U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number : 0-25836
PORTLAND BREWING COMPANY
(Exact name of small business issuer as specified in its charter)
Oregon 93-0865997
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2730 NW 31st Avenue
Portland, Oregon 97210
(Address of principal executive offices and zip code)
(503) 226-7623
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock as of May 1,
2000 was 4,994,714 shares.
Transitional Small Business Disclosure Format (check one): Yes [X] No [ ]
<PAGE>
PORTLAND BREWING COMPANY
FORM 10-QSB
INDEX
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -March 31, 2000 and December 31, 1999 2
Consolidated Statements of Operations -Three Months ended
March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows - Three Months ended
March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II OTHER INFORMATION
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
1
<PAGE>
PORTLAND BREWING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, 2000 December 31, 1999
------ -------------- ------------------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 136,226 $ 103,006
Accounts receivable, net of allowance of $7,138 (2000) and $8,000 (1999) 983,098 655,064
Inventories 958,792 729,853
Prepaid assets 249,747 218,550
------------------ ------------------
Total current assets 2,327,863 1,706,473
Property and equipment, net of accumulated depreciation of $4,383,439 (2000) 6,745,166 6,711,257
and $4,208,710 (1999)
Other assets, net 940,618 198,544
------------------ ------------------
Total assets $10,013,647 $8,616,274
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 531,699 $ 435,465
Current portion of long-term debt 35,946 26,706
Accounts payable 1,206,544 809,369
Customer deposits held 141,183 131,821
Accrued payroll 184,188 170,580
Other accrued liabilities 191,265 65,853
----------------- -----------------
Total current liabilities 2,290,825 1,639,794
Long-term debt, less current portion 95,992 86,099
Stockholder term loan 2,500,000 2,100,000
Other long-term liabilities 80,000 -
Series A Redeemable Convertible Preferred Stock, $52 par value, 10,000 shares
authorized, 5,770 shares issued and outstanding, liquidation preference of
of $300,040 300,040 300,040
STOCKHOLDERS' EQUITY:
Common stock, no par value, 25,000,000 shares authorized
shares issued and outstanding: 4,994,714 (2000), 4,094,714 (1999) 8,148,883 7,662,883
Stock notes receivable (375) (375)
Accumulated deficit (3,401,718) (3,172,167)
------------------ ------------------
Total stockholders' equity 4,746,790 4,490,341
------------------ ------------------
Total liabilities and stockholders' equity $10,013,647 $8,616,274
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
PORTLAND BREWING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
-----------------------------------
2000 1999
--------------- ---------------
Sales $ 2,894,320 $ 2,256,926
Less- excise tax 160,468 111,338
------------ ------------
Net sales 2,733,852 2,145,588
Cost of sales 1,877,650 1,595,246
------------ ------------
Gross profit 856,202 550,342
General and administrative expenses 387,244 314,098
Sales and marketing expenses 643,238 497,816
------------ ------------
Loss from operations (174,280) (261,572)
Interest expense (62,462) (51,340)
Other income (expense), net 7,190 (7,196)
------------ ------------
Total other expense, net (55,272) (58,536)
Net loss $ (229,552) $ (320,108)
============ ============
Basic and diluted net loss per share $ (0.05) $ (0.10)
============ ============
Shares used in per share calculations 4,694,714 3,365,267
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
PORTLAND BREWING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows relating to operating activities:
Net loss $ (229,552) $ (320,108)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation 221,658 232,807
Amortization 48,415 32,165
Loss (gain) on sale of assets (8,275) (300)
(Increase) decrease in:
Accounts receivable, net (328,034) 212,857
Inventories (186,774) (51,445)
Prepaid assets (31,197) 81,375
(Decrease) increase in:
Accounts payable 397,175 (49,948)
Customer deposits held 9,362 4,052
Accrued payroll and other accrued liabilities 19,020 29,497
------------ ------------
Net cash (used in) provided by operating activities (88,202) 170,952
Cash flows relating to investing activities:
Purchase of property and equipment (105,566) (323,286)
Proceeds from sale of property and equipment 8,275 300
Changes in other assets (43,092) (21,256)
Acquisition, net of cash paid (253,562) -
------------ ------------
Net cash used in investing activities (393,945) (344,242)
Cash flows relating to financing activities:
Net borrowings (repayments) under line of credit 96,234 (160,615)
Issuance of long term debt 27,720 -
Proceeds from stockholders' loans 400,000 -
Issuance of preferred stock - 300,040
Repayments of long term debt (8,587) (8,588)
------------ ------------
Net cash provided by financing activities 515,367 130,837
Net increase (decrease) in cash 33,220 (42,453)
Cash, beginning of period 103,006 52,532
------------ ------------
Cash, end of period $ 136,226 $ 10,079
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 62,462 $ 51,340
Supplemental disclosure of noncash information:
Common stock issued in connection with acquisition $ 486,000 $ -
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
PORTLAND BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods presented. The financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999. This quarterly report should be
read in conjunction with such Annual Report.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
December 31, 2000, or any portion thereof.
2. Comprehensive Loss
The Company has adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" which
establishes requirements for disclosure of comprehensive income (loss).
Comprehensive loss did not differ from reported net loss in the periods
presented.
3. Net Loss Per Share
Basic loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding for the period. Diluted net
loss per common share for all periods presented is the same as basic net loss
per share since all potential dilutive securities are excluded because they are
antidilutive.
The dilutive effect of stock options outstanding for the purchase of 360,300 and
143,975 shares at March 31, 2000 and 1999, respectively, and warrants
outstanding for the purchase of 87,697.5 shares at March 31, 2000 and 1999 were
not included in loss per share calculations, because to do so would have been
antidilutive.
5
<PAGE>
4. Inventories
Inventories are stated at the lower of average cost, which approximates the
first-in, first-out (FIFO) method, or market and include materials, labor and
manufacturing overhead. Inventories consist of the following:
March 31, Dec. 31,
2000 1999
------------- --- -------------
Raw materials $ 335,648 $ 352,860
Work-in-process 211,954 177,985
Finished goods 328,888 111,268
Merchandise 82,302 87,740
------------- -------------
$ 958,792 $ 729,853
============= =============
5. Segment Information
The Company is organized into three product-based segments: brewery operations,
restaurant operations and hand truck manufacturing. The Company's brewery
segment brews and sells specialty beer in its Portland, Oregon brewery which is
sold to distributors and retail customers. The Company's restaurant, which
adjoins its brewery, sells the Company's specialty beers along with lunch and
dinner. In October 1999, the Company purchased Harco Products, Inc., a company
which produces hand trucks for various industrial uses.
All revenues are attributable to, and all long-lived assets are located in the
United States, the Company's country of domicile. The basis of accounting for
transactions between segments is based on the fair market value of the
respective goods or services. Interest expense is considered a corporate expense
and is not allocated to the three segments.
Three months ended March 31,
-------------------------------------
2000 1999
----------------- ---------------
Net Sales:
Brewery $ 2,314,813 $ 1,867,083
Restaurant 395,738 341,844
Less: intersegment sales (78,130) (63,339)
------------- -------------
Subtotal 2,632,421 2,145,588
Harco Products 101,431 -
------------- -------------
Total net sales $ 2,733,852 $ 2,145,588
============= =============
Gross Profit:
Brewery $ 780,299 $ 523,716
Restaurant 82,996 55,525
Less: intersegment gross profit (45,569) (28,899)
------------- -------------
817,726 550,342
Harco Products 38,476 -
------------- -------------
Total gross profit $ 856,202 $ 550,342
============= =============
6
<PAGE>
6. Acquisitions
In October 1999, the Company acquired all of the outstanding common stock of
Harco Products, Inc. ("Harco"), from a related party. Harco produces hand trucks
for various industrial uses. The purchase price of $569,585 was paid by the
issuance of shares of the Company's common stock valued at $0.75 per share. The
common stock issued in connection with this acquisition contains certain
incidental registration rights. The acquisition was accounted for using the
purchase method of accounting, which requires that the purchase price be
allocated to the net assets acquired based upon the relative fair value of
assets acquired. The excess of the acquisition cost over the fair value of the
net assets acquired, of approximately $36,000, is being amortized using the
straight-line method over five years. The accompanying financial statements
include the results of operations from the date of acquisition. In connection
with the acquisition, the Company received 30,000 shares of its common stock
that Harco owned, and recorded a corresponding reduction to stockholders'
equity.
On January 31, 2000, the Company purchased certain assets (equipment and brands)
from Saxer Brewing Company ("Saxer") for 900,000 shares of the Company's common
stock, $150,000 cash and a three-year agreement to pay certain amounts based on
barrel sales of the Saxer and Nor'wester brands, such amount secured by the
Saxer and Nor'wester brands. In connection with this purchase, the Company
recorded intangible assets of approximately $747,000, representing the fair
value of trademarks and brand names purchased from Saxer, which are being
amortized on a straight-line basis over five years. Also in connection with this
purchase, the Company recorded a liability of $200,000 representing the minimum
payments to be made over a three-year period based on barrel sales of the Saxer
and Nor'wester brands.
Item 2. Management's Discussion and Analysis or Plan of Operation
Certain statements in the Management's Discussion and Analysis or Plan of
Operation are forward-looking statements. These forward-looking statements are
based on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those expressed in such
forward-looking statements. Such risks and uncertainties include general
business and economic conditions, competitive products and pricing, fluctuations
in demand and availability of financing. See "Factors That May Affect Future
Results" below for additional risks and uncertainties.
Results of Operations
Three months ended March 31, 2000 and 1999
Net sales in the first quarter of 2000 increased 28% to $2,894,320 from
$2,256,926 in the first quarter of 1999. Net sales from brewery operations
increased 24% to $2,314,183 in the first quarter of 2000 from $1,867,083 in the
first quarter of 1999, primarily as a result of increased volume. Shipments
increased 21% to 14,725 barrels in the first quarter of 2000 from 12,122 barrels
in the first quarter of 1999. Net sales from restaurant operations increased 16%
to $395,738 in the first quarter of 2000 from $341,844 in the first quarter of
1999. The Company's restaurant was closed for two weeks in the first quarter of
1999 for remodeling. Additionally, the increase in restaurant sales in the first
quarter of 2000 was attributable to increased volume resulting from promotional
programs, and to a lesser extent, certain price increases. Net sales in the
first quarter of 2000 also included $101,431 of sales of Harco Products, Inc.
("Harco") products.
Gross profit increased 56% to $856,202 (31% of net sales) in the first quarter
of 2000 from $550,342 (26% of net sales) in the first quarter of 1999. Gross
profit from brewery operations increased to 34% of brewery net sales in the
first quarter of 2000 from 28% of brewery net sales in the first quarter of
1999, primarily as a result of increased production volume and therefore better
capacity utilization. Gross profit from restaurant operations increased to 21%
of restaurant sales in the first quarter of 2000 from 16% of restaurant sales in
the first quarter of 2000, primarily as a result of increased volume and to a
lesser extent, certain price increases. Gross profit in the first quarter of
2000 also included $38,476 from sales of Harco products.
7
<PAGE>
General and administrative expenses increased 23% to $387,244 (14% of net sales)
in the first quarter of 2000 from $314,098 (14% of net sales) in the first
quarter of 1999. The increase is primarily the result of additional operating
costs related to the acquisition of Harco in October 1999 and of the Saxer and
Nor'wester brands in January 2000. See Note 6 of Notes to Consolidated Financial
Statements.
Sales and marketing expenses increased 29% to $643,238 (24% of net sales) in the
first quarter of 2000 from $497,816 (23% of net sales) in the first quarter of
1999. As a percentage of net sales, sales and marketing expenses were relatively
constant over the two periods.
Interest expense increased to $62,462 in the first quarter of 2000 from $51,340
in the first quarter of 1999, as a result of increased borrowings used to
support working capital and higher production and sales levels.
Liquidity and Capital Resources
The Company requires capital principally to fund its working capital needs. The
Company has met its capital requirements through cash flow from operations, bank
borrowings, loans from shareholders and the private and public sale of its
Common Stock.
Accounts receivable increased $328,034 in the first quarter of 2000, primarily
as a result of increased sales, much of which occurred late in the quarter.
Inventories increased $228,939 in the first quarter of 2000, primarily as a
result of increased sales, increased inventory related to Harco (which was
acquired in October 1999) and increased inventory related to the Saxer and
Nor'wester brands (which were acquired in January 2000).
The Company has a $2.5 million term loan ("Term Loan") payable to the
MacTarnahan Limited Partnership (a related party), which is secured by
receivables, inventory, equipment and general intangibles of the Company. The
Term Loan bears interest at a per annum rate equal to the prime lending rate of
the Bank of the Northwest plus 1% (10.0% at March 31, 2000). The Term Loan is
due on April 1, 2001.
The Company has a $1,000,000 revolving line of credit ("Revolving Line") with a
bank, under which $531,699 was outstanding at March 31, 2000. Payment of the
Revolving Line is secured by certain of the Company's assets and is guaranteed
by certain of the Company's shareholders. Interest is payable monthly at a per
annum rate equal to prime rate plus 1% (10.0% at March 31, 2000). The Revolving
Line expires on June 1, 2001.
Acquisitions
In October 1999, the Company acquired all of the outstanding common stock of
Harco from a related party. Harco produces hand trucks for various industrial
uses. The purchase price of $569,585 was paid by the issuance of shares of the
Company's common stock valued at $0.75 per share. See Note 6 of Notes to
Consolidated Financial Statements.
On January 31, 2000, the Company purchased certain assets (equipment and brands)
from Saxer Brewing Company ("Saxer") for 900,000 shares of the Company's common
stock, $150,000 cash and a three year agreement to pay certain amounts based on
barrel sales of the Saxer and Nor'wester brands, such amount secured by the
Saxer and Nor'wester brands. See Note 6 of Notes to Consolidated Financial
Statements.
Factors That May Affect Future Results
Competition. The Company operates in the specialty beer industry. Intense
competition and the proliferation of new brands has had and may continue to have
an adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will be able to increase
its sales volume or be able to maintain its selling prices in existing markets
or new markets.
8
<PAGE>
Operating Losses. The Company experienced significant operating losses during
the last three fiscal years, and has continued to incur losses in the first
quarter of 2000. Operating results have and may continue to fluctuate as a
result of many factors including lower sales volumes and selling prices,
increased depreciation and other fixed operating costs as a percent of sales
during periods when the Company's brewery is at less than full capacity, changes
in product mix, increased selling and marketing costs incurred as the Company
protects its business in existing markets and increased transportation costs as
it develops business in new geographic markets.
Purchase of Assets from Saxer Brewing Company. In March 2000 the Company began
production of the Saxer and Nor'wester brands at its Portland brewery. The
Company believes that the additional volume will strengthen its financial
performance over time. However, the production and distribution of the Saxer and
Nor'wester brands requires additional working capital. The Company has also
agreed to pay certain amounts based on barrel sales of the Saxer and Nor'wester
brands. The Company has increased its Term Loan from $2.1 million to $2.5
million and its Revolving Line from $750,000 to $1,000,000 to accommodate its
anticipated additional working capital needs. There are no assurances that the
production and distribution of the Saxer and Nor'wester brands will provide
sufficient cash flow from operations to accommodate the increased working
capital needs and repayment of the increased debt.
Ability to Refinance or Retire Outstanding Debt. The Company has a Term Loan
payable to the MacTarnahan Limited Partnership (a related party) of $2.5
million. The Term Loan is due on April 1, 2001. The Company expects to place the
debt permanently with a financial institution by April 1, 2001 or pay off the
debt through the raising of additional capital. There can be no assurance that
the Company will be able to obtain permanent financing from a financial
institution or that the Company will be able to raise additional capital on
commercially reasonable terms or at all.
The Company's working capital requirements over the next 12 months are expected
to be met from cash flow through operations, funds available under the Revolving
Line and, if appropriate and available, additional equity offerings and/or
borrowings from other lenders. There can be no assurance the Company will be
able to raise additional funds through equity offerings or additional
borrowings.
9
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) On October 27, 1999, 684,000 shares, and on January 31, 2000, an
additional 75,447 shares, of the Company's common stock were issued to
the shareholders of Harco. See Note 6 of Notes to Consolidated
Financial Statements.
On January 31, 2000, 900,000 shares of the Company's common stock were
issued to the Saxer Brewing Company. See Note 6 of Notes to
Consolidated Financial Statements.
For both transactions, the Company relied on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933
and/or Regulation D as the transactions did not involve a public
offering and/or the parties were "accredited investors."
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits included herein:
Number Number
(1-A) (S-B 601) Description
--------------- -------------- -------------------------------------------
6.27 10.27 Loan Agreement, dated February 2, 2000
12 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31,
2000.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 10th day of May, 2000.
PORTLAND BREWING COMPANY
Signature Title
--------- -----
/s/ GLENMORE JAMES Executive Vice President and
---------------------- Chief Financial Officer
Glenmore James (Principal Financial and Accounting Officer)
11
LOAN AGREEMENT
<TABLE>
- ---------------- -------------- -------------- ------------ --------- -------------- ----------- -------------- --------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 02-02-2000 06-01-2001 0101 4A0 6100 1049968 610
- ---------------- -------------- -------------- ------------ --------- -------------- ----------- -------------- --------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: Portland Brewing Company Lender: Washington Mutual Bank doing
2730 NW 31st Avenue business as Western Bank
Portland, OR 97210 Beaverton Business Banking Center
12655 SW Center Street, Suite 500
Beaverton, OR 97005
THIS LOAN AGREEMENT between Portland Brewing Company ("Borrower") and Washington
Mutual Bank doing business as Western Bank ("Lender") is made and executed on
the following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of February 2, 2000, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
Account. The word "Account" means a trade account, account receivable, or
other right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity
obligated upon an Account.
Advance. The word "Advance" means a disbursement of Loan funds under this
Agreement.
Borrower. The word "Borrower" means Portland Brewing Company.
Borrowing Base. The words "Borrowing Base" mean, as determined by Lender
from time to time, the lesser of (a) $1,000,000.00; or (b) the sum of (i)
75.000% of the aggregate amount of Eligible Accounts, plus (ii) 50.000% of
the aggregate amount of Eligible Inventory.
Business Day. The words "Business Day" mean a day on which commercial banks
are open for business in the State of Oregon.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise. The
word "Collateral" includes without limitation all collateral described
below in the section titled "COLLATERAL."
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by Lender in writing, Eligible
Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders,
officers, or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States, except to the extent such Accounts are
supported by insurance, bonds or other assurances satisfactory to
Lender.
(e) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the Account
Debtor to Borrower.
(f) Accounts which are subject to dispute, counterclaim, or setoff.
(g) Accounts with respect to which the goods have hot been shipped or
delivered, or the services have not been rendered, to the Account
Debtor.
(h) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such
debts become due.
(j) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(k) Accounts which have not been paid in full within 60 days from the
invoice date. The entire balance of any Account of any single Account
debtor will be ineligible whenever the portion of the Account which
has not been paid within 60 days from the invoice date is in excess of
10.000% of the total amount outstanding on the Account.
Eligible Inventory. The words "Eligible Inventory" mean, at any time, all
of Borrower's Inventory as defined below except:
(a) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(b) Inventory which Lender, in its sole discretion, deems to be
obsolete, unsalable, damaged, defective, or unfit for further
processing.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended. Event of Default. The words "Event of Default" mean
and include without limitation any of the Events of Default set forth below
in the section titled "EVENTS OF DEFAULT."
Expiration Date. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may
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02-02-2000 LOAN AGREEMENT Page 2
Loan No 0101 (Continued)
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become otherwise unenforceable.
Inventory. The word "Inventory" means all of Borrower's raw materials, work
in process, finished goods, merchandise, parts and supplies, of every kind
and description, and goods held for sale or lease or furnished under
contracts of service in which Borrower now has or hereafter acquires any
right, whether held by Borrower or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of Borrower's custody or possession and all returns on
Accounts.
Lender. The word "Lender" means Washington Mutual Bank doing business as
Western Bank, its successors and assigns.
Line of Credit. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets. See Exhibit "A".
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered
by Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.
(d) All guaranties required by Lender for the Line of Credit shall
have been executed by each Guarantor, delivered to Lender, and be in
full force and effect.
(e) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, books, records,
and operations, and Lender shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due
and payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and
Borrower shall have delivered to Lender the compliance certificate
called for in the paragraph below titled "Compliance Certificate."
Making Loan Advances. Advances under the Line of Credit may be requested
either orally or in writing by authorized persons. Lender may, but need
not, require that all oral requests be confirmed in writing. Each Advance
shall be conclusively deemed to have been made at the request of and for
the benefit of Borrower (a) when credited to any deposit account of
Borrower maintained with Lender or (b) when advanced in accordance with the
instructions of an authorized person. Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount of
the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount
of all Advances then outstanding and all accrued unpaid interest, together
with all other applicable fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others,
if required) shall grant to Lender Security Interests in such property and
assets as Lender may require (the "Collateral"), including without limitation
Borrower's present and future Accounts, general intangibles, and Inventory.
Lender's Security Interests in the Collateral shall be continuing liens and
shall include the proceeds and products of the Collateral, including without
limitation the proceeds of any insurance. With respect to the Collateral,
Borrower agrees and represents and warrants to Lender:
Perfection of Security Interests. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's Security Interests in the Collateral. Upon
request of Lender, Borrower will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Contemporaneous with the execution of this
Agreement, Borrower will execute one or more UCC financing statements and
any similar statements as may be required by applicable law, and will file
such financing statements and all such similar statements in the
appropriate location or locations. Borrower hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security Interest. Lender may at
any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for
use as a financing statement. Borrower will reimburse Lender for all
expenses for the perfection, termination, and the continuation of the
perfection of Lender's security interest in the Collateral. Borrower
promptly will notify Lender of any change in Borrower's name including any
change to the assumed business names of Borrower. Borrower also promptly
will notify Lender of any change in Borrower's Social Security Number or
Employer Identification Number. Borrower further agrees to notify Lender in
writing prior to any change in address or location of Borrower's principal
governance office or should Borrower merge or consolidate with any other
entity.
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02-02-2000 LOAN AGREEMENT Page 3
Loan No 0101 (Continued)
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Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. With respect to the Inventory,
Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Inventory and
records itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrower's Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory. The following is an accurate and
complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower's Accounts and Inventory: 2730 NW 31st
Avenue, Portland, OR 97210.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts and Inventory and Eligible Accounts and Eligible Inventory, in
form and substance satisfactory to the Lender. Thereafter and at such
frequency as Lender shall require, Borrower shall execute and deliver to
Lender such supplemental schedules of Eligible Accounts and Eligible
Inventory and such other matters and information relating to the Accounts
and Inventory as Lender may request.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (b) All Account information listed on schedules delivered to
Lender will be true and correct, subject to immaterial variance; and (c)
Lender, its assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit Borrower's records and to
confirm with Account Debtors the accuracy of such Accounts.
Representations and Warranties Concerning Inventory. With respect to the
Inventory, Borrower represents and warrants to Lender: (a) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (b) All Inventory values listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; (c) The value of
the Inventory will be determined on a consistent accounting basis; (d)
Except as agreed to the contrary by Lender in writing, all Eligible
Inventory is now and at all times hereafter will be in Borrower's physical
possession and shall not be held by others on consignment, sale on
approval, or sale or return; (e) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (f) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will
concurrently at the time of bailment cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to
Lender, warehouse receipts in Lender's name evidencing the storage of
Inventory; and (g) Lender, its assigns, or agents shall have the right at
any time and at Borrower's expense to inspect and examine the Inventory and
to check and test the same as to quality, quantity, value, and condition.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized and validly
existing under the laws of the State of Oregon and is validly existing and
in good standing in all states in which Borrower is doing business.
Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently
proposes to engage. Borrower also is duly qualified as a foreign
corporation and is in good standing in all states in which the failure to
so qualify would have a material adverse effect on its businesses or
financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower.
Properties. Except for Permitted Liens, Borrower owns and has good title to
all of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years. See Exhibit
"A".
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). Except as disclosed to
and acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the properties,
there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or substance
by any person on, under, about or from any of the properties. (b) Borrower
has no knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or
from the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of any
kind by any person relating to such matters. (c) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, about or from any of the
properties; and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the properties to make such inspections and
tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or liability
on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release of a hazardous waste or substance
on the properties, or as a result of a violation of any Environmental Laws.
The provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral. See Exhibit "A."
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 2730 NW 31st Avenue, Portland, Oregon 97210.
Unless Borrower has designated otherwise in writing this location is also
the office or offices where Borrower keeps its records concerning the
Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
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02-02-2000 LOAN AGREEMENT Page 4
Loan No 0101 (Continued)
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this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Other Ratio. Maintain a ratio of Debt Service Coverage, defined as net
cash after operations divided by financing costs plus current portion
of long term debt plus capital expenditures In excess of 1.00 to 1.00.
The following provisions shall apply for purposes of determining compliance
with the foregoing financial covenants and ratios: the above covenants and
ratios will be measured annually. Except as provided above, all
computations made to determine compliance with the requirements contained
in this paragraph shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantors
named below, on Lender's forms, and in the amounts and under the conditions
spelled out in those guaranties.
Guarantors Amounts
---------- -------
Robert M. MacTarnahan $1,000,000.00
Charles A. Adams $1,000,000.00
Charles A. Adams Family Trust $1,000,000.00
MacTarnahan Limited Partnership $1,000,000.00
Harmer Mill & Logging Supply Co. dba Harmer Co. $1,000,000.00
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice,
summons, lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurance. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
<PAGE>
02-02-2000 LOAN AGREEMENT Page 5
Loan No 0101 (Continued)
- --------------------------------------------------------------------------------
Borrower's accounts, except to Lender. See Exhibit "A".
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, transfer, merge or consolidate with any
other entity (unless Borrower is the surviving entity), change ownership,
change its name, dissolve or transfer or sell Collateral out of the
ordinary course of business, (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock), or (d) purchase or retire any
of Borrower's outstanding shares or alter or amend Borrower's capital
structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets or (b) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower has with
Lender; (b) Borrower becomes insolvent, files a petition in bankruptcy or
similar proceedings, or is adjudged a bankrupt.
YEAR 2000. Unless Lender has provided Borrower with a written waiver of the
following "Year 2000" provisions, the following provisions shall apply:
Borrower represents, warrants and covenants that it has, or will have by a date
that is acceptable to Lender: (i) undertaken a detailed inventory, review, and
assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower to be Year 2000 compliant on a
timely basis, (ii) developed a detailed plan and timeline and committed adequate
resources for becoming Year 2000 compliant on a timely basis, and (iii)
implemented that plan in accordance with that timetable in all material
respects. Borrower covenants and agrees that Borrower shall from time to time
upon Lender's request furnish periodic updates to Lender regarding Borrower's
progress on its Year 2000 compliance efforts, and provide copies to Lender of
any internal and third-party assessments of Borrower's Year 2000 compliance
efforts. Borrower covenants to be and reasonably anticipates that it will be
Year 2000 compliant on a timely basis.
Borrower has made (or will make, by a date acceptable to Lender) written inquiry
(or, if acceptable to Lender, oral inquiry) of each of its key suppliers,
vendors, and customers as to whether such persons will be Year 2000 compliant in
all material respects on a timely basis. Based on that inquiry, and to the best
of Borrower's knowledge only, Borrower believes that all such persons will be
Year 2000 compliant in all material respects on a timely basis. For purposes of
this provision, "key suppliers, vendors, and customers" refers to those
suppliers, vendors, and customers of Borrower whose business failure would, with
reasonable probability, result in a material adverse change in the business,
properties, condition (financial or otherwise), or prospects of Borrower, or
Borrower's ability to repay the indebtedness evidenced by this Agreement.
"Year 2000 compliant" means, with regard to any entity, that all software,
embedded microchips, and other processing capabilities utilized by, and material
to the business operations or financial condition of, such entity are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates in
and after the Year 2000.
It shall be an event of default under this Note if (x) any of Borrower's
representations and warranties regarding Year 2000 shall cease to be true
(whether or not true when made) and, as a result, Lender reasonably believes
that Borrower's financial condition or its ability to pay its debts as they
become due will thereby be materially impaired, (y) Borrower fails to comply
with any of its Year 2000 covenants, or (z) Borrower fails to be Year 2000
compliant in any material respect on a timely basis.
GUARANTOR'S SUBMISSION OF FINANCIAL STATEMENTS AND TAX RETURNS. Borrower agrees
that, while this Agreement is in effect, Guarantor will furnish to Lender the
following: (1) As soon as available, but in no event later than 120 days after
the end of each year, Guarantor's individual financial statement for such yearly
period, prepared and certified as correct to the best knowledge and belief by
Guarantor. (2) Promptly after the filing thereof and in any event within 30 days
after the filing thereof, a copy of Guarantor's filed federal and state tax
returns together with all supplemental schedules to include K-1's.
SUBMISSION OF FINANCIAL STATEMENTS AND TAX RETURNS FOR CHARLES A. ADAMS FAMILY
TRUST, MACTARNAHAN LIMITED PARTNERSHIP, HARMER MILL & LOGGING SUPPLY CO. DBA
HARMER CO. Borrower agrees that, while this Agreement is in effect, Guarantor
will furnish to Lender the following: (1) As soon as available, but in no event
later than 120 days after the end of each year, Guarantor's balance sheet and
profit and loss statement for such yearly period, compiled by a certified public
accountant acceptable to Lender. (2) Promptly after the filing thereof and in
any event within 30 days after the filing thereof, a copy of Guarantor's filed
federal and state tax returns together with all supplemental schedules to
include K-1's.
AGING AND LISTING OF ACOUNTS RECEIVABLE AND PAYABLE. Borrower covenants and
agrees with Lender that, while this Agreement is in effect, Borrower shall
deliver to Lender within thirty (30) days after the end of each month, a
detailed aging of Borrower's accounts and contracts receivable and accounts
payable as of the last day of the month, together with an explanation of any
adjustments made at the end of that month, all in a form acceptable to Lender.
COLLATERAL SCHEDULE. Unless waived in writing by Lender, Borrower agrees to
provide Lender with a Collateral Schedule within Ten (10) days after the end of
each month. Each "Collateral Schedule" shall be in form acceptable to Lender,
duly executed by Borrower and detailing the status of the Line of Credit as of
the date thereon.
SUBMISSION OF BORROWER'S FINANICAL STATEMENTS. Borrower covenants and agrees
with Lender that, while this Agreement is in effect, Borrower will furnish
Lender with, as soon as available, but in no event later than one hundred twenty
(120) days after the end of each fiscal year, Borrower's balance sheet and
income statement for the year ended, audited by a certified public accountant
satisfactory to Lender, and company-prepared statements within 60 days of year
end. Borrower will also furnish Lender with, as soon as available, but in no
event later than thirty (30) days after the end of each fiscal quarter,
Borrower's balance sheet and profit and loss statement for the period ended,
prepared and certified as correct to the best knowledge and belief by Borrower's
chief financial officer of other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be prepared
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
RIGHT OF SETOFF. See Exhibit "A".
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness
<PAGE>
02-02-2000 LOAN AGREEMENT Page 6
Loan No 0101 (Continued)
- --------------------------------------------------------------------------------
of the claim which is the basis of the creditor or forfeiture proceeding,
and if Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
See Exhibit "A".
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Washington
County, the State of Oregon. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any
court costs, in addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. Under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENT MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
<PAGE>
02-02-2000 LOAN AGREEMENT Page 7
Loan No 0101 (Continued)
- --------------------------------------------------------------------------------
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREMENT IS DATED AS OF
FEBRUARY 2, 2000.
BORROWER:
Portland Brewing Company
By: /s/ C.A. Adams
-------------------------------
Charles A. Adams, President/CEO
LENDER:
Washington Mutual Bank doing business as Western Bank
By: /s/ Jerry Boehm
-------------------------------
Authorized Officer
<PAGE>
EXHIBIT "A"
This Exhibit is attached to and by this reference is made a part of
each Loan Agreement dated February 2, 2000, and executed in connection with a
loan or other financial accommodations between Washington Mutual Bank doing
business as Western Bank and Portland Brewing Company.
RIGHT OF SETOFF. Lender shall not have a security Interest in, nor shall Lender
set off against amounts due hereunder, the sums in any account of Borrower
maintained with Lender.
DEFAULT. Notwithstanding the foregoing, Borrower will not be in default as
provided above unless and until (a) Lender gives to Borrower written notice of
the alleged default specifying that the default be cured within the time allowed
by this Promissory Note, and (b) Borrower fails to cure the alleged default
within such time period. With respect to a failure to make a payment hereunder,
the amount of time allowed to cure the default shall be ten days following such
written notice from Lender. With respect to any other default, the amount of
time allowed for cure shall be 30 days following written notice of default;
however, in the event a default reasonably requires more than 30 days for cure,
Borrower shall not be deemed in default so long as Borrower commences cure
within such 30-day period and thereafter diligently pursues cure to completion.
ADDITIONAL SECURED PARTY: As previously disclosed to Lender, MacTarnahan Limited
Partnership holds a security interest in certain assets of Borrower, including,
but not limited to, a junior security interest in accounts receivable and
inventory. The security interest of MacTarnahan Limited Partnership, and any
assignment of that security interest, is a "Permitted Lien" and shall not be a
default under this Loan Agreement.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements found in the Company's Report on Form 10-QSB for
the three months ended March 31, 2000, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000943658
<NAME> Portland Brewing Company
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 138,226
<SECURITIES> 0
<RECEIVABLES> 990,236
<ALLOWANCES> 7,138
<INVENTORY> 958,792
<CURRENT-ASSETS> 2,327,863
<PP&E> 11,128,605
<DEPRECIATION> 4,383,439
<TOTAL-ASSETS> 10,013,647
<CURRENT-LIABILITIES> 2,290,825
<BONDS> 0
300,040
0
<COMMON> 8,148,883
<OTHER-SE> (3,402,093)
<TOTAL-LIABILITY-AND-EQUITY> 10,013,647
<SALES> 2,894,320
<TOTAL-REVENUES> 2,733,852
<CGS> 1,877,650
<TOTAL-COSTS> 1,877,650
<OTHER-EXPENSES> 1,030,482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,462
<INCOME-PRETAX> (229,552)
<INCOME-TAX> 0
<INCOME-CONTINUING> (229,552)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (229,552)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
