date and the Corporation accepts the future effective date,
the Board of Directors may fill the pending vacancy before the effective date,
if the Board of Directors provides that the successor will not take office until
the effective date.
(d) This section shall not affect the rights of the
Corporation or any officer under anyexpress contract of employment.
Section 3. CHAIRMAN OF THE BOARD
---------------------
The Chairman of the Board, if and when elected, shall preside
at all meetings of the Board of Directors and at meetings of the shareholders,
and shall have all powers and responsibilities attendant therewith.
Section 4. PRESIDENT
---------
The President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
Corporation. In the absence of the Chairman of the Board, the President shall
perform the duties and responsibilities of the Chairman of the Board. The
President shall be ex officio a member of all the standing committees of the
Board of Directors (including the Executive Committee, if any), shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Restated Bylaws.
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Section 5. VICE PRESIDENTS
---------------
The Vice Presidents, if any, shall perform such duties as the
Board of Directors prescribes. In the absence or disability of the President,
the President's duties and powers shall be performed and exercised by a senior
Vice President, as designated by the Board of Directors.
Section 6. SECRETARY
---------
(a) The Secretary shall keep or cause to be kept at the
principal office, or such other place as the Board of Directors may order, a
book of minutes of all meetings of directors and shareholders showing the time
and place of the meeting, and if a special meeting, how authorized, the notice
given, the names of those present at directors meetings, the number of shares
present or represented at shareholders meetings and the proceedings thereof.
(b) The Secretary shall keep or cause to be kept, at the
principal office or at the office of the Corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for such shares and the number and date of
cancellation of certificates surrendered for cancellation.
(c) The Secretary shall give or cause to be given such notice
of the meetings of the shareholders and of the Board of Directors as is required
by these Restated Bylaws. If the Corporation elects to have a seal, the
Secretary shall keep the seal and affix it to all documents requiring a seal.
The Secretary shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or these Restated Bylaws.
Section 7. TREASURER
---------
The Treasurer, if any, shall be responsible for the funds of
the Corporation, shall pay them out only on the checks of the Corporation signed
in the manner authorized by the Board of Directors, shall deposit and withdraw
such funds in such depositories as may be authorized by the Board of Directors,
and shall keep full and accurate accounts of receipts and disbursements in books
maintained at the Corporation's principal offices.
Section 8. ASSISTANTS
----------
The Board of Directors may appoint or authorize the
appointment of assistants to the Secretary or Treasurer, or both. Such
assistants may exercise the powers of the Secretary or Treasurer, as the case
may be, and shall perform such duties as are prescribed by the Board of
Directors.
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ARTICLE 5
CORPORATE RECORDS AND REPORTS - INSPECTION
Section 1. RECORDS
-------
The Corporation shall maintain all records required by law.
All such records shall be kept at its principal office, registered office or at
any other place designated by the Corporation's chief executive officer, or as
otherwise provided by law.
Section 2. INSPECTION OF RECORDS
---------------------
The records of the Corporation shall be open to inspection by
the shareholders or the shareholders' agents or attorneys in the manner and to
the extent required by law.
Section 3. CHECKS, DRAFTS, ETC.
--------------------
All checks, drafts or other orders for payment of money, notes
or other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as may be determined from time to time by resolution of the Board of
Directors.
Section 4. EXECUTION OF DOCUMENTS
----------------------
The Board of Directors may, except as otherwise provided in
these Restated Bylaws, authorize any officer or agent of the Corporation to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation. Such authority may be general or confined to specific
instances. Unless so authorized by the Board of Directors, or unless inherent in
the authority vested in the office under the provision of these Restated Bylaws,
no officer, agent or employee of the Corporation shall have any power or
authority to bind the Corporation by any contract or engagement, or to pledge
its credit, or to render it liable for any purpose or for any amount.
ARTICLE 6
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES
-----------------------
(a) Certificates for shares shall be in such form as the Board
of Directors may designate, shall designate the name of the Corporation and the
state law under which the Corporation is organized, shall state the name of the
person to whom the shares represented by the certificate are issued, and shall
state the number and class of shares and the designation of the series, if any,
the certificate represents. If the Corporation is authorized to issue different
classes of shares or different series within a class, the designations, relative
rights, preferences and limitations applicable to each class, the variations and
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series shall be
summarized on the front or back of each certificate, or each certificate may
state conspicuously on its front or back that the Corporation will furnish
shareholders with this information on request in writing and without charge.
14
<PAGE>
(b) Each certificate for shares must be signed, either
manually or in facsimile, by the Chairman, the President or a Vice President and
the Secretary or an Assistant Secretary of the Corporation. The certificates may
bear the corporate seal or its facsimile.
(c) If any officer who has signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
Section 2. TRANSFER ON THE BOOKS
---------------------
Upon surrender to the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and subject to any limitations on transfer in these
Restated Bylaws, appearing on the certificate or in the Corporation's stock
transfer records, the Corporation shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES
--------------------------------------
In the event a certificate is represented to be lost, stolen
or destroyed, a new certificate shall be issued in place thereof upon such proof
of the loss, theft or destruction and upon the giving of such bond or other
indemnity as may be required by the Board of Directors.
Section 4. TRANSFER AGENTS AND REGISTRARS
------------------------------
The Board of Directors may from time to time appoint one or
more transfer agents and one or more registrars for the shares of the
Corporation who shall have such powers and duties as the Board of Directors may
specify.
Section 5. CLOSING STOCK TRANSFER BOOKS
----------------------------
The Board of Directors may close the transfer books for a
period not exceeding 70 days nor less than 10 days preceding any annual or
special meeting of the shareholders or the day appointed for the payment of a
dividend.
ARTICLE 7
GENERAL PROVISIONS
Section 1. SEAL
----
If the Corporation elects to have a corporate seal, the seal
will be circular in form and will have inscribed thereon the name of the
Corporation and the state of its incorporation.
Section 2. AMENDMENT OF RESTATED BYLAWS
----------------------------
(a) Except as otherwise provided by law or by the Restated
Articles of Incorporation, the Board of Directors may amend or repeal these
Restated Bylaws unless:
15
<PAGE>
(i) The Restated Articles of Incorporation or Oregon
law reserve this power exclusively to the shareholders in
whole or in part; or
(ii) The shareholders in amending or repealing a
particular Bylaw provide expressly that the Board of Directors
may not amend or repeal that Bylaw.
(b) Subject to the Restated Articles of Incorporation, the
Corporation's shareholders may amend or repeal these Restated Bylaws even though
these Restated Bylaws may also be amended or repealed by the Board of Directors,
except as expressly otherwise provided in any provision of these Restated
Bylaws.
(c) Whenever an amendment or new Bylaw is adopted, it shall be
copied in the minute book with the original Restated Bylaws in the appropriate
place. If any Bylaw is repealed, the fact of repeal and the date on which the
repeal occurred shall be stated in such book and place.
Section 3. WAIVER OF NOTICE
----------------
(a) A shareholder may at any time waive any notice required by
law, the Restated Articles of Incorporation or these Restated Bylaws. Except as
otherwise provided in paragraph (c) of Section 4 of Article 1 of these Restated
Bylaws, the waiver shall be in writing, shall be signed by the shareholder
entitled to the notice, and shall be delivered to the Corporation for inclusion
in the minutes or filing with the corporate records.
(b) A director may at any time waive any notice required by
law, the Restated Articles of Incorporation or these Restated Bylaws. Except as
otherwise provided in paragraph (b) of Section 8 of Article 2 of these Restated
Bylaws, the waiver shall be in writing, shall be signed by the director entitled
to the notice, shall specify the meeting for which notice is waived and shall be
filed with the minutes or appropriate records.
Section 4. ACTION WITHOUT A MEETING
------------------------
(a) Action required or permitted by law to be taken at a
shareholders meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action shall be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Action taken under this Section 4 is effective when the last shareholder signs
the consent, unless the consent specifies an earlier or later effective date. If
not otherwise determined by law, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
signs the consent. A consent signed under this Section 4 has the effect of a
meeting vote and may be described as such in any document.
(b) Unless the Restated Articles of Incorporation or Restated
Bylaws provide otherwise, action required or permitted by law to be taken at a
meeting of the Board of Directors, or at a meeting of a committee of the Board
of Directors, may be taken without a meeting if the action is taken by all
members of the Board. The action shall be evidenced by one or more written
16
<PAGE>
consents describing the action taken, signed by each director and included in
the minutes or filed with the corporate records reflecting the action taken.
Action taken under this section is effective when the last director signs the
consent, unless the consent specifies an earlier or later effective date. A
consent signed under this section has the effect of a meeting vote and may be
described as such in any document.
Section 5. TELEPHONIC MEETINGS
-------------------
Unless the Restated Articles of Incorporation provide
otherwise, the Board of Directors may permit any or all directors to participate
in a regular or special meeting by, or conduct the meeting through, use of any
means of communication by which all directors participating may simultaneously
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
ARTICLE 8
INDEMNIFICATION
(a) The Corporation shall indemnify to the fullest extent
permitted by law, any person who is made, or threatened to be made, a party to
or witness in, or is otherwise involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
investigative, or otherwise (including any action, suit or proceeding by or in
the right of the Corporation) by reason of the fact that:
(i) the person is or was a director or officer of the
Corporation or any of its subsidiaries;
(ii) the person is or was serving as a fiduciary
within the meaning of the Employee Retirement Income Security
Act of 1974 with respect to any employee benefit plan of the
Corporation or any of its subsidiaries; or
(iii) the person is or was serving, at the request of
the Corporation or any of its subsidiaries, as a director or
officer, or as a fiduciary of an employee benefit plan, of
another corporation, partnership, joint venture, trust or
other enterprise.
(b) The Corporation may indemnify its employees and other
agents to the fullest extent permitted by law.
(c) The expenses incurred by a director or officer or other
indemnified personin connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
investigative, or otherwise, which the director or officer is made or threatened
to be made a party to or witness in, or is otherwise involved in, shall be paid
by the Corporation in advance upon written request if the indemnified person:
(i) furnishes the Corporation a written affirmation
that in good faith the person believes that he or she is
entitled to be indemnified by the Corporation; and
17
<PAGE>
(ii) furnishes the Corporation a written undertaking
to repay such advance to the extent that it is ultimately
determined by a court that such person is not entitled to be
indemnified by the Corporation. Such advances shall be made
without regard to the person's ability to repay such expenses
and without regard to the person's ultimate entitlement to
indemnification under this Article or otherwise.
(d) The rights of indemnification provided in this Article 8
shall be in addition to any rights to which a person may otherwise be entitled
under any articles of incorporation, bylaw, agreement, statute, policy of
insurance, vote of shareholders or Board of Directors, or otherwise; shall
continue as to a person who has ceased to be a director, officer, employee or
agent of the Corporation; and shall inure to the benefit of the heirs, executors
and administrators of such person.
(e) Any repeal of this Article 8 shall be prospective only and
no repeal or modification of this Article 8 shall adversely affect any right or
protection that is based upon this Article 8 and pertains to an act or omission
that occurred prior to the time of such repeal or modification.
(f) As a condition precedent to indemnification under this
Article 8, not later than 30 days after receipt by the director or officer of
notice of the commencement of any proceeding the director or officer shall, if a
claim in respect of the proceeding is to be made against the Corporation under
this Article 8, notify the Corporation in writing of the commencement of the
proceeding. The failure to properly notify the Corporation shall not relieve the
Corporation from any liability which it may have to the director or officer
otherwise than under this Article 8. With respect to any proceeding as to which
the director or officer so notifies the Corporation of the commencement:
(i) The Corporation shall be entitled to participate
in the proceeding at its own expense.
(ii) Except as otherwise provided in this paragraph
(f), the Corporation may, at its option and jointly with any other
indemnifying party similarly notified and electing to assume such
defense, assume the defense of the proceeding, with legal counsel
reasonably satisfactory to the director or officer. The director or
officer shall have the right to use separate legal counsel in the
proceeding, but the corporation shall not be liable to the director or
officer under this Article 8 for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of its
assumption of the defense, unless (A) the director or officer
reasonably concludes that there may be a conflict of interest between
the Corporation and the director or officer in the conduct of the
defense of the proceeding, or (B) the Corporation does not use legal
counsel to assume the defense of such proceeding. The Corporation shall
not be entitled to assume the defense of any proceeding brought by or
on behalf of the Corporation or as to which the director or officer has
made the conclusion provided for in (A) above.
(iii) If two or more persons who may be entitled to
indemnification from the Corporation, including the director or officer
seeking indemnification, are parties to any proceeding, the Corporation
may require the director or officer to use the same legal
18
<PAGE>
counsel as the other parties. The director or officer shall have the
right to use separate legal counsel in the proceeding, but the
Corporation shall not be liable to the director or officer under this
Article 8 for the fees and expenses of separate legal counsel incurred
after notice from the Corporation of the requirement to use the same
legal counsel as the other parties, unless the director or officer
reasonably concludes that there may be a conflict of interest between
the director or officer and any of the other parties required by the
Corporation to be represented by the same legal counsel.
(iv) The Corporation shall not be liable to indemnify
the director or officer under this Article 8 for any amounts paid in
settlement of any proceeding effected without its written consent,
which shall not be unreasonably withheld. The director or officer shall
permit the Corporation to settle any proceeding that the Corporation
assumes the defense of, except that the Corporation shall not settle
any action or claim in any manner that would impose any penalty or
limitation on the director or officer without such person's written
consent.
(g) Notwithstanding any provision in this Article 8, the
Corporation shall not be obligated under this Article 8 to make any
indemnification or advance any expenses in connection with any claim made
against any director or officer:
(i) for which payment is required to be made to or on
behalf of the director or officer under any insurance policy, except
with respect to any excess amount to which the director or officer is
entitled under this Article 8 beyond the amount of payment under such
insurance policy;
(ii) if a court having jurisdiction in the matter
finally determines that such indemnification is not lawful under any
applicable statute or public policy;
(iii) in connection with any proceeding (or part of
any proceeding) initiated by the director or officer, or any proceeding
by the director or officer against the Corporation or its directors,
officers, employees or other persons entitled to be indemnified by the
Corporation, unless: (A) the Corporation is expressly required by law
to make the indemnification; (B) the proceeding was authorized by the
Board of Directors; or (C) the director or officer initiated the
proceeding pursuant to subsection (i) of this Article 8 and the
director or officer is successful in whole or in part in such
proceeding; or
(iv) for an accounting of profits made from the
purchase and sale by the director or officer of securities of the
Corporation within the meaning of Section 16(b) of the Exchange Act, or
similar provision of any state statutory law or common law.
(h) In the event of payment under this Article 8, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the director or officer. The director or officer shall
execute all documents required and shall do all acts that may be necessary to
secure such rights and to enable the Corporation effectively to bring suit to
enforce such rights.
19
<PAGE>
(i) Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Article 8 shall be deemed to be contractual rights and be effective
to the same extent and as if provided for in a contract between the Corporation
and the director or officer. Any director or officer may enforce any right to
indemnification or advances under this Article 8 in any court of competent
jurisdiction if: (i) the Corporation denies the claim for indemnification or
advances, in whole or in part, or (ii) the Corporation does not dispose of such
claim within 45 days of request therefor. It shall be a defense to any such
enforcement action (other than an action brought to enforce a claim for
advancement of expenses pursuant to, and in compliance with, this Article 8)
that the director or officer is not entitled to indemnification under this
Article 8. However, except as provided in subsection (f) of this Article 8, the
Corporation shall not assert any defense to an action brought to enforce a claim
for advancement of expenses pursuant to this Article 8 if the director or
officer has tendered to the Corporation the affirmation and undertaking required
hereunder. The burden of proving by clear and convincing evidence that
indemnification is not appropriate shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors or independent
legal counsel) to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the director
or officer has met the applicable standard of conduct nor an actual
determination by the Corporation (including its Board of Directors or
independent legal counsel) that indemnification is improper because the director
or officer has not met such applicable standard of conduct, shall be asserted as
a defense to the action or create a presumption that the director or officer is
not entitled to indemnification under this Article 8 or otherwise. The
director's or officer's expenses incurred in connection with successfully
establishing such person's right to indemnification or advances, in whole or in
part, in any proceeding shall also be paid or reimbursed by the Corporation.
(j) The rights conferred on any person by this Article 8 shall
continue as to a person who has ceased to be a director, officer, employee or
other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) To the fullest extent permitted by law, the Corporation,
upon approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Article 8.
(l) If this Article 8 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Article 8 that shall not
have been invalidated, or by any other applicable law.
ARTICLE 9
TRANSACTIONS WITH INTERESTED DIRECTORS
Section 1. VALIDITY OF TRANSACTION
-----------------------
No transaction involving the Corporation shall be voidable by
the Corporation solely because of a director's direct or indirect interest in
the transaction if:
20
<PAGE>
(a) The material facts of the transaction and the director's
interest were disclosed or known to the Board of Directors or a committee of the
Board of Directors, and the Board of Directors or committee authorized, approved
or ratified the transaction; or
(b) The material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and a
majority of those shareholders authorized, approved or ratified the transaction;
or
(c) The transaction was fair to the Corporation.
Solely for purposes of this Article 9, a director of the
Corporation has an indirect interest in a transaction if another entity in which
the director has a material financial interest or in which the director is a
general partner is a party to the transaction or the transaction is with another
entity of which the director is a director, officer or trustee and the
transaction is or should be considered by the Board of Directors.
Section 2. APPROVAL BY BOARD
-----------------
For purposes of Section 1, a transaction in which a director
has an interest is authorized, approved or ratified if it receives the
affirmative vote of a majority of the directors on the Board of Directors, or on
the committee, who have no direct or indirect interest in the transaction. A
transaction may not be authorized, approved or ratified under this Article 9 by
a single director. If a majority of the directors who have no direct or indirect
interest in the transaction vote to authorize, approve or ratify the
transaction, a quorum shall be deemed to be present for the purpose of taking
action under this Article 9. The presence of, or a vote cast by, a director with
a direct or indirect interest in the transaction does not affect the validity of
any action taken by the Board of Directors or a committee thereof if the
transaction is otherwise authorized, approved or ratified in any manner as
provided in Section 1.
Section 3. APPROVAL BY SHAREHOLDERS
------------------------
For purposes of Section 1, a transaction in which a director
has an interest is authorized, approved or ratified if it receives the vote of a
majority of the shares entitled to be counted under this Article 9, voting as a
single voting group. Shares owned by or voted under the control of a director
who has a direct or indirect interest in the transaction, and shares owned by or
voted under the control of any entity affiliated with the director as described
in Section 1 may be counted in a vote of shareholders to determine whether to
authorize, approve or ratify a transaction by vote of the shareholders under
this Article 9. A majority of the shares, whether or not present, that are
entitled to be counted in a vote on the transaction under this Article 9
constitutes a quorum for the purpose of taking action under this Article 9.
ARTICLE 10
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by law, no director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for conduct as a director. For example, without limiting
the generality of the foregoing, if the Oregon Revised Statutes are amended,
after this Article 10 becomes effective, to authorize corporate action further
eliminating or limiting the personal liability of directors of the Corporation,
then the liability of
21
<PAGE>
directors of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Oregon Revised Statutes, as so amended. No amendment or
repeal of this Article 10, nor the adoption of any provision of these Restated
Bylaws inconsistent with this Article 10, nor a change in the law, shall
adversely affect any right or protection that is based upon this Article 10 and
pertains to conduct that occurred prior to the time of such amendment, repeal,
adoption or change. No change in the law shall reduce or eliminate the rights
and protections set forth in this Article 10 unless the change in the law
specifically requires such reduction or elimination.
ADOPTED BY SHAREHOLDERS: JANUARY 27, 1995
22
December 1, 1999
Mr. Joe O'Brien, CFO
Phoenix Gold International, Inc.
9300 North Decatur
Portland, OR 97203
Dear Joe:
I am pleased to advise you that U.S. Bank National Association has renewed your
revolving line of credit subject to the following terms and conditions:
BORROWER: Phoenix Gold International, Inc.
GUARANTOR(S): None.
REVOLVING LINE OF CREDIT:
-------------------------
MAXIMUM LOAN AMOUNT: $5,000,000.
PURPOSE: Operating funds.
INTEREST RATE: Borrower will have the option of:
1) Fully floating variable interest rate equal
to Lender's Prime Rate (currently 8.50%),
2) London Inter-Bank Offering Rate
(LIBOR)+ 1.75%(currently 7.18%, based on a
30-day LIBOR rate of 5.43%).
LIBOR advances are subject to:
------------------------------
a) Minimum advance of $500,000, increments of $100,000
thereafter.
b) No prepayment is permitted.
c) Contracts may be fixed for 1, 2, or 3 months (not to
extend past
expiry date).
d) Two business days' notice required with rates set
between 8:00 AM and 12:00 PM Pacific Coast Time.
<PAGE>
PAGE 2
PHOENIX GOLD INTERNATIONAL, INC.
DECEMBER 1, 1999
THE INTEREST RATE CHARGED TO BORROWER IS TIED TO THE
PRIME RATE OF U.S. BANK NATIONAL ASSOCIATION, COMPUTED
ON THE BASIS OF A 360-DAY YEAR AND THE ACTUAL NUMBER OF
DAYS ELAPSED. BORROWER IS ADVISED THAT U.S BANK NATIONAL
ASSOCIATION'S PRIME RATE IS THE RATE OF INTEREST WHICH
THE BANK FROM TIME TO TIME IDENTIFIES AND PUBLICLY
ANNOUNCES AS ITS PRIME RATE, AND IS NOT NECESSARILY, FOR
EXAMPLE, THE LOWEST RATE OF INTEREST WHICH THE BANK
COLLECTS FROM ANY BORROWER OR GROUP OF BORROWERS.
MATURITY DATE: Payable on demand.
REVIEW DATE: December 31, 2000.
REPAYMENT: Optional advance note; interest payable monthly,
principal payable upon demand, automated credit
sweep on prime based borrowings.
REPAYMENT OF EACH ADVANCE RECEIVED BY THE
BORROWER UNDER THE LINE OF CREDIT IS SUBJECT TO
THE TERMS OF THE PROMISSORY NOTE EVIDENCING THAT
ADVANCE AS WELL AS ALL TERMS AND CONDITIONS OF
THIS LETTER. IN THE EVENT OF ANY CONFLICT
BETWEEN THE TWO, THE TERMS AND CONDITIONS
OF THE PROMISSORY NOTE SHALL CONTROL.
LOAN FEE: Upfront annual loan fee of 1/8th of 1% ($6,250),
plus all out of pocket expenses.
COLLATERAL: Perfected first priority security interest in
all of Borrower's now owned and hereafter
acquired accounts receivable and inventory.
COSTS: Borrower shall be responsible for all of the
Banks costs, expenses, fees, including attorneys
fees, associated with the negotiation and
documentation of these credit facilities.
FINANCIAL REPORTING
-------------------
1. Annual CPA audited financial statement to be provided within 90 days of the
end of each fiscal year.
2. Monthly company prepared financial statements to be provided within 30 days
of the end of each month.
3. Quarterly compliance certificate to be provided within 30 days of the end of
each quarter.
<PAGE>
PAGE 3
PHOENIX GOLD INTERNATIONAL, INC.
DECEMBER 1, 1999
FINANCIAL COVENANTS
-------------------
As long as indebted to Bank, Borrower is to be in compliance with the following
financial benchmarks, as described below. All covenants to be tested on a
quarterly basis.
CURRENT RATIO: Maintain a ratio of Current Assets to Current
Liabilities equal to or greater than 2.0:1.
Current Ratio is defined as Current Assets
divided by Current Liabilities
TANGIBLE NET WORTH: Maintain a Tangible Net Worth in excess of
$9,500,000. Tangible Net Worth is defined as
Net Worth minus any intangible assets. The
Bank will exclude net treasury stock
purchases totaling up to $2,000,000 during
the period beginning December 1st, 1999
through December 31st, 2000 from the Tangible
Net Worth covenant calculation.
PERMITTED STOCK
REPURCHASE: Beginning December 1st, 1999, through
December 31st, 2000 up to a maximum of
$2,000,000 worth of publicly traded, common
stock can be repurchased without prior
written bank approval as long as the Borrower
remains in compliance with all financial
covenants. Limited purchases of stock held
by the Borrower's management or the board of
directors is permitted. Total purchases of
management and board member stock not exceed
$250,000.
MAXIMUM FUNDED
DEBT TO TANGIBLE NET
WORTH: Maintain a Total Funded Debt to Tangible Net
Worth ratio of less than 0.25. Total Funded
Debt is defined as all interest-bearing debt.
Tangible Net Worth is defined at Net Worth
minus any intangible assets.
All computations made to determine compliance with the covenant requirements
shall be made in accordance with generally accepted accounting principles,
applied on a consistent basis and certified by Borrower as being true and
correct.
GENERAL TERMS AND CONDITIONS
----------------------------
1. PRIME RATE: U.S. Bank's prime rate is the rate of interest which Lender
from time to time establishes as its prime rate and is not, for example,
the lowest rate of interest which Lender collects from any borrower or
class of borrowers.
2. LOAN ADVANCES: Advances may be requested by Borrower from time to time in
accordance with the terms of the promissory note. All advances shall be
made at the sole option of Lender. Lender may decline to make any advance
and may terminate the availability of advances at any time.
<PAGE>
PAGE 4
PHOENIX GOLD INTERNATIONAL, INC.
DECEMBER 1, 1999
3. INSURANCE: Borrower shall maintain insurance in such amounts and covering
such risks as Lender shall require.
4. FINANCIAL REPORTING: At any time requested by Lender, Borrower shall
furnish any additional information regarding Borrower's financial condition
and business operations that Lender reasonably requests. This information
may include, but is not limited to, financial statements, tax returns,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets and forecasts.
5. LOAN DOCUMENTATION: Borrower shall deliver to Lender duly executed
promissory notes, deeds of trust, mortgages, security agreements, financing
statements, loan agreements, guaranties, borrower authorizations, attorney
opinion letters and other documents ("Loan Documents") as required by
Lender in form and substance satisfactory to Lender and its counsel.
6. NON-ASSIGNABLE: This credit accommodation may not be assigned by
Borrower. No guarantor or any third party is intended as a third-party
beneficiary or has any right to rely hereon.
7. ARBITRATION: Borrower and Lender hereby agree to be bound by the terms of
the Arbitration clause attached hereto as Exhibit A.
8. EXPENSES: Borrower shall reimburse Lender for all out-of-pocket expenses
incurred in connection with this credit accommodation upon demand, whether
or not this transaction closes or is funded. Such expenses shall include,
without limitation, attorney fees, title insurance fees, travel costs,
examination expenses, and filing fees.
9. EXPIRATION DATE: This offer will expire on December 31, 1999 and the
revolving credit facility contemplated by this letter must be documented
and closed on or before January 15, 2000.
10. ACCESS LAWS: Without limiting the generality of any provision of this
agreement requiring Borrower to comply with applicable laws, rules, and
regulations, Borrower agrees that it will at all times comply with
applicable laws relating to disabled access including, but not limited to,
all applicable titles of the Americans with Disabilities Act of 1990.
This letter summarizes certain principal terms and conditions relating to the
loan and supersedes all prior oral or written negotiations, understandings,
representations and agreements with respect to the loan. However, the Loan
Documents will include additional terms, conditions, covenants, representations,
warranties and other provisions which Lender customarily includes in similar
transactions or which Lender determines to be appropriate to this transaction.
Except to the extent modified by any other agreement, all terms, condition,
covenants and other provisions of this letter shall remain in effect until the
revolving line of credit (including any renewals, extensions or modifications)
is terminated and the loan balance is paid in full, and by signing below,
Borrower agrees to comply with all such provisions.
In addition to the events of default in any Loan Document, any failure to comply
with any term, condition or obligation in this letter shall constitute an event
of default under each of the Loan Documents. The provisions of this letter shall
survive the closing of the loan and the execution and delivery of the Loan
Documents. In the event of a conflict between this letter and the Loan
Documents, the terms of the Loan Documents shall control.
<PAGE>
PAGE 5
PHOENIX GOLD INTERNATIONAL, INC.
DECEMBER 1, 1999
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER
TO BE ENFORCEABLE.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER OREGON LAW.
If the above terms and conditions are acceptable to you, please sign, date and
return the acknowledgment copy of this letter on or before the Expiration Date.
Sincerely,
/s/ Jeffery Swift
Jeffery Swift
Vice President
275-5175
Borrower hereby accepts Lender's offer to extend credit on terms and conditions
stated above. Borrower hereby agrees to the Arbitration clause set forth in
Exhibit A attached hereto.
PHOENIX GOLD INTERNATIONAL, INC.
- --------------------------------
By: /s/ Joseph K. O'Brien
---------------------
Title: Chief Financial Officer and Secretary
----------------------------------------
Date: December 6, 1999
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<PAGE>
PAGE 6
PHOENIX GOLD INTERNATIONAL, INC.
DECEMBER 1, 1999
EXHIBIT A
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this letter or the revolving line of credit or otherwise, including
without limitation contract and tort disputes, shall be arbitrated pursuant to
the Rules of the American Arbitration Association, upon request of either party.
No act to take or dispose of any collateral securing any loan shall constitute a
waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This includes, without limitation, obtaining injunctive relief or a
temporary restraining order; foreclosing by notice and sale under any deed of
trust or mortgage; obtaining a writ of attachment or imposition of a receiver;
or exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to Article
9 of the Uniform Commercial Code. Any disputes, claims, or controversies
concerning the lawfulness or reasonableness or any act, or exercise of any
right, concerning any collateral securing any loan, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral
securing any loan, shall also be arbitrated, provided however that no arbitrator
shall have the right or other power to enjoin or restrain any act of any party.
Judgment upon any award rendered by any arbitrator may be entered in any court
having jurisdiction. Nothing herein shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of any action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.
ALTERNATIVE RATE OPTIONS
PROMISSORY NOTE
(PRIME RATE, LIBOR)
$5,000,000.00 Dated as of: 12-01-99
- ---------------------------------------------------------- ---------
PHOENIX GOLD INTERNATIONAL, INC. ("BORROWER")
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U.S. BANK NATIONAL ASSOCIATION ("LENDER")
1. TYPE OF CREDIT. This note is given to evidence Borrower's obligation to
repay all sums which Lender may from time to time advance to Borrower
("Advances") under a:
|_| single disbursement loan. Amounts loaned to Borrower hereunder will be
disbursed in a single Advance in the amount shown in Section 2.
|X| revolving line of credit. No Advances shall be made which create a
maximum amount outstanding at any one time which exceeds the maximum
amount shown in Section 2. However, Advances hereunder may be borrowed,
repaid and reborrowed, and the aggregate Advances loaned hereunder from
time to time may exceed such maximum amount.
|_| non-revolving line of credit. Each Advance made from time to time
hereunder shall reduce the maximum amount available shown in Section 2.
Advances loaned hereunder which are repaid may not be reborrowed.
2. PRINCIPAL BALANCE. The unpaid principal balance of all Advances
outstanding under this note ("Principal Balance") at one time shall not exceed
$5,000,000.00 .
- ---------------
3. PROMISE TO PAY. For value received Borrower promises to pay to Lender
or order at COMMERCIAL LOAN SERVICING - WEST, the Principal Balance of this
note, with interest thereon at the rate(s) specified in Sections 4 and 11 below.
4. INTEREST RATE. The interest rate on the Principal Balance outstanding
may vary from time to time pursuant to the provisions of this note. Subject to
the provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable periods of
time based on the rate options provided herein; PROVIDED, however, that once
Borrower notifies Lender of the rate option chosen in accordance with the
provisions of this note, such notice shall be irrevocable. The rate options are
the Prime Borrowing Rate and the LIBOR Borrowing Rate, each as defined herein.
(a) DEFINITIONS. The following terms shall have the following meanings:
"Business Day" means any day other than a Saturday, Sunday, or
other day that commercial banks in Portland, Oregon or New York City are
authorized or required by law to close; provided, however that when used in
connection with a LIBOR Rate, LIBOR Amount or LIBOR Interest Period such term
shall also exclude any day on which dealings in U.S. dollar deposits are not
carried on in the London interbank market.
"Dow Jones Page 3750" means the display designated as such on
the Dow Jones Markets Service (formerly known as Telerate) (or such other page
as may replace page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits).
"LIBOR Amount" means each principal amount for which Borrower
chooses to have the LIBOR Borrowing Rate apply for any specified LIBOR Interest
Period.
"LIBOR Interest Period" means as to any LIBOR Amount, a period
of 1, 2 OR 3 months commencing on the date the LIBOR Borrowing Rate becomes
applicable thereto; PROVIDED, however, that: (i) the first day of each LIBOR
Interest Period must be a Business Day; (ii) no LIBOR Interest Period shall
commence on or after expiry; (iii) no LIBOR Interest Period shall be selected
which would extend beyond EXPIRY ; (iv) no LIBOR Interest Period shall extend
beyond the date of any principal payment required under Section 6 of this note,
unless the sum of the Prime Rate Amount, plus LIBOR Amounts with LIBOR Interest
Periods ending on or before the scheduled date of such principal payment, plus
principal amounts remaining unborrowed under a line of credit, equals or exceeds
the amount of such principal payment; (v) any LIBOR Interest Period which would
otherwise expire on a day which is not a Business Day, shall be extended to the
next succeeding Business Day, unless the result of such extension would be to
extend such LIBOR Interest Period into another calendar month, in which event
the LIBOR Interest Period shall end on the immediately preceding Business Day;
and (vi) any LIBOR Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Interest Period) shall end on the
last Business Day of a calendar month.
<PAGE>
"LIBOR Rate" means, for any LIBOR Interest Period, the average
offered rate for deposits in United States Dollars (rounded upwards, if
necessary, to the nearest 1/16 of 1%) for delivery of such deposits on the first
day of such LIBOR Interest Period, for the number of months therein, which
appears on Dow Jones Page 3750 as of 11:00 a.m., London time (or such other time
as of which such rate appears) on the day that is two Business Days preceding
the first day of such LIBOR Interest Period; or the rate for such deposits
determined by Lender at such time based on such other published service of
general application as shall be selected by Lender for such purpose; provided,
that in lieu of determining the rate in the foregoing manner, Lender may
determine the rate based on the rates offered to Lender for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%) in the
interbank eurodollar market at such time for delivery on the first day of such
LIBOR Interest Period for the number of months therein; and provided, further,
that in any case the LIBOR Rate shall be adjusted to take into account the
maximum reserves required to be maintained for Eurocurrency liabilities by banks
during each such LIBOR Interest Period as specified in Regulation D of the Board
of Governors of the Federal Reserve System or any successor regulation.
"Prime Rate" means the rate of interest which Lender from time
to time establishes as its prime or reference rate and is not, for example, the
lowest rate of interest which Lender collects from any borrower or class of
borrowers. When the Prime Rate is applicable under Section 4(b) or 11(b), the
interest rate hereunder shall be adjusted without notice effective on the day
the Prime Rate changes, but in no event shall the rate of interest be higher
than allowed by law.
"Prime Rate Amount" means any portion of the Principal Balance
bearing interest at the Prime Borrowing Rate.
(b) THE PRIME BORROWING RATE.
(i) The Prime Borrowing Rate is a variable per annum rate equal to
the Prime Rate plus 0.00%.
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(ii) Whenever Borrower desires to use the Prime Borrowing Rate
option, Borrower shall give Lender notice orally or in writing in accordance
with Section 15 of this note, which notice shall specify the requested effective
date (which must be a Business Day) and principal amount of the Advance or
increase in the Prime Rate Amount, and whether Borrower is requesting a new
Advance under a line of credit or conversion of a LIBOR Amount to the Prime
Borrowing Rate.
(iii) Subject to Section 11 of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing Rate unless and except to the
extent that the LIBOR Borrowing Rate is in effect.
(c) THE LIBOR BORROWING RATE.
(i) The LIBOR Borrowing Rate is the LIBOR Rate plus 1.75% per annum.
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(ii) Borrower may obtain LIBOR Borrowing Rate quotes from Lender
between before 10:00 a.m. (Portland, Oregon time) on any Business Day. Borrower
may request an Advance, conversion of any portion of the Prime Rate Amount to a
LIBOR Amount or a new LIBOR Interest Period for an existing LIBOR Amount, at
such rate only by giving Lender notice in accordance with Section 4 (c) (iii)
before 10:00 a.m. (Portland, Oregon time) on such day.
(iii) Whenever Borrower desires to use the LIBOR Borrowing Rate
option, Borrower shall give Lender irrevocable notice (either in writing or
orally and promptly confirmed in writing) no later than 10:00 a.m. (Portland,
Oregon time) two (2) Business Days prior to the desired effective date of such
rate. Any oral notice shall be given by, and any written notice or confirmation
of an oral notice shall be signed by, the person(s) authorized in Section 15 of
this note, and shall specify the requested effective date of the rate, LIBOR
Interest Period and LIBOR Amount, and whether Borrower is requesting a new
Advance at the LIBOR Borrowing Rate under a line of credit, conversion of all or
any portion of the Prime Rate Amount to a LIBOR Amount, or a new LIBOR Interest
Period for an outstanding LIBOR Amount. Notwithstanding any other term of this
note, Borrower may elect the LIBOR Borrowing Rate in the minimum principal
amount of $ 500,000.00 and in multiples of $ 100,000.00 above such amount;
PROVIDED, however, that no more than N/A separate LIBOR Interest Periods may be
in effect at any one time.
(iv) If at any time the LIBOR Rate is unascertainable or unavailable
to Lender or if LIBOR Rate loans become unlawful, the option to select the LIBOR
Borrowing Rate shall terminate immediately. If the LIBOR Borrowing Rate is then
in effect, (A) it shall terminate automatically with respect to all LIBOR
Amounts (i) on the last day of each then applicable LIBOR Interest Period, if
Lender may lawfully continue to maintain such loans, or (ii) immediately if
Lender may not lawfully continue to maintain such loans through such day, and
(B) subject to Section 11, the Prime Borrowing Rate automatically shall become
effective as to such amounts upon such termination.
(v) If at any time after the date hereof (A) any revision in or
adoption of any applicable law, rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax, duty, or other charge, or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on the LIBOR Rate, or
(ii) shall impose or modify any reserve, insurance, special deposit, or similar
requirements against assets of, deposits with or for the account of, or credit
extended by Lender or its Eurodollar lending office, or impose on Lender or its
Eurodollar lending office any other condition affecting any such loans, and (B)
the result of any of the foregoing is (i) to increase the cost to Lender of
making or maintaining any such loans or (ii) to reduce the amount of any sum
receivable under this note by Lender or its Eurodollar lending office, Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate Lender for such increased cost or reduction. The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands compensation under this Section 4(c)(v),
Borrower may upon three (3) Business Days' notice to Lender pay the accrued
interest on all LIBOR Amounts, together with any additional amounts payable
under Section 4(c)(vi). Subject to Section 11, upon Borrower's paying such
accrued interest and additional costs, the Prime Borrowing Rate immediately
shall be effective with respect to the unpaid principal balance of such LIBOR
Amounts.
<PAGE>
(vi) Borrower will indemnify Lender upon demand, against any loss or
expense which Lender may sustain or incur (including, without limitation, any
loss or expense sustained or incurred in obtaining, liquidating or employing
deposits or other funds acquired to effect, fund or maintain any portion of the
loan or any Advance) as a consequence of (A) any failure of Borrower to make any
payment when due of any amount due hereunder, (B) any failure of Borrower to
borrow, if permitted by the terms of this note, continue or convert any portion
of the Prime Rate Amount to a LIBOR Amount, on a date specified therefor in a
notice thereof, or (C) any payment, voluntary or mandatory prepayment or payment
on default or conversion of any LIBOR Amount to the Prime Borrowing Rate, on a
date other than the last day of the applicable LIBOR Interest Period.
Determinations by Lender of the amount required to indemnify Lender shall be
conclusive in the absence of manifest error.
(vii) Notwithstanding any provision of this note to the contrary,
Lender shall be entitled to fund and maintain its funding of all or any part of
the loan evidenced by this note in any manner it elects; it being understood,
however, that with respect to any LIBOR Amount, all determinations hereunder
shall be made as if Lender had actually funded and maintained each LIBOR Amount
during the LIBOR Interest Period applicable to it through the purchase of
deposits having a term corresponding to such LIBOR Interest Period and bearing
an interest rate equal to the LIBOR Rate for such LIBOR Interest Period (whether
or not Lender shall have granted any participations in such LIBOR Amounts).
(viii) Notwithstanding any other term of this note, Borrower may not
select the LIBOR Borrowing Rate if an event of default hereunder has occurred
and is continuing.
(ix) Nothing contained in this note, including without limitation the
determination of any LIBOR Interest Period or Lender's quotation of any LIBOR
Borrowing Rate, shall be construed to prejudice Lender's right, if any, to
decline to make any requested Advance or to require payment on demand.
5. COMPUTATION OF INTEREST. All interest under Section 4 and Section 11
will be computed at the applicable rate based on a 360-day year and applied to
the actual number of days elapsed.
6. PAYMENT SCHEDULE.
(a) Principal. Principal shall be paid:
|X| on demand.
|_| on demand, or if no demand, on___
|_| on ___.
subject to Section 8, in installments of
|_| ___each, plus accrued interest, beginning on___and on the
same day of each___thereafter until___when the entire
Principal Balance plus interest thereon shall be due and
payable.
|_| ___each, including accrued interest, beginning on___and on
the same day of each___thereafter___until when the entire
Principal Balance plus interest thereon shall be due and
payable.
|_| ___.
(b) INTEREST.
(i) Interest on the Prime Rate Amount shall be paid:
|X| on the FIRST day of JANUARY, 2000 and on the same day of
each MONTH thereafter prior to maturity and at maturity.
|_| at maturity.
|_| at the time each principal installment is due and at
maturity.
|_| ___.
(ii) Interest on all LIBOR Amounts shall be paid:
|X| on the last day of the applicable LIBOR Interest Period,
and if such LIBOR Interest Period is longer than three
months, on the last day of each three month period
occurring during such LIBOR Interest Period, and at
maturity.
|_| on the____day of____and on the same day of each___
thereafter prior to maturity and at maturity.
|_| at maturity.
|_| at the time each principal installment is due and at
maturity.
|_| ____.
7. PREPAYMENT.
(a) Prepayments of all or any part of the Prime Rate Amount may be made at
any time without penalty.
(b) Except as otherwise specifically set forth herein, Borrower may not
prepay all or any part of any LIBOR Amount or terminate any LIBOR
Borrowing Rate, except on the last day of the applicable LIBOR Interest
Period.
<PAGE>
(c) Principal prepayments will not postpone the date of or change the
amount of any regularly scheduled payment. At the time of any principal
prepayment, all accrued interest, fees, costs and expenses shall also
be paid.
8. CHANGE IN PAYMENT AMOUNT. Each time the interest rate on this note
changes the holder of this note may, from time to time, in holder's sole
discretion, increase or decrease the amount of each of the installments
remaining unpaid at the time of such change in rate to an amount holder in its
sole discretion deems necessary to continue amortizing the Principal Balance at
the same rate established by the installment amounts specified in Section 6(a),
whether or not a "balloon" payment may also be due upon maturity of this note.
Holder shall notify the undersigned of each such change in writing. Whether or
not the installment amount is increased under this Section 8, Borrower
understands that, as a result of increases in the rate of interest the final
payment due, whether or not a "balloon" payment, shall include the entire
Principal Balance and interest thereon then outstanding, and may be
substantially more than the installment specified in Section 6.
9. ALTERNATE PAYMENT DATE. Notwithstanding any other term of this note,
if in any month there is no day on which a scheduled payment would otherwise
be due (e.g. February 31), such payment shall be paid on the last banking day
of that month.
10. PAYMENT BY AUTOMATIC DEBIT.
|X| Borrower hereby authorizes Lender to automatically deduct the amount of
all principal and interest payments from account number_________. If there are
insufficient funds in the account to pay the automatic deduction in full, Lender
may allow the account to become overdrawn, or Lender may reverse the automatic
deduction. Borrower will pay all the fees on the account which result from the
automatic deductions, including any overdraft and non-sufficient funds charges.
If for any reason Lender does not charge the account for a payment, or if an
automatic payment is reversed, the payment is still due according to this note.
If the account is a Money Market Account, the number of withdrawals from that
account is limited as set out in the account agreement. Lender may cancel the
automatic deduction at any time in its discretion.
Provided, however, if no account number is entered above, Borrower does not want
to make payments by automatic debit.
11. DEFAULT.
(a) Without prejudice to any right of Lender to require payment on demand or
to decline to make any requested Advance, each of the following shall be an
event of default: (i) Borrower fails to make any payment when due. (ii) Borrower
fails to perform or comply with any term, covenant or obligation in this note or
any agreement related to this note, or in any other agreement or loan Borrower
has with Lender. (iii) 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 related documents. (iv) 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. (v) Borrower dies, becomes insolvent, liquidates
or dissolves, 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. (vi) 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. (vii) Any of the events described in
this default section occurs with respect to any general partner in Borrower or
any guarantor of this note, or any guaranty of Borrower's indebtedness to Lender
ceases to be, or is asserted not to be, in full force and effect. (viii) There
is any material adverse change in the financial condition or management of
Borrower or Lender in good faith deems itself insecure with respect to the
payment or performance of Borrower's obligations to Lender. If this note is
payable on demand, the inclusion of specific events of default shall not
prejudice Lender's right to require payment on demand or to decline to make any
requested Advance.
(b) Without prejudice to any right of Lender to require payment on demand,
upon the occurrence of an event of default, Lender may declare the entire unpaid
Principal Balance on this note and all accrued unpaid interest immediately due
and payable, without notice; provided, however, that if any proceeding under any
bankruptcy or insolvency law is commenced by or against Borrower, the
availability of advances shall be immediately terminated without notice and the
entire Principal Balance and all accrued interest shall, without notice, become
immediately due and payable. 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 to a rate equal to the Prime Borrowing
Rate plus 5%. The interest rate will not exceed the maximum rate permitted by
applicable law. In addition, if any payment of principal or interest is 19 or
more days past due, Borrower will be charged a late charge of 5% of the
delinquent payment.
12. EVIDENCE OF PRINCIPAL BALANCE; PAYMENT ON DEMAND. Holder's records
shall, at any time, be conclusive evidence of the unpaid Principal Balance and
interest owing on this note. Notwithstanding any other provisions of this note,
in the event holder makes Advances hereunder which result in an unpaid Principal
Balance on this note which at any time exceeds the maximum amount specified in
Section 2, Borrower agrees that all such Advances, with interest, shall be
payable on demand.
13. LINE OF CREDIT PROVISIONS. If the type of credit indicated in Section 1
is a revolving line of credit or a non-revolving line of credit, Borrower agrees
that Lender is under no obligation and has not committed to make any Advances
hereunder. Each Advance hereunder shall be made at the sole option of Lender.
14. DEMAND NOTE. If this note is payable on demand, Borrower acknowledges
and agrees that (a) Lender is entitled to demand Borrower's immediate payment in
full of all amounts owing hereunder and (b) neither anything to the contrary
contained herein or in any other loan documents (including but not limited to,
provisions relating to defaults, rights of cure, default rate of interest,
installment payments, late charges, periodic review of Borrower's financial
condition, and covenants) nor any act of Lender pursuant to any such
<PAGE>
provisions shall limit or impair Lender's right or ability to require Borrower's
payment in full of all amounts owing hereunder immediately upon Lender's demand.
15. REQUESTS FOR ADVANCES.
(a) Any Advance may be made or interest rate option selected upon the
request of Borrower (if an individual), any of the undersigned (if Borrower
consists of more than one individual), any person or persons authorized in
subsection (b) of this Section 15, and any person or persons otherwise
authorized to execute and deliver promissory notes to Lender on behalf of
Borrower.
(b) Borrower hereby authorizes any ONE of the following individuals to
requestAdvances and to select interest rate options:____unless Lender is
otherwise instructed in writing.
(c) All Advances shall be disbursed by deposit directly to Borrower's
account_______number with Lender, or by cashier's check issued to Borrower.
(d) Borrower agrees that Lender shall have no obligation to verify the
identity of any person making any request pursuant to this Section 15, and
Borrower assumes all risks of the validity and authorization of such requests.
In consideration of Lender agreeing, at its sole discretion, to make Advances
upon such requests, Borrower promises to pay holder, in accordance with the
provisions of this note, the Principal Balance together with interest thereon
and other sums due hereunder, although any Advances may have been requested by a
person or persons not authorized to do so.
16. PERIODIC REVIEW. Lender will review Borrower's credit accommodations
periodically. At the time of the review, Borrower will furnish Lender with any
additional information regarding Borrower's financial condition and business
operations that Lender requests. This information may include but is not limited
to, financial statements, tax returns, lists of assets and liabilities, agings
of receivables and payables, inventory schedules, budgets and forecasts. If upon
review, Lender, in its sole discretion, determines that there has been a
material adverse change in Borrower's financial condition, Borrower will be in
default. Upon default, Lender shall have all rights specified herein.
17. NOTICES. Any notice hereunder may be given by ordinary mail, postage
paid and addressed to Borrower at the last known address of Borrower as shown
on holder's records. If Borrower consists of more than one person, notification
of any of said persons shall be complete notification of all.
18. ATTORNEY FEES. Whether or not litigation or arbitration is commenced,
Borrower promises to pay all costs of collecting overdue amounts. Without
limiting the foregoing, in the event that holder consults an attorney regarding
the enforcement of any of its rights under this note or any document securing
the same, or if this note is placed in the hands of an attorney for collection
or if suit or litigation is brought to enforce this note or any document
securing the same, Borrower promises to pay all costs thereof including such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees, including without limitation, costs and attorney fees incurred in any
appellate court, in any proceeding under the bankruptcy code, or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.
19. WAIVERS; CONSENT. Each party hereto, whether maker, co-maker, guarantor
or otherwise, waives diligence, demand, presentment for payment, notice of
non-payment, protest and notice of protest and waives all defenses based on
suretyship or impairment of collateral. Without notice to Borrower and without
diminishing or affecting Lender's rights or Borrower's obligations hereunder,
Lender may deal in any manner with any person who at any time is liable for, or
provides any real or personal property collateral for, any indebtedness of
Borrower to Lender, including the indebtedness evidenced by this note. Without
limiting the foregoing, Lender may, in its sole discretion: (a) make secured or
unsecured loans to Borrower and agree to any number of waivers, modifications,
extensions and renewals of any length of such loans, including the loan
evidenced by this note; (b) impair, release (with or without substitution of new
collateral), fail to perfect a security interest in, fail to preserve the value
of, fail to dispose of in accordance with applicable law, any collateral
provided by any person; (c) sue, fail to sue, agree not to sue, release, and
settle or compromise with, any person.
20. JOINT AND SEVERAL LIABILITY. All undertakings of the undersigned
Borrowers are joint and several and are binding upon any marital community of
which any of the undersigned are members. Holder's rights and remedies under
this note shall be cumulative.
21. SEVERABILITY. If any term or provision of this note is declared by a
court of competent jurisdiction to be illegal, invalid or unenforceable for any
reason whatsoever, such illegality, invalidity or unenforceability shall not
affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable, and this note shall be
construed as if such illegal, invalid or unenforceable provision had not been
contained herein.
22. ARBITRATION.
(a) Either Lender or Borrower may require that all disputes, claims,
counterclaims and defenses, including those based on or arising from any alleged
tort ("Claims") relating in any way to this note or any transaction of which
this note is a part (the "Loan"), be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and Title 9 of the U.S. Code. All Claims will be subject to the
statutes of limitation applicable if they were litigated. This provision is void
if the Loan, at the time of the proposed submission to arbitration, is secured
by real property located outside of Oregon or Washington, or if the effect of
the arbitration procedure (as opposed to any Claims of Borrower) would be to
materially impair Lender's ability to realize on any collateral securing the
Loan.
(b) If arbitration occurs and each party's Claim is less than $100,000, one
neutral arbitrator will decide all issues; if any party's Claim is $100,000 or
more, three neutral arbitrators will decide all issues. All arbitrators will be
active Oregon State Bar members in good
<PAGE>
standing. All arbitration hearings will be held in Portland, Oregon. In addition
to all other powers, the arbitrator(s) shall have the exclusive right to
determine all issues of arbitrability. Judgment on any arbitration award may be
entered in any court with jurisdiction.
(c) If either party institutes any judicial proceeding relating to the Loan,
such action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff; (ii) self-help repossession; (iii) judicial or
non-judicial foreclosure against real or personal property collateral; and (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.
23. GOVERNING LAW. This note shall be governed by and construed and enforced
in accordance with the laws of the State of Oregon without regard to conflicts
of law principles; provided, however, that to the extent that Lender has greater
rights or remedies under Federal law, this provision shall not be deemed to
deprive Lender of such rights and remedies as may be available under Federal
law.
24. YEAR 2000. Borrower has reviewed and assessed its business operations
and computer systems and applications to address the "year 2000 problem" (that
is, that computer applications and equipment used by the Borrower, directly or
indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1, 2000). Borrower
reasonably believes that the year 2000 problem will not result in a material
adverse change in Borrower's business condition (financial or otherwise),
operations, properties or prospects or ability to repay Lender. Borrower agrees
that this representation will be true and correct on and shall be deemed made by
Borrower on each date Borrower requests any advance under this Agreement or
delivers any information to Lender. Borrower will promptly deliver to Lender
such information relating to this representation as Lender requests from time to
time.
25. RENEWAL AND EXTENSION. This Note is given in renewal and extension and
not in novation of the following described indebtedness: That certain Promissory
Note dated December 28, 1998, in the amount of $5,500,000.00 executed by
Borrower payable to Lender. It is further agreed that all liens and security
interest securing said indebtedness are hereby renewed and extended to secure
the Note and all renewals, extensions and modifications thereof.
26. PAYMENT OF INTEREST ACCRUED ON REPLACED NOTE. All interest accrued but
unpaid on Borrower's promissory note dated December 28, 1998, payable to the
order of Lender in the original amount $5,500,000.00, as amended, supplemented,
extended or otherwise modified, shall be due and payable in full on the first
interest payment date under this Note.
27. DISCLOSURE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
LENDERS AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
THE LENDER TO BE ENFORCEABLE.
EACH OF THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
DOCUMENT.
PHOENIX GOLD INTERNATIONAL, INC.
- --------------------------------------------------------
Borrower Name (Corporation, Partnership or other Entity)
/S/ JOSEPH K. O'BRIEN CFO & SECRETARY
- -----------------------------------------------------
By Title
For valuable consideration, Lender agrees to the terms of the arbitration
provision set forth in this note.
Lender Name:U.S. BANK NATIONAL ASSOCIATION
------------------------------
By: /s/ Jeffery Swift
--------------------
Title: Vice President
-----------------
Date: 12/1/99
--------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PHOENIX
GOLD INTERNATIONAL, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-24-2000
<PERIOD-END> DEC-26-1999
<CASH> 677,002
<SECURITIES> 0
<RECEIVABLES> 4,342,707
<ALLOWANCES> 0
<INVENTORY> 6,283,774
<CURRENT-ASSETS> 11,893,159
<PP&E> 4,776,646
<DEPRECIATION> 3,828,091
<TOTAL-ASSETS> 13,860,892
<CURRENT-LIABILITIES> 2,218,683
<BONDS> 0
<COMMON> 6,695,590
0
0
<OTHER-SE> 4,014,882
<TOTAL-LIABILITY-AND-EQUITY> 13,860,892
<SALES> 6,893,627
<TOTAL-REVENUES> 6,893,627
<CGS> 5,092,858
<TOTAL-COSTS> 5,092,858
<OTHER-EXPENSES> 1,458,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 350,973
<INCOME-TAX> 139,000
<INCOME-CONTINUING> 211,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,973
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
