Exhibit 10.3
ASSUMPTION AGREEMENT
 
 
 
DATE:
December 23, 2009
   
BETWEEN:
Paneltech International, LLC (together, “Borrower”)
 
2999 John Stevens Way
 
Hoquiam, WA 98550
   
AND:
Paneltech Products, Inc. (“Transferee”)
 
2999 John Stevens Way
 
Hoquiam, WA 98550
   
AND:
ShoreBank Pacific (“Bank”)
 
PO Box 400
 
Ilwaco, WA 98624
   
LOAN NO.
100012003

 
RECITALS
 
A.           Bank is the holder of that certain Promissory Note dated January
19, 2001 (the “Note”) in the original principal sum of $500,000, as amended and
increased by Change in Terms and currently in the amount of $1,500,000, made by
Borrower in favor of Bank.
 
B.           Borrower executed a Security Agreement dated January 19, 2001 (the
“Security Agreement”), by which Borrower granted to Bank a security interest in
the personal property of Borrower.
 
C.           Borrower also executed a Business Loan Agreement dated January 19,
2001, which has been replaced by a Business Loan Agreement dated November 30,
2009 (the “Business Loan Agreement”), reciting the terms and conditions under
which certain loan or loans were extended to Borrower by Bank as well as other
Related Documents as defined in the Business Loan Agreement.
 
D.           Leroy D. Nott, Scott D. Olmstead, Ronald H. Iff, Sorb Management
Corporation, and L.D. Nott Company (Collectively as “Guarantors”) have provided
or will provide Guaranties in favor of Bank, the form of which will be
satisfactory to bank in its sole discretion.
 
E.           The Security Agreement, the Business Loan Agreement, the Promisory
Note, Guaranties and the Related Documents, and any amendments thereto, together
with this Agreement, are collectively referred to as the “Loan Agreements”.
 
F.           Transferee and Borrower have entered into that certain Agreement
and Plan of Merger by and among Charleston Basics, Inc., Paneltech Products,
Inc., and Paneltech International, L.L.C. dated December 23, 2009 (the “Merger
Agreement”) and Borrower and Transferee have requested that Transferee be
permitted to assume the obligations under the Note and the Loan Agreements. Bank
has agreed to permit such an assumption in accordance with the terms of this
Agreement.
 
 

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G.           Borrower and Guarantors hereby agree to remain liable for the
obligations of the Transferee and further agree that the personal property
defined in the Security Agreement will further secure the obligations of
Borrower and Transferee under this Agreement.
 
WHEREFORE, in consideration of the covenants contained herein and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower, Transferee, and Bank agree as follows:
 
AGREEMENT
 
1.           Assumption. Transferee does hereby assume and agree to punctually
pay and perform all covenants and obligations of the Note and the Loan Documents
as though the Note and the Loan Documents had originally been made, executed,
and delivered by Transferee.
 
2.           Consent; Borrower’s Continued Liability. Bank and Borrower consent
to Transferee’s assumption of the Note and the Loan Documents pursuant to the
Merger Agreement and merger related documents subject to confirmation by
Transferee and Borrower of the following clarifications, which if withheld would
be considered an event of default: a) the Bank has a valid lien on all assets of
the Borrower and is senior to other lien claimants except for as provided in the
security agreement and the lntercreditor Agreement with Anchor Bank; b) the bank
has not received Audited financial statements, c) the bank’s lien is not limited
to ‘purchase money security interest; d) the bank’s indebtedness is senior in
security and right of payment to any payments relating to equity or Preferred
securities; e) the bank does not waive or forbear upon any rights or remedies
under the loan documents in agreeing to this assumption; f) the Transferee also
agrees to sign a security agreement, in form satisfactory to Bank, where they
grant interest in all existing collateral and collateral subsequently acquired,
and to assist with all UCC filings required by Bank, and Transferree and
Borrower hereby grant Bank full power of attorney to execute any such document.
All parties further agree (a) that Transferee’s assumption shall not relieve
Borrower from liability under the Note and the Loan Documents, (b) that Borrower
is jointly and severally liable with Transferee under the Note and the Loan
Documents until all obligations arising thereunder have been fully performed,
and (c) that Borrower’s liability is primary with and not secondary to the
liability of Transferee. Borrower further agrees that the company assets shall
continue to secure Borrower’s obligations under the Agreement. Borrower further
agrees to execute documents as necessary to perfect Bank’s security interest.
 
3.           Representations and Warranties. Borrower and Transferee represent
and warrant (a) that the Note and Loan Documents are legal, binding, valid and
enforceable obligations of Borrower and Transferee and are in full force and
effect, and (b) that there are no existing claims, defenses, personal or
otherwise, or rights of setoff whatsoever available to Borrower or Transferee
with respect to the Note and Loan Documents. Borrower and Transferee agree to
execute, at Bank’s request, any documents reasonably required by Bank to
evidence and carry out this Agreement.
 
4.           Notice. Transferee is entitled to the same notice as Borrower.
Notice to Transferee shall be directed to Transferee’s address stated above.
Notice to Borrower shall be directed to the address stated above. A party may
change the address to which notice is directed in the manner provided in the
Note and the Loan Agreements.
 
 
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5.           Binding Effect of Agreement. This Agreement is binding on the
heirs, executors, administrators, successors, and assigns of the parties.
 
6.           Incorporation of Recitals. The Recitals are incorporated herein as
part of this Agreement.
 
7.           Entire Agreement. The parties declare and represent that no
promise, inducement, or agreement not expressed in the Loan Documents has been
made between them, and that the Loan Documents contain the entire agreement
between them. The Loan Documents cannot be modified except by a writing signed
by all the parties.
 
8.           Effective Date. This Agreement shall be deemed to have taken effect
on the date first written above.
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed.
 
ACKNOWLEDGED AND AGREED TO:
 

               
BANK:
/s/ Randell Leach
     
Shorebank Pacific
           
BORROWER:
/s/ Leroy D. Nott
     
Paneltech International, L.L.C.
           
TRANSFEREE:
/s/ Leroy D. Nott
     
Paneltech Products, Inc.
           
GUARANTORS:
/s/ Leroy D. Nott
 
/s/ Scott D. Olmstead
 
Leroy D. Nott
 
Scott D. Olmstead
         
/s/ Ronald H. Iff
 
/s/ Scott D. Olmstead
 
Ronald H. Iff
 
Sorb Management Corporation
         
/s/ Leroy D. Nott
     
L.D. Nott Company
   

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