EXHIBIT 10.10
U.S. Bank
Xxxxxx X. Xxxx
Vice President
Oregon Corporate Banking
111 S.W. Fifth Avenue, Suite 400
Post Office Box 4412
Portland, OR 97204
000-000-0000
December 27, 1996
Mr. Xxxxx Xxxxx
Vice President - Finance
Phoenix Gold International, Inc.
0000 Xxxxx Xxxxxxx
Xxxxxxxx, XX 00000
This letter sets forth the terms and conditions of your credit facility with
United States National Bank of Oregon and supersedes our letter of December 9,
1996.
Borrower: Phoenix Gold International, Inc.
Guarantor(s): None.
REVOLVING LINE OF CREDIT:
------------------------
Maximum Loan Amount: $5,500,000.
Purpose: Operating funds.
Interest Rate: Fully floating variable interest rate equal
to U.S. Bank's prime rate plus 0.50%. All
interest shall be computed on the basis of a
360-day year and the actual number of days
elapsed.
Maturity Date: Payable on demand.
Review Date: March 31, 1997.
Repayment: Optional advance note with principal and
interest payable on demand. Interest payable
monthly in absence of demand.
Loan Fee: Non-refundable upfront annual loan fee of
1/4th of 1% prorated to $1,145.83 due upon
acceptance of this commitment for the
extension to March 31, 1997.
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Phoenix Gold International, Inc.
December 27, 1996
Collateral: Perfected first priority security interest in
all of Xxxxxxxx's now owned and hereafter
acquired accounts receivable, inventory and
equipment.
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.
LETTERS OF CREDIT:
-----------------
Maximum Loan Amount: $500,000. Issued letters of credit reduce
both the credit and collateral availability
under the revolving line of credit.
Purpose: Issuance of stand-by, commercial, or import
letters of credit.
Review Date: March 31, 1997.
Maturity Date: June 30, 1997.
Repayment: Vary depending upon type of letter of credit
issued.
Pricing: Standard issuance fees, which vary depending
upon type of letter of credit issued.
Collateral: Cross-collateralized to revolving line of
credit.
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.
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Phoenix Gold International, Inc.
December 27, 1996
FINANCIAL COVENANTS
-------------------
As long as indebted to Bank, Borrower is to be in compliance with the following
financial benchmarks, as described below:
Current Ratio: Maintain a ratio of Current Assets to Current
Liabilities equal to or greater than 1.50:1. Current
Ratio is defined as Current Assets divided by Current
Liabilities.
Tangible Net Worth: Maintain a Tangible Net Worth in excess of
$10,000,000. Tangible Net Worth is defined as Net
Worth minus any intangible assets.
Debt-to-Worth Ratio: Debt-to-Worth Ratio not to exceed 1.00:1. Debt-to-
Worth Ratio is defined as total liabilities divided
by net worth minus any intangible assets.
Cash Flow Cover: Cash Flow Cover in excess of 1.20:1. Cash Flow Cover
is defined as (net profit after tax plus non cash
items such as depreciation and amortization) divided
by (the required term debt payments plus cash funded
fixed asset purchases plus dividends/withdrawals).
All computations made to determine compliance with the covenant requirements
shall be made in accordance with generally accepted accounting principals,
applied on a consistent basis and certified by Borrower as being true and
correct on a quarterly basis (except the cash flow cover which is tested on an
annual basis) beginning December 31, 1996.
As of September 30, 1996, the Borrower was out of compliance with the Cash Flow
Cover covenant. The Lender has elected to forebear through March 15, 1997,
subject to the terms outlined in the Forbearance Letter dated December 27, 1996.
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 Xxxxxxxx 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.
3. Insurance: Borrower shall maintain insurance in such amounts and covering
such risks as Lender shall require.
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Phoenix Gold International, Inc.
December 27, 1996
4. Financial Reporting: At any time requested by Xxxxxx, Borrower shall furnish
any additional information regarding Xxxxxxxx'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 Xxxxxx in form and
substance satisfactory to Lender and its counsel.
6. Non-Assignable: This credit accommodation may not be assigned by Xxxxxxxx. No
guarantor or any third party is intended as a third-party beneficiary or has any
right to rely hereon.
7. Arbitration: Borrower and Xxxxxx 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, 1996 and the
revolving credit facility contemplated by this letter must be documented and
closed on or before December 31, 1996.
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,
Xxxxxxxx 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.
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Phoenix Gold International, Inc.
December 27, 1996
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY XXXXXXX
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 WASHINGTON 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/ Xxxxx X. Xxxxxx, VP
for Xxxxxx X. Xxxx
Vice President
275-5175
Borrower hereby accepts Xxxxxx's offer to extend credit on terms and conditions
stated above. Xxxxxxxx hereby agrees to the Arbitration clause set forth in
Exhibit A attached hereto.
By: /s/ Xxxxxxx X. Xxxxxxx
Title: Executive Vice President
Date: December 27, 1996
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Phoenix Gold International, Inc.
December 27, 1996
EXHIBIT A
ARBITRATION. Xxxxxx and Xxxxxxxx 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 stature 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.
