EXHIBIT 10.16
[LETTERHEAD]
January 26, 1998
Mr. Norman Fujitaki
Corporate Controller
Coastcast Corporation
14831 Maple Avenue
Gardena, CA 90247
Dear Mr. Fujitaki:
It is with great pleasure that we extend to you Imperial Bank's commitment to
make available to Coastcast Corporation the following credit accommodation,
effective as of December 23, 1997:
TYPE: Unsecured Revolving Line of Credit
AMOUNT: $5,000,000.00
MATURITY: 364 days from date of documentation
PURPOSE: Fund cash flow timing differences
INTEREST RATE: Prime or LIBOR plus 200 basis points
FEES: $250.00 for documentation
This loan commitment will be subject to a Credit Agreement to be drawn by the
Bank containing covenants satisfactory to Bank and agreed to by Coastcast
Corporation.
If the terms of this commitment meet with your approval, please sign and
return a copy of this letter. This offer expires thirty (30) days from the
date hereof unless accepted by your return of the enclosed copy signed by an
authorized officer or unless extended by the Bank in writing.
Sincerely,
/s/ Donald D. Douthwright /s/ Brougham J. Morris
Donald D. Douthwright Brougham J. Morris
Regional Vice President Senior Vice President
Accepted and agreed to on ___________________ , 1998
Coastcast Corporation
By: /s/ Robert C. Bruning
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Title: CFO
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[LOGO]
IMPERIAL BANK
Member FDIC
NOTE
$5,000,000.00 INGLEWOOD, California, FEBRUARY 2, 1998
On FEBRUARY 1, 1999, and as hereinafter provided, for value received,
the undersigned promises to pay to IMPERIAL BANK ("Bank") a California banking
corporation, or order, at its LOS ANGELES AIRPORT REGIONAL office, the
principal sum of $5,000,000.00 (Maximum) or such sums up to the maximum if so
stated, as the Bank may now or hereafter advance to or for the benefit of the
undersigned in accordance with the terms hereof, together with interest from
date of disbursement or N/A, whichever is later, on the unpaid principal
balance / / at the rate of % per year /X/ at the rate of 0.000*% per year
in excess of the rate of interest which Bank has announced as its prime
lending rate (the "Prime Rate"), which shall vary concurrently with any
change in such Prime Rate, or $250.00, whichever is greater. Interest shall
be computed at the above rate on the basis of the actual number of days
during which the principal balance is outstanding, divided by 360, which
shall, for interest computation purposes, be considered one year.
Interest shall be payable /X/ monthly / / quarterly / / included with
principal / / in addition to principal / /, beginning FEBRUARY 26, 1998, and
if not so paid shall become a part of the principal. All payments shall be
applied first to any late charges owing, then to interest and the remainder,
if any, to principal. / / (If checked), Principal shall be payable in
installments of $ , or more, each Installment on the day of
each , beginning . Advances not to exceed any
unpaid balance owing at any one time equal to the maximum amount specified
above, may be made at the option of Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of
principal or interest when due, or in the performance or observance, when
due, of any item, covenant or condition of any deed of trust, security
agreement or other agreement (including amendments or extensions thereof)
securing or pertaining to this note, at the option of the holder hereof and
without notice or demand, the entire balance of principal and accrued
interest then remaining unpaid shall (a) become immediately due and payable,
and (b) thereafter bear interest, until paid in full, at the increased rate
of 5% per year in excess of the rate provided for above, as it may vary from
time to time.
Defaults shall include, but not be limited to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether as maker, co-maker, endorser or guarantor
(individually or collectively referred to as the "Obligor") of a voluntary or
involuntary petition under the provisions of the Federal Bankruptcy Act; the
issuance of any attachment or execution against any asset of any Obligor; the
death of any Obligor; or any deterioration of the financial condition of any
Obligor which results in the holder hereof considering itself, in good faith,
insecure.
If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent ten or more days,
Obligor agrees to pay Bank a late charge in the amount of 5% of the payment
so due and unpaid, in addition to the payment, but nothing in this paragraph
is to be construed as any obligation on the part of the holder of this note
to accept payment of any payment past due or less than the total unpaid
principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorneys fees incurred by
the holder hereof on account of such collection, plus interest at the rate
applicable to the principal, whether or not suit is filed hereon. Each
Obligor shall be jointly and severally liable hereon and consents to
renewals, replacements and extensions of time for payment hereof, before, at
or after maturity; consents to the acceptance, release or substitution of
security for this note; and waives demand and protest and the right to assert
any statute of limitations. Any married person who signs this note agrees that
recourse may be had against separate property for any obligations hereunder.
The indebtedness evidenced hereby shall be payable in lawful money of the
United States. In any action brought under or arising out of this note, each
Obligor, including successor(s) or assign(s) hereby consents to the
application of California law, to the jurisdiction of any competent court
within the State of California, and to service of process by any means
authorized by California law.
No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect
to any of the security. Any delay or omission on the part of the holder
hereof in exercising any right hereunder, or under any deed of trust,
security agreement or other agreement, shall not operate as a waiver of such
right, or of any other right, under this note or any deed of trust,
security agreement or other agreement in connection herewith.
*SEE LIBOR ADDENDUM TO NOTE ATTACHED HERETO AND MADE A PART HEREOF BY THIS
REFERENCE.
COASTCAST CORPORATION
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By: /s/ Robert C. Bruning
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[LOGO]
IMPERIAL BANK LIBOR ADDENDUM
MEMBER FDIC TO NOTE
This Libor Addendum ("Addendum") is dated as of FEBRUARY 2, 1998, and is
by and between COASTCAST CORPORATION ("Borrower") and Imperial Bank ("BANK").
This Addendum amends and supplements the Note to which it is attached (the
"Note") and forms a part of and is incorporated into the Note.
In the event of any inconsistency between the terms herein and the terms
of the Note, the terms herein shall in all cases govern and control. All
capitalized terms herein, unless otherwise defined herein, shall have the
meanings set forth in the Note.
1. ADVANCES.
1.1 PRIME LOANS. Advances permitted pursuant to the terms of the Note
or this Addendum which bear interest in relation to Bank's Prime Rate shall
be referred to herein as "Prime Loans" and each such advance shall be a
"Prime Loan." Each Prime Loan shall bear interest at an annual rate equal to
the sum of 0.000% plus the Bank's Prime Rate. "Prime Rate" shall mean the
rate of interest publicly announced by Bank from time to time in Inglewood,
California, as its prime rate for lending. The Prime Rate is not intended to
be the lowest rate of interest charged by the Bank in connection with
extensions of credit to borrowers.
1.2 LIBOR LOANS. Advances permitted pursuant to the terms of the Note or
this Addendum which bear interest in relation to the Libor Rate shall be
referred to herein as "Libor Loans" and each such advance shall be a "Libor
Loan." Each Libor Loan shall bear interest at the Libor Rate, as defined
below. A Libor Loan shall be in the minimum amount of FIVE HUNDRED DOLLARS
($500,000.00) or such greater amount which is an integral multiple of Fifty
Thousand Dollars ($50,000). No Libor Loan shall be made after the last
Business Day that is at least THREE (3) MONTHS prior to the Maturity Date
described in the Note.
2. INTEREST ON LIBOR LOANS.
2.1 RATE OF INTEREST. Each Libor Loan shall bear interest on the unpaid
principal amount thereof from the Loan Date through the date paid (whether
by acceleration or otherwise) at a rate equal to the sum of 2.000% per annum
plus the Libor Rate for the Interest Period.
(a) "Loan Date" shall mean the date on which (i) a Libor Loan is
made, a Libor Loan is continued, or a Prime Loan is converted to a Libor Loan.
(b) "Interest Period" shall mean a period of ONE (1) MONTH,
commencing on the applicable Loan Date, as selected by Borrower pursuant to
Section 2.2; PROVIDED, HOWEVER, that Borrower may not select an Interest
Period that would otherwise extend beyond the Maturity Date of the Loan.
Borrower may also select a twelve (12) month Interest Period if and when Bank
notifies Borrower that such Interest Period is available, as determined by
Bank in its sole discretion.
(c) "Libor Rate" shall mean, for the applicable Interest Period
for a Libor Loan, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to (i) the Libor Base Rate for such Interest Period
divided by (ii) 1.00 minus the Reserve Requirement Rate (expressed as a
decimal fraction) for such Interest Period.
(d) "Libor Base Rate" shall mean with respect to any Interest
Period, the rate equal to the arithmetic mean (rounded upwards, if necessary,
to the nearest 1/16 of 1%) of:
(i) the offered rates per annum for deposits in U.S. Dollars
for a period equal to such Interest Period which appears at 11:00 a.m.,
London time, on the Reuters Screen LIBOR Page on the Business Day that
is two (2) Business Days before the first day of such Interest Period,
in each case if at least four (4) such offered rates appear on such
page, or
(ii) if clause (i) is inapplicable, (x) the offered rate per
annum for deposits in U.S. Dollars for a period equal to such Interest
Period which appears as of 11:00 a.m., London time on the Telerate
Monitor on Telerate Screen 3750 on the Business Day which is two (2)
Business Days before the first day of such Interest Period; or (y) if
clause (x) above is inapplicable, the arithmetic mean (rounded upwards,
if necessary, to the nearest 1/16 of 1%) of the interest rates per annum
offered by at least three (3) prime banks selected by Bank at
approximately 11:00 a.m. London time, on the Business Day which is two
(2) Business Days before such date for deposits in U.S. Dollars to prime
banks in the London interbank market, in each case for a period equal to
such Interest Period in an amount equal to the amount to which the Libor
Rate applies.
Page 1 of 4
(e) "Business Day" means any day on which Bank is open for
business in the State of California.
(f) "Reuters Screen LIBOR Page" means the display designated as
page LIBOR on the Reuters Monitor Money Rates Service or such other page as
may replace the LIBOR page on that service for the purpose of displaying
London interbank offered rates of major banks.
(g) "Reserve Requirement Rate" means, for any Interest Period, the
aggregate of the rates, effective as of the Business Day which is two (2)
Business Days before the first day of the Interest Period, at which:
(i) reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System; and
(ii) any additional reserves are required to be maintained by
Bank by reason of any Regulatory Change against (x) any category of
liabilities which includes deposits by reference to which the Libor Rate
is to be determined as provided in the definition of "Libor Base Rate;"
or (y) any category of extensions of credit or other assets which
include Libor Loans.
(h) "Regulatory Change" means, with respect to Bank, any change on
or after the date of the Note and this Addendum in any Governmental
Regulation, including the introduction of any new Governmental Regulation or
the rescission of any existing Governmental Regulation.
(i) "Governmental Regulation" means any (i) United States
Federal, state or foreign law or regulation (including without limitation
Regulation D); and (ii) the adoption or making of any interpretation,
application, directive or request applying to a class of lenders, including
Bank, of or under any United States Federal, state, or any foreign law or
regulation (whether or not having the force of law) by any court or by any
governmental, central banking, monetary or taxing authority charged with the
interpretation or administration of such law or regulation.
2.2 DETERMINATION OF INTEREST RATES. Subject to the terms and condition
of the Note and this Addendum, Borrower, at its option, may request an
advance in the form of a Libor Loan, a continuation of a Libor Loan, or a
conversion of a Prime Loan into a Libor Loan, only upon delivery to Bank of
an irrevocable written notice received by Bank at least three (3) Business
Days prior to the requested Loan Date, specifying (i) the principal amount of
such Libor Loan, (ii) the requested Loan Date, and (iii) the selected
Interest Period. Upon receiving such notice, Bank shall determine (which
determination shall be in accordance with Section 2.1 and shall, absent
manifest error, be final, conclusive and binding upon all parties hereto) the
Libor Rate applicable to such Libor Loan two (2) Business Days prior to the
Loan Date, and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Borrower. If Borrower shall fail to notify Bank of
its selected Interest Period for a Libor Loan (including the continuation of
an existing Libor Loan or the conversion of a Prime Loan into a Libor Loan),
the Borrower shall be deemed to have selected an Interest Period of three (3)
months.
2.3 COMPUTATION OF INTEREST AND FEES. All computations of interest and
fees payable pursuant to the Note shall be calculated on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed
(less the date of repayment).
2.4 RECORDATION BY BANK. Bank is hereby authorized to record the Loan
Date, the applicable Interest Period, the principal amount, and the interest
rate of each Libor Loan made (or continued or converted) by Bank, and the
date and amount of each payment or prepayment of principal thereof, in Bank's
records. Any such recordation shall constitute PRIMA FACIE evidence of the
accuracy of the information recorded; PROVIDED that the failure to make any
such recordation shall not in any way affect the Borrower's obligations
hereunder.
3. CONVERSION TO PRIME LOANS.
3.1 ELECTION BY BORROWER. Subject to all the terms and conditions of
this Addendum, Borrower may elect from time to time to convert a Libor Loan
to a Prime Loan by giving Bank at least three (3) Business Days' prior
irrevocable notice of such election, and any such conversion of a Libor Loan
shall be made on the last day of the Interest Period with respect thereto.
3.2 FAILURE OF NOTICE BY BORROWER. If Borrower otherwise fails to give
notice specifying its requests with respect to any Libor Loans that are
scheduled to become due, such failure shall be deemed, in the absence of any
notice from Borrower to the contrary, to be notice of a requested advance in
the form of a Prime Loan in a principal amount equal to the amount of said
Libor Loan.
4. PREPAYMENTS.
4.1 VOLUNTARY PREPAYMENT BY BORROWER. Subject to the terms and
conditions of the Note and this Addendum, Borrower may, upon at least three
(3) Business Days' irrevocable notice to Bank as provided herein, at any time
and from time to time on any Business Day prepay any Prime Loan or Libor Loan
in whole or in part, without penalty or premium, other than customary actual
"Breakage Fees" and "Prepayment Costs" as defined below, resulting from
prepayment of any Libor Loan prior to the expiration of the Interest Period
relating thereto. The notice of prepayment shall specify the date and amount
of the prepayment, and the Loan to which the
Page 2 of 4
prepayment applies. Each partial prepayment of a Libor Loan shall be in an
amount not less than Fifty Thousand Dollars ($50,000) or such greater amount
which is an integral multiple of Fifty Thousand Dollars ($50,000), PROVIDED,
that unless a Libor Loan is prepaid in full, no prepayment shall be made if,
after giving effect to such prepayment, the aggregate principal amount of
Libor Loans having the same Interest Period shall be less than FIVE HUNDRED
($500,000.00). Notice of prepayment having been delivered as aforesaid, the
principal amount of the prepayment specified in such notice shall become due
and payable on the prepayment date set forth in such notice. All payments of
principal under this Section 4 shall be accompanied by accrued but unpaid
interest on the amount being prepaid through the date of such prepayment.
4.2 BREAKAGE FEES. If for any reason (including voluntary or mandatory
prepayment, voluntary or mandatory conversion of a Libor Loan into a Prime
Loan, or acceleration), Bank receives all or part of the principal amount of
a Libor Loan prior to the last day of the Interest Period for such Loan,
Borrower shall immediately notify Borrower's account officer at Bank and, on
demand by Bank, pay Bank the Breakage Fees, defined as the amount (if any)
by which (i) the additional interest which would have been payable on the
amount so received had it not been received until the last day of such
Interest Period exceeds (ii) the interest which would have been recoverable
by Bank (without regard to whether Bank actually so invests said funds) by
placing the amount so received on deposit in the certificate of deposit
markets or the offshore currency interbank markets or United States Treasury
investment products, as the case may be, for a period starting on the date on
which it was so received and ending on the last day of such Interest Period
at the interest rate determined by Bank in its reasonable discretion. Bank's
determination as to such amount shall be conclusive and final, absent
manifest error.
4.3 PREPAYMENT COSTS. Borrower shall pay to Bank, upon the demand of
Bank, such other amount or amounts as shall be sufficient (in the sole good
faith opinion of Bank) to compensate it for any loss, costs or expense
incurred by it as a result of any prepayment by Borrower (including voluntary
or mandatory prepayment, voluntary or mandatory conversion of a Libor Loan
into a Prime Loan, or prepayment due to acceleration) of all or part of the
principal amount of a Libor Loan prior to the last day of the Interest Period
for such Loan (including without limitation any failure by Borrower to
borrow a Libor Loan on the Loan Date for such borrowing specified in the
relevant notice of borrowing hereunder). Such costs shall include, without
limitation, any interest or fees payable by Bank to lenders of funds obtained
by it in order to make or maintain its loans based on the London interbank
eurodollar market. Bank's determination as to such costs shall be conclusive
and final, absent manifest error.
5. REMEDIES UPON EVENTS OF DEFAULT.
5.1 CONVERSION TO PRIME LOANS. If any Event of Default has occurred and
is continuing under the Note or this Addendum, then in addition to all other
remedies available to Bank under the Note, at the option of Bank and without
demand or notice, all Libor Loans then outstanding shall be automatically
converted to Prime Loans on the last day of each respective Interest Period
for each Libor Loan.
5.2 INDEMNITY. Borrower agrees to pay and indemnify Bank for, and to
hold Bank harmless from, any and all cost, loss or expense (including without
limitation any such cost, loss or expense arising from interest or fees
payable by Bank to lenders of funds obtained by it in order to maintain its
Libor Loans hereunder, or in its reemployment of funds obtained in connection
with the making or maintaining of Libor Loans) which Bank may sustain or
incur as a consequence of any default by Borrower in connection with or
related to: (a) payment of the principal amount of or interest on Libor
Loans, (b) making a borrowing or conversion of a Libor Loan after Borrower
has given a notice thereof in accordance with this Addendum, or (c) making a
prepayment of a Libor Loan after Borrower has given a notice thereof in
accordance with this Addendum, or any prepayment (whether optional or
mandatory) of any Libor Loan prior to the end of the applicable Interest
Period for such Loan.
6. ADDITIONAL PROVISIONS REGARDING LIBOR LOANS.
6.1 LIBOR RATE TAXES. All payments of principal, interest, fees, costs,
expenses and all other amounts payable to Borrower pursuant to the Note and
this Addendum shall be made free and clear of and without reduction by reason
of all present and future income, stamp and other taxes or other charges
whatsoever imposed, assessed, levied or collected by any national government
or any political subdivision or taxing authority thereof or any organization
of which it is a member (excluding (i) any taxes imposed on or measured by
the overall net income or gross receipts of Bank by any such entity, and (ii)
any taxes which would have been imposed even if no provisions for Libor Loans
had appeared in this Addendum) (collectively, "Libor Taxes").
If any Libor Taxes are required to be withheld from any amounts
payable to Bank, Borrower shall pay such additional amounts as may be
necessary so as to yield to Bank a net amount equal to the total amount of the
payments provided for in this Addendum or under the Note which Bank would
have received if such amounts had not been subject to Libor Taxes.
If any Libor Taxes are payable directly by Borrower, they shall be
paid by Borrower prior to the date on which penalties attach for failure to
timely pay such Libor Taxes. Within forty five (45) days after the date on
which payment of any such Libor Taxes is due pursuant to applicable law,
Borrower will furnish Bank the original receipt for the full payment of such
Libor Taxes or, if such is not available, evidence of such payment
satisfactory in form and substance to Bank. Borrower shall indemnify and hold
Bank harmless against, and will reimburse to Bank, upon demand, any
incremental taxes, interest or penalties that may become payable by Bank as a
result of any failure by Borrower to pay any Libor Taxes when due.
Page 3 of 4
6.2 INABILITY TO DETERMINE FAIR INTEREST RATE. If at any time Bank, in
its sole and absolute discretion, determines that: (i) the amount of the
Libor Loans for periods equal to the corresponding Interest Periods are not
available to Bank in the offshore currency interbank markets, (ii) the
Libor Rate does not accurately reflect the cost to Bank of lending the Libor
Loan, or (iii) by reason of any changes arising after the date of the Note
affecting the London interbank eurodollar market, adequate and fair means do
not exist for ascertaining the applicable interest rate on the basis provided
for in Sections 2.1 and 2.2 above, then Bank shall promptly give notice
thereof to Borrower. Upon the giving of such notice, Bank's obligation to
make Libor Loans shall terminate, unless Bank and the Borrower agree in
writing to a different interest rate applicable to Libor Loans, or until such
time as Bank notifies Borrower that the circumstances giving rise to Bank's
notice no longer exist. While such circumstances continue to exist, (x) any
requested Libor Loan shall be treated as a request for a Prime Loan, (y) any
Prime Loan that was to have been converted to a Libor Loan shall be continued
as a Prime Loan, and (z) any outstanding Libor Loan shall be converted
retroactively, on the first day of the then current Interest Period with
respect thereto, to a Prime Loan.
6.3 ILLEGALITY OR IMPRACTICABILITY. If (i) due to any Governmental
Regulation it shall become unlawful for Bank to continue to fund or maintain
any Libor Loans, or to perform its obligations hereunder, or (ii) due to any
contingency occurring after the date of the Note which has a material adverse
effect on the London interbank eurodollar market, it has become impracticable
for Bank to continue to fund or maintain any Libor Loans, or to perform its
obligations hereunder, then Bank shall promptly give notice thereof to
Borrower. Upon the giving of such notice, Bank's obligation to make Libor
Loans shall terminate, and in such event, (x) any requested Libor Loan shall
be treated as a request for a Prime Loan, (y) any Prime Loan that was to have
been converted to a Libor Loan shall be continued as a Prime Loan, and (z)
any outstanding Libor Loan shall be converted retroactively, on the first day
of the then current Interest Period with respect thereto, to a Prime Loan.
6.4 GOVERNMENTAL REGULATIONS; INCREASED COSTS. Borrower shall pay to
Bank, within 15 days after demand by Bank, from time to time such amounts as
Bank may determine to be necessary to compensate it for any increased costs
incurred by Bank that Bank determines are attributable to its making or
maintaining of any Libor Loans to Borrower (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which:
(a) imposes a new tax or changes the basis of taxation of any
amounts payable to Bank under the Note or this Addendum in respect of any
Libor Loans (other than changes which affect taxes measured by or imposed on
the overall net income of Bank by the jurisdiction in which such Bank has its
principal office); or
(b) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits or other liabilities with or for the account of Bank (including any
Libor Loans or any deposits referred to in the definition of Libor Base
Rate); or
(c) imposes any other condition affecting the Note (or any of such
extensions of credit or liabilities); or
(d) imposes or modifies a Governmental Regulation regarding capital
adequacy which has or would have the effect of reducing the rate of return on
capital of Bank or any person or entity controlling Bank ("Parent") as a
consequence of its obligations hereunder to a level below that which Bank (or
its Parent) could have achieved but for such adoption, change or compliance
(taking into consideration its policies with respect to capital adequacy) by
an amount deemed by Bank to be material.
Bank will notify Borrower of any event occurring after the date of the
Note which will entitle Bank to Additional Costs pursuant to this Section 6.4
as promptly as practicable after it obtains knowledge thereof and determines
to request such compensation. Bank will furnish Borrower with a statement
setting forth the basis and amount of each request by Bank for Additional
Costs under this Section 6.4. Determinations and allocations by Bank for
purposes of this Section 6.4 of the effect of any Regulatory Change on its
costs of maintaining its obligations to make Libor Loans or of making or
maintaining Libor Loans or on amounts receivable by it in respect of Libor
Loans, and of the additional amounts required to compensate Bank in respect
of any Additional Costs, shall be conclusive and final, absent manifest error.
This Addendum is executed as of the date first written above.
BORROWER BANK
Coastcast Corporation , IMPERIAL BANK,
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a California corporation a California banking corporation
--------------------------------
By /s/ Robert C. Bruning By /s/ Brougham Morris
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Its CFO Brougham Morris, Senior Vice President
------------------------------- Its
-----------------------------------
By ,
-------------------------------
Its
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[LOGO]
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made by and between Coastcast
Corporation, a California corporation ("Borrower") and Imperial Bank, a
California banking corporation ("Bank").
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
1.01 EXISTENCE AND RIGHTS. Borrower is a corporation duly organized and
existing and in good standing under the laws of the State of California,
without limit as to the duration of its existence and is authorized and in
good standing to do business in the State of California; Borrower has powers
and adequate authority, rights and franchises to own its property and to carry
on its business as now conducted, and is duly qualified and in good standing
in each State in which the character of the properties owned by it therein or
the conduct of its business makes such qualification necessary; and Borrower
has the power and adequate authority to make and carry out this Agreement.
Borrower has no investment in any other business entity.
1.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement are duly authorized and do not require the consent or approval
of any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, by-laws, as the case may
be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms, subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
1.03 NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any
of its property may be bound or affected, and do not cause any lien, charge
or other encumbrance to be created or imposed upon any such property by
reason thereof.
1.04 LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower which if determined adversely to
Borrower or its interest would have a material adverse effect on the
financial condition of Borrower, and Borrower is not in default with respect
to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
1.05 FINANCIAL CONDITION. The balance sheet of Borrower as of
September 30, 1997, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower
to Bank in connection with this request for credit are true and correct, and
said balance sheet truly presents the financial condition of Borrower as of
the date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no material adverse changes in the financial condition or
business of Borrower. Borrower has no knowledge of any liabilities,
contingent or otherwise, at such date not reflected in said balance sheet,
and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially
adverse effect upon its financial condition, operations or business as now
conducted.
1.06 TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted
by Section 3.03 hereof.
1.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
1.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license
rights of others.
1.09 REGULATION U. None of the proceeds of any loan from the Bank to
Borrower shall be used to purchase or carry margin stock (as defined within
Regulation U of the Board of Governors of the Federal Reserve system).
2. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, it will, unless Bank shall otherwise
consent in writing:
2.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2.02 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good
business judgment.
2.03 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon or against it or any of its
properties, and all its other liabilities at any time existing, except to the
extent and so long as:
a. The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
b. It shall have set aside on its books reserves (segregated to
the extent required by generally accepted accounting practice)
deemed by it adequate with respect thereto.
All financial information referenced herein shall be interpreted and
prepared in accordance with generally accepted accounting
principals applied on a basis consistent with previous years.
2.04 CURRENT ASSETS TO CURRENT LIABILITIES. Borrower shall maintain a
ratio of current assets to current liabilities of not less than 3.00 to 1.00.
2.05 DEBT TO TANGIBLE NET WORTH. Borrower shall maintain a ratio of
total liabilities to tangible net worth (tangible net worth shall be defined
as the excess of all assets, excluding any value for goodwill, trademarks,
patents, copyrights, leaseholds, organization expense, other similar
intangible items, and all amounts due from officers, stockholders and
affiliates, over its liabilities less subordinated debt) of not more than
1.00 to 1.00.
2.06 PROFITABLE OPERATIONS. Borrower shall maintain profitable
operations at fiscal year end.
2.07 OUT-OF-DEBT PERIOD. The unpaid balance of the loan made to Borrower
under this Agreement shall be zero for a 30 consecutive day period prior to
each anniversary date of this Agreement.
2.08 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's
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representatives to have access to, and to examine its properties, books and
records at all reasonable times and upon reasonable notice during normal
business hours; and furnish Bank:
a. QUARTERLY FINANCIAL STATEMENT. As soon as available, and in
any event within forty-five (45) days after the close of each
quarter of each fiscal year of Borrower, commencing with the
quarter next ending, a balance sheet, profit and loss statement,
Statement of Cash Flows, and reconciliation of Borrower's capital
account as of the close of such period and covering operations for
the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail accompanied by Form 10-Q,
prepared in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower, subject, however,
to year-end audit adjustments.
b. ANNUAL FINANCIAL STATEMENT. As soon as available, and in any
event within one hundred and twenty (120) days after the end of
each fiscal year of Borrower, deliver to Bank, the same
consolidated financial statements as otherwise provided quarterly,
all in reasonable detail accompanied by Form 10-K, submitted on an
"Unqualified" basis by an independent certified public accountant
selected by Borrower but acceptable to Bank.
c. COMPLIANCE CERTIFICATE. Promptly after the receipt of any
quarterly or annual financial statements of Borrower, a
certificate of chief financial officer of Borrower, stating that
Borrower has performed and observed each and every covenant
contained in this Agreement to be performed by it and that no
event has occurred and no condition then exists which constitutes
an event of default hereunder or would constitute such an event of
default upon the lapse of time or upon the giving of notice and
the lapse of time specified herein; or, if any such event has
occurred or any such condition exists, specifying the nature
thereof;
d. AUDIT REPORTS. Promptly after the receipt thereof by Borrower,
copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with each annual or interim
audit of the accounts of Borrower made by such accountants.
e. OTHER REPORTS AND STATEMENTS. Promptly after the same are
available, copies of all such proxy statements, financial statements
and reports as Borrower shall send to its stockholders, if any, and
copies of all reports which Borrower may file with the Securities
and Exchange Commission or any governmental authority at any time
substituted therefor.
f. OTHER INFORMATION. Such other information relating to the
affairs of Borrower as the Bank reasonably may request form time to
time;
2.09 NOTICE OF DEFAULT. Promptly notify Bank in writing of the
occurrence of any Event of Default hereunder or any event which upon notice
and lapse of time would be an Event of Default.
2.10 OPERATING ACCOUNTS. Maintain most operating accounts with Bank
during the term of any loans from Bank to Borrower. Borrower shall maintain,
or cause to be maintained, on deposit with Imperial Bank, non-interest
bearing demand deposit balances sufficient to compensate Bank for all services
provided by Bank. Balances shall be calculated after reduction for the
reserve requirement of the Federal Reserve Board and uncollected funds. Any
deficiencies shall be charged directly to the Borrower on a monthly basis.
2.11 ATTORNEY'S FEES. Pay promptly to Bank without demand after notice,
with interest thereon from the date of expenditure at the rate applicable to
any loans from Bank to Borrower, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising any such loan
after the occurrence of an Event of Default, whether or not suit is filed.
If suit is brought to enforce any provision of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and court
costs in addition to any other remedy or recovery awarded by the court.
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2.12 DOCUMENTATION FEE. A documentation fee of $250.00 shall be due
upon execution of this Agreement.
3. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, it will
not, without Bank's written consent:
3.01 TYPE OF BUSINESS. Make any substantial change in the character of
its business.
3.02 OUTSIDE INDEBTEDNESS. Other than in the ordinary course of
business and consistent with past practices, create, incur, assume or permit
to exist any indebtedness for borrowed moneys, other than loans from Bank,
except obligations now existing as shown in the financial statement dated
September 30, 1997, excluding those obligations being refinanced by Bank.
3.03 LIENS AND ENCUMBRANCES. Other than in the ordinary course of
business which includes obtaining collaboration agreements with corporate
partners, and consistent with past practices, create, incur, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned and given as security in connection with this agreement, other than
liens for taxes not delinquent and liens in Bank's favor, except for those
already existing as of September 30, 1997.
3.04 LOANS, INVESTMENT, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business and consistent with past practices or make any
investment in the securities of any person or other entity inconsistent with
company investment guidelines; or guarantee or otherwise become liable upon
the obligation of any person or other entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business an consistent with past practices. The foregoing will
not restrict Borrower from issuing guarantees or otherwise becoming obligated
to its landlords for security deposits.
3.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION.
Liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except in the ordinary course of its business
consistent with past practices; or except in the ordinary course of business,
sell, lease assign or transfer any substantial part of its business or fixed
assets, or any property or other assets necessary for the continuance of its
business as now conducted, including without limitation the selling of any
dividends, property or other asset accompanies by the leasing back of the
same.
4. EVENTS OF DEFAULT
The occurrence of any of the following events (each an "Event of
Default") shall, at Bank's option, terminate Bank's commitment to lend and
make all sums of principal and interest then remaining unpaid on all of
Borrower's indebtedness to Bank immediately due and payable, all without
demand, presentment or notice, all of which are hereby expressly waived:
4.01 FAILURE TO PAY. Failure to pay any installment of principal or
interest on any indebtedness of Borrower to Bank within 10 days of due date.
4.02 BREACH OF COVENANT. Failure to perform any other term or condition
of this Agreement binding upon Borrower within 20 days of notice from Bank.
4.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any respect.
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4.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
4.05 JUDGMENTS, ATTACHMENTS. Any money judgment greater than $100,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period later than five days prior to the date of any proposed
sale thereunder.
4.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors, if not terminated within 60 days, shall be
instituted by or against Borrower and, if instituted against it, shall be
consented to.
5. MISCELLANEOUS PROVISIONS
5.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of Bank or any holder of any note issued by Borrower to Bank, in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement or
any note issued in connection with a loan that Bank may make hereunder, are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
5.02 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or
banker's lien.
5.03 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
5.04 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby agree to submit.
5.05 OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of any note issued by Borrower in favor of
Bank may have under applicable law, Bank or other holder of such notes shall,
upon the occurrence of any Event of Default or any event which with the
passage of time or notice would constitute such an Event of Default, have the
right to appropriate and apply to the payment of the outstanding balance
owing under any such note any and all balances, credits, deposits, accounts
or monies of Borrower then or thereafter with Bank or other holder, within
ten (10) days after the Event of Default, and notice of the occurrence of any
Event of Default by Bank to Borrower.
5.06 SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
5.07 TIME OF THE ESSENCE. Time is hereby declared to be of the essence
of this Agreement and of every part hereof.
5.08 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
5.09 MODIFICATION. This Agreement may be modified only by a writing
signed by both parties hereto.
Page 5 of 7
5.10 JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this Credit Agreement, any General Security
Agreement executed by Borrower in favor of Bank or any Note executed by
Borrower in favor of Bank (collectively, in this Section 5.11, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "CLAIM DATE" (defined as the date on which
a party subject to this Agreement gives written notice to all other parties
that a controversy, dispute or claim exists), will be settled by a reference
proceeding in California in accordance with the provisions of Section 638 ET
SEQ. of the California Code of Civil Procedure, or their successor section
("CCP"), which shall constitute the exclusive remedy for the settlement of
any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or
jurisdiction other than the Superior Court in the County where the Real
Property, if any, is located or San Diego County if none (the "COURT"). The
referee shall be a retired Judge of the Court selected by mutual agreement of
the parties, and if they cannot so agree within forty-five (45) days after
the Claim Date, the referee shall be promptly selected by the Presiding Judge
of the Court (or his representative). The referee shall be appointed to sit
as a temporary judge, with all of the powers for a temporary judge, as
authorized by law, and upon selection should take and subscribe to the oath
of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. The referee shall (a) be requested
to set the matter for hearing within sixty (60) days after the date of
selection of the referee and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section
644 in any court in the State of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute
or claim, by filing a petition for a hearing and/or trial. All discovery
permitted by this Section 5.11 shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days
written notice, and request for production or inspection of documents shall
be responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Section 5.11, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of
the reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter except
that when any party so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of California
will be applicable to the reference proceeding. The referee shall be
empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will
be binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto
expressly reserve the right to contest or appeal from the final judgment or
any appealable order or appealable judgment entered by the referee. The
parties hereto expressly reserve the right to findings of
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fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise by determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the
Court, in accordance with the California Arbitration Act, Section 1280
through Section 1294.2 of the CCP as amended from time to time. The
limitations with respect to discovery as set forth hereinabove shall apply to
any such arbitration proceeding.
This Agreement is executed on behalf of the parties by duly authorized
representatives as of February 2, 1998.
IMPERIAL BANK ("BANK")
By: /s/ Brougham J. Morris
---------------------------
Brougham J. Morris,
Senior Vice President
COASTCAST CORPORATION ("BORROWER")
By: /s/ Robert C. Bruning
---------------------------
Robert C. Bruning,
Chief Financial Officer
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