Exhibit 10.1


 




 





CREDIT AGREEMENT


 


by and between


 


CUTTER & BUCK INC., a Washington corporation


 


and


 


WELLS FARGO HSBC TRADE BANK, N.A.


 


Dated as of


 


March 10, 2005


 


 


Exhibit A – Addendum to Credit Agreement


Exhibit B – Revolving Credit Facility Supplement


Exhibit C – Collateral/Credit Support Document


 




 
























 


	
  WELLS FARGO HSBC TRADE BANK

  	
  CREDIT AGREEMENT

  



 


CUTTER & BUCK INC., a Washington corporation
(“Borrower”), organized under the laws of the State of Washington whose chief
executive office is located at the address specified after its signature to
this Agreement (“Borrower’s Address”) and WELLS FARGO HSBC TRADE
BANK, N.A. (“Trade Bank”), whose address is specified after its
signature to this Agreement, have entered into this CREDIT
AGREEMENT as of March 10, 2005 (“Effective Date”). All references to
this “Agreement” include those covenants included in the Addendum to Agreement
(“Addendum”) attached as Exhibit A hereto.


 


I.  CREDIT
FACILITY


 


1.1           The
Facility. Subject to
the terms and conditions of this Agreement, Trade Bank will make available to
Borrower a Revolving Credit Facility (“Facility”) for which a Facility
Supplement (“Supplement”) is attached as Exhibit B hereto. Additional terms for
the Facility (and each subfacility thereof (“Subfacility”)) are set forth in
the Supplement. The Facility will be available from the Closing Date up to and
until March 31, 2008 (“Facility Termination Date”). Collateral and credit
support required for the Facility is set forth in Exhibit C hereto. Definitions
for those capitalized terms not otherwise defined are contained in Article 8
below.


 


1.2           Credit
Extension Limit. The aggregate outstanding amount of all Credit
Extensions may at no time exceed Thirty-five Million Dollars ($35,000,000) (“Overall
Credit Limit”). The aggregate outstanding amount of all Credit Extensions
outstanding at any time under Revolving Credit Facility may not exceed that
amount specified as the “Credit Limit” in the Supplement for the Facility, and
the aggregate outstanding amount of all Credit Extensions outstanding at any
time under each Subfacility (or any subcategory thereof) may not exceed that
amount specified as the “Credit Sublimit” in the Supplement for the Facility.
An amount equal to 100% of each unfunded Credit Extension shall be used in calculating
the outstanding amount of Credit Extensions under this Agreement.


 


The Subfacility(s) of the Revolving Credit Facility are as follows:


 


(a)           Sight
Commercial Letters of Credit


(b)           Usance
Commercial Letters of Credit including:


(1)           Acceptances


(c)           Standby
Letters of Credit


(d)           Shipping
Guarantees


 


1.3           Overadvance.
All Credit Extensions made hereunder shall be added to and deemed part of the
Obligations when made. If, at any time and for any reason, the aggregate
outstanding amount of all Credit Extensions made pursuant to this Agreement
exceeds the dollar limitation in Section 1.2, then Borrower shall
immediately pay to Trade Bank on demand, in cash, the amount of such excess.


 


1.4           Repayment;
Interest and Fees. Each funded Credit Extension shall be repaid
by Borrower, and shall bear interest from the date of disbursement at those per
annum rates and such interest shall be paid, at the times specified in the
Supplement, Note or Facility Document. Borrower agrees to pay to Trade Bank
with respect to (a) the Revolving Credit Facility, interest at a per annum
rate equal to (i) the Prime Rate minus 1% as specified in the Note, or
(ii) Wells Fargo’s LIBOR Rate plus 1.50% as specified in the Note, and
(b) the Subfacilities, the fees specified in the Supplement as well as
those fees specified in the relevant Facility Document(s). Interest and fees
will be calculated on the basis of a 360 day year, actual days elapsed. Any
overdue payments of principal (and interest to the extent permitted by law)
shall bear interest at a per annum floating rate equal to the Prime Rate plus
5%.


 


1.5           Prepayments.
Credit Extensions under any Facility may only be prepaid in accordance with the
terms of the Supplement. At the time of any prepayment (including, but not
limited to, any prepayment which is a result of the occurrence of an Event of
Default and an acceleration of the Obligations) Borrower will pay to Trade Bank
all interest accrued on the amount so prepaid to the date of such prepayment
and all costs, expenses and fees specified in the Loan Documents.


 


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II.  REPRESENTATIONS
AND WARRANTIES


 


Borrower represents and warrants to Trade Bank that
the following representations and warranties are true and correct:


 


2.1           Legal
Status. Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction indicated in this Agreement, and is
qualified or licensed to do business in all jurisdictions in which such
qualification or licensing is required and in which the failure to so qualify
or to be so licensed could have a material adverse affect on Borrower.


 


2.2           Authorization
and Validity. The execution, delivery and performance of this
Agreement, and all other Loan Documents to which Borrower is a party, have been
duly and validly authorized, executed and delivered by Borrower and constitute
legal, valid and binding agreements of Borrower, and are enforceable against
Borrower in accordance with their respective terms.


 


2.3           Borrower’s
Name. The name of
Borrower set forth at the end of this Agreement is its correct name. If
Borrower is conducting business under a fictitious business name, Borrower is
in compliance with all laws relating to the conduct of such business under such
name.


 


2.4           Financial
Condition and Statements. All financial statements of Borrower
delivered to Trade Bank have been prepared in conformity with GAAP, and
completely and accurately reflect the financial condition of Borrower (and any
consolidated Subsidiaries) at the times and for the periods stated in such
financial statements. Neither Borrower nor any Subsidiary has any material
contingent liability not reflected in the aforesaid financial statement. Since
the date of the financial statements delivered to Trade Bank for the last
fiscal period of Borrower to end before the Effective Date, there has been no
material adverse change in the financial condition, business or prospects of
Borrower. Borrower is solvent.


 


2.5           Litigation.
Except as disclosed in writing to Trade Bank prior to the Effective Date, there
is no action, claim, suit, litigation, proceeding or investigation pending or
(to best of Borrower’s knowledge) threatened by or against or affecting
Borrower or any Subsidiary in any court or before any governmental authority,
administrator or agency which may result in (a) any material adverse
change in the financial condition or business of Borrower’s, or (b) any
material impairment of the ability of Borrower to carry on its business in
substantially the same manner as it is now being conducted.


 


2.6           No
Violation. The execution, delivery, and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in a breach of or constitute a default under any
contract, obligation, indenture, or other instrument to which Borrower is a
party or by which Borrower may be bound.


 


2.7           Income
Tax Returns. Except as previously disclosed to Trade Bank in
writing, Borrower has no knowledge of any pending assessments or adjustments of
its income tax payable with respect to any year.


 


2.8           No
Subordination. There is no agreement, indenture, contract, or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.


 


2.9           ERISA.
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
or recodified from time to time (“ERISA”); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event,
as defined in ERISA, has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under GAAP.


 


2.10         Other
Obligations. Except as disclosed in writing to Trade Bank prior
to the Effective Date, neither Borrower nor any Subsidiary are in default of
any obligation for borrowed money, any purchase money obligation or any
material lease, commitment, contract, instrument or obligation.


 


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2.11         No
Defaults. No Event of Default, and event which with the giving
of notice or the passage of time or both would constitute an Event of Default,
has occurred and is continuing.


 


2.12         Information
Provided to Trade Bank. The information provided to the Trade
Bank concerning Borrower’s business is true and correct.


 


2.13         Environmental
Matters. Except as disclosed by Borrower to Trade Bank in
writing prior to the Effective Date, Borrower (as well as any Subsidiary) is
each in compliance in all material respects with all applicable Federal or
state environmental, hazardous waste, health and safety statutes, and any rules
or regulations adopted pursuant thereto, which govern or affect any Borrower’s
or any Subsidiary’s operations and/or properties, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, the Federal Toxic Substances
Control Act and the California Health and Safety Code, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower or of any Subsidiary is the subject of any Federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste
or substance into the environment.


 


III.  CONDITIONS
TO EXTENDING FACILITIES


 


3.1           Conditions
to Initial Credit Extension. The obligation of Trade Bank to
make the first Credit Extension is subject to the fulfillment to Trade Bank’s
satisfaction of the following conditions:


 


(a)           Approval of Trade Bank Counsel. All
legal matters relating to making the Facility available to Borrower must be
satisfactory to counsel for Trade Bank.


 


(b)           Documentation. Trade Bank must have
received, in form and substance satisfactory to Trade Bank, the following
documents and instruments duly executed and in full force and effect:


 


(1)           a
corporate borrowing resolution and incumbency certificate if Borrower is a
corporation, a partnership or joint venture borrowing certificate if Borrower
is a partnership or joint venture, and a limited liability company borrowing
certificate if Borrower is a limited liability company;


 


(2)           the
Facility Documents for the Facility, including, but not limited to, note(s) (“Notes”)
for the Revolving Credit Facility, Trade Bank’s standard Commercial Letter of
Credit Agreement or Standby Letter of Credit Agreement for any letter of credit
Facility;


 


(3)           those
guarantees, security agreements, deeds of trust, subordination agreements,
intercreditor agreements, factoring agreements, tax service contracts, and
other Collateral Documents required by Trade Bank to evidence the
collateral/credit support specified in the Supplement;


 


(4)           if an
audit or inspection of any books, records or property is specified in the
Supplement for the Facility, an audit or inspection report from Wells Fargo or
another auditor or inspector acceptable to Trade Bank reflecting values and
property conditions satisfactory to Trade Bank; and


 


(5)           if
insurance is required in the Addendum, the insurance policies specified in the
Addendum (or other satisfactory proof thereof) from insurers acceptable to
Trade Bank.


 


3.2           Conditions
to Making Each Credit Extension. The obligation of Trade Bank to
make each Credit Extension is subject to the fulfillment to Trade Bank’s
satisfaction of the following conditions:


 


(a)           Representations and Warranties. The
representations and warranties contained in this Agreement, the Facility
Documents and the Collateral Documents will be true and correct on and


 


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as of the date of the Credit Extension with the same effect as though
such representations and warranties had been made on and as of such date;


 


(b)           Documentation. Trade Bank must have
received, in form and substance satisfactory to Trade Bank, the following
documents and instruments duly executed and in full force and effect:


 


(1)           if the
Credit Extension is the issuance of a Commercial Letter of Credit, Trade Bank’s
standard Application For Commercial Letter of Credit or standard Application
and Agreement For Commercial Letter of Credit;


 


(2)           if the
Credit Extension is the issuance of a Standby Letter of Credit, Trade Bank’s
standard Application For Standby Letter of Credit or standard Application and
Agreement For Standby Letter of Credit;


 


(3)           if a
Borrowing Base Certificate is required for the Credit Extension, a Borrowing
Base Certificate demonstrating compliance with the requirements for such Credit
Extension.


 


(c)           Fees. Trade Bank must have received
any fees required by the Loan Documents to be paid at the time such Credit
Extension is made.


 


IV.  AFFIRMATIVE
COVENANTS


 


Borrower covenants that so long as Trade Bank remains
committed to make Credit Extensions to Borrower, and until payment of all
Obligations and Credit Extensions, Borrower will comply with each of the
following covenants: (For purposes of this Article IV, and Article V
below, reference to “Borrower” may also extend to Borrower’s subsidiaries, if so
specified in the Addendum.)


 


4.1           Punctual
Payments. Punctually pay all principal, interest, fees and other
Obligations due under this Agreement or under any Loan Document at the time and
place and in the manner specified herein or therein.


 


4.2           Notification
to Trade Bank. Promptly, but in no event more than 5 calendar
days after the occurrence of each such event, provide written notice in
reasonable detail of each of the following:


 


(a)           Occurrence of a Default. The
occurrence of any Event of Default or any event which with the giving of notice
or the passage of time or both would constitute an Event of Default;


 


(b)           Borrower’s Trade Names; Place of Business.
Any change of Borrower’s (or any Subsidiary’s) name, trade name or place of
business, or chief executive officer;


 


(c)           Litigation. Any action, claim,
proceeding, litigation or investigation threatened or instituted by or against
or affecting Borrower (or any Subsidiary) in any court or before any government
authority, administrator or agency which may materially and adversely affect
Borrower’s (or any Subsidiary’s) financial condition or business or Borrower’s
ability to carry on its business in substantially the same manner as it is now
being conducted;


 


(d)           Uninsured or Partially Uninsured Loss.
Any uninsured or partially uninsured loss through liability or property damage
or through fire, theft or any other cause affecting Borrower’s (or any
Subsidiary’s) property in excess of the aggregate amount required hereunder;


 


(e)           Reports Made to Insurance Companies.
Copies of all material reports made to insurance companies; and


 


(f)            ERISA. The occurrence and nature of
any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
any funding deficiency with respect to any Plan.


 


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4.3           Books and
Records. Maintain at Borrower’s address books and records in
accordance with GAAP, and permit any representative of Trade Bank, at any
reasonable time, to inspect, audit and examine such books and records, to make
copies of them, and to inspect the properties of Borrower.


 


4.4           Tax
Returns and Payments. Timely file all tax returns and reports
required by foreign, federal, state and local law, and timely pay all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower. Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower’s obligation to pay the
taxes by appropriate proceedings promptly instituted and diligently conducted,
(ii) notifies Trade Bank in writing of the commencement of, and any
material development in, the proceedings, (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral, and (iv) makes provision, to Trade Bank’s satisfaction,
for eventual payment of such taxes in the event Borrower is obligated to make
such payment.


 


4.5           Compliance
with Laws. Comply in all material respects with the provisions
of all foreign, federal, state and local laws and regulations relating to
Borrower, including, but not limited to, those relating to Borrower’s ownership
of real or personal property, the conduct and licensing of Borrower’s business,
and health and environmental matters.


 


4.6           Taxes and
Other Liabilities. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real and personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good
faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Trade Bank’s satisfaction, for eventual
payment thereof in the event that Borrower is obligated to make such payment.


 


4.7           Insurance.
Maintain and keep in force insurance of the types and in amounts customarily
carried in lines of business similar to that of Borrower, including, but not
limited to, fire, extended coverage, public liability, flood, property damage
and workers’ compensation, with all such insurance to be in amounts
satisfactory to Trade Bank and to be carried with companies approved by Trade
Bank before such companies are retained, and deliver to Trade Bank from time to
time at Trade Bank’s request schedules setting forth all insurance then in
effect. All insurance policies shall name Trade Bank as an additional loss
payee, and shall contain a lenders loss payee endorsement in form reasonably
acceptable to Trade Bank. (Upon receipt of the proceeds of any such insurance,
Trade Bank shall apply such proceeds in reduction of the outstanding funded
Credit Extensions and shall hold any remaining proceeds as collateral for the
outstanding unfunded Credit Extensions, as Trade Bank shall determine in its
sole discretion, except that, provided no Event of Default has occurred, Trade
Bank shall release to Borrower insurance proceeds with respect to equipment
totaling less than $100,000, which shall be utilized by Borrower for the
replacement of the equipment with respect to which the insurance proceeds were
paid, if Trade Bank receives reasonable assurance that the insurance proceeds
so released will be so used.) If Borrower fails to provide or pay for any
insurance, Trade Bank may, but is not obligated to, obtain the insurance at
Borrower’s expense.


 


4.8           Further
Assurances. At Trade Bank’s request and in form and substance
satisfactory to Trade Bank, execute all documents and take all such actions at
Borrower’s expense as Trade Bank may deem reasonably necessary or useful to
perfect and maintain Trade Bank’s perfected security interest in the Collateral
and in order to fully consummate all of the transactions contemplated by the
Loan Documents.


 


V.  NEGATIVE
COVENANTS


 


Borrower covenants that so long as Trade Bank remains
committed to make any Credit Extensions to Borrower and until all Obligations
and Credit Extensions have been paid, Borrower will not:


 


5.1           Merge or
Consolidation, Transfer of Assets. Merge into or consolidate
with any other entity; make any substantial change in the nature of Borrower’s
business as conducted as of the date hereof; acquire all or substantially all
of the assets of any other entity; nor sell, lease, transfer or otherwise
dispose of all or a substantial or material portion of Borrower’s assets except
in the ordinary course of its business.


 


5.2           Use of
Proceeds. Borrower will not use the proceeds of any Credit
Extension except for the purposes, if any, specified for such Credit Extension
in the Supplement covering the Facility under which such Credit Extension is
made.


 


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5.3           Liens.
Mortgage, pledge, grant or permit to exist a security interest in, or lien
upon, all or any portion of Borrower’s assets now owned or hereafter acquired,
except any of the foregoing in favor of Trade Bank or which is existing as of,
and disclosed to Trade Bank in writing prior to, the date hereof.


 


5.4           Acquisitions
of Assets. Borrower will not acquire any assets or enter into
any other transaction outside the ordinary course of Borrower’s business.


 


5.5           Loans and
Investments. Borrower will not make any loans or advances to, or
investments in, any person or entity except for accounts receivable created in
the ordinary course of Borrower’s business and additional loans or advances to
Borrower’s employees in amounts not to exceed an aggregate of $250,000
outstanding at any one time.


 


5.6           Indebtedness
For Borrowed Money. Borrower will not incur any indebtedness for
borrowed money, except (i) to Trade Bank, (ii) unsecured indebtedness not to
exceed $250,000 in the aggregrate at any one time and (iii)  indebtedness subordinated to the Obligations
by an instrument or agreement in form acceptable to Trade Bank.


 


5.7           Guarantees.
Borrower will not guarantee or otherwise become liable with respect to the
obligations of any other person or entity, except for endorsement of
instruments for deposit into Borrower’s account in the ordinary course of
Borrower’s business.


 


5.8           Investments
in, or Acquisitions of, Subsidiaries. Borrower will not make any
investments in, or form or acquire, any subsidiaries.


 


5.9           Capital
Expenditures. Borrower shall not make any capital expenditures
in Borrower’s fiscal year 2005 in an aggregate amount in excess of $4,500,000
and in an aggregate amount in excess of $4,000,000 in any fiscal year
thereafter.


 


VI.  EVENTS
OF DEFAULT AND REMEDIES


 


6.1           Events of
Default. The occurrence of any of the following shall constitute
an “Event of Default”:


 


(a)           Failure to Make Payments When Due.
Borrower’s failure to pay principal, interest, fees or other amounts when due
under any Loan Document.


 


(b)           Failure to Perform Obligations. Any
failure by Borrower to comply with any covenant or obligation in this Agreement
or in any Loan Document (other than those referred to in subsection (a)above),
and such default shall continue for a period of twenty calendar days from the
earlier of (i) Borrower’s failure to notify Trade Bank of such Event of
Default pursuant to Section 4.2(a) above, or (ii) Trade Bank’s notice
to Borrower of such Event of Default.


 


(c)           Untrue or Misleading Warranty or Statement.
Any warranty, representation, financial statement, report or certificate made
or delivered by Borrower under any Loan Document is untrue or misleading in any
material respect when made or delivered.


 


(d)           Defaults Under Other Loan Documents.
Any “Event of Default” occurs under any other Loan Document; any Guaranty is no
longer in full force and effect (or any claim thereof made by Guarantor) or any
failure of a Guarantor to comply with the provisions thereof; or any breach of
the provisions of any Subordination Agreement or Intercreditor Agreement by any
party other than the Trade Bank.


 


(e)           Defaults Under Other Agreements or Instruments.
Any default in the payment or performance of any obligation, or the occurrence
of any event of default, under the terms of any other agreement or instrument
pursuant to which Borrower, any Subsidiary or any Guarantor or general partner
of Borrower has incurred any debt or other material liability to any person or
entity.


 


(f)            Concealing or Transferring Property.
Borrower conceals, removes or transfers any part of its property with intent to
hinder, delay or defraud its creditors, or makes or suffers any transfer of


 


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any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law.


 


(g)           Judgments and Levies Against Borrower.
The filing of a notice of judgment lien against Borrower, or the recording of
any abstract of judgment against Borrower, in any county in which Borrower has
an interest in real property, or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against the assets of
Borrower, or the entry of a judgment against Borrower.


 


(h)           Event or Condition Impairing Payment or
Performance. Any event occurs or condition arises which Trade
Bank in good faith believes impairs or is substantially likely to impair the
prospect of payment or performance by Borrower of the Obligations, including,
but not limited to any material adverse change in Borrower’s financial
condition, business or prospects.


 


(i)            Voluntary Insolvency. Borrower, any
Subsidiary or any Guarantor (i) becomes insolvent, (ii) suffers or
consents to or applies for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, (iii) generally fails to pay
its debts as they become due, (iv) makes a general assignment for the
benefit of creditors, or (v) files a voluntary petition in bankruptcy, or
seeks reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time (“Bankruptcy
Code”), or under any state or Federal law granting relief to debtors, whether
now or hereafter in effect.


 


(j)            Involuntary Insolvency. Any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower, any Subsidiary or
Guarantor, or an order for relief is entered against it by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors.


 


(k)           Change in Ownership. Any change in
the ownership of Borrower, any general partner of Borrower or any Guarantor
which the Trade Bank determines, in its sole discretion, may adversely affect
the creditworthiness of Borrower or credit support for the Obligations.


 


6.2           Remedies.
Upon the occurrence of any Event of Default, or at any time thereafter, Trade
Bank, at its option, and without notice or demand of any kind (all of which are
hereby expressly waived by Borrower), may do any one or more of the following:
(a) terminate Trade Bank’s obligation to make Credit Extensions or to make
available to Borrower the Facility or other financial accommodations;
(b) accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Credit Extension; and/or (c) exercise all its rights, powers and remedies
available under the Loan Documents, or accorded by law, including, but not
limited to, the right to resort to any or all Collateral or other security for
any of the Obligations and to exercise any or all of the rights of a beneficiary
or secured party pursuant to applicable law. Notwithstanding the provisions in
the foregoing sentence, if any Event of Default set out in subsections
(i) and (j) of Section 6.1 above shall occur, then all the
remedies specified in the preceding sentence shall automatically take effect
without notice or demand of any kind (all of which are hereby expressly waived
by Borrower) with respect to any and all Obligations. All rights, powers and
remedies of Trade Bank may be exercised at any time by Trade Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.


 


VII.  GENERAL
PROVISIONS


 


7.1           Notices.
All notices to be given under this Agreement shall be in writing and shall be
given personally or by regular first-class mail, by certified mail return
receipt requested, by a private delivery service which obtains a signed
receipt, or by facsimile transmission addressed to Trade Bank or Borrower at
the address indicated after their signature to this Agreement, or at any other
address designated in writing by one party to the other party. Trade Bank is
hereby authorized by Borrower to act on such instructions or notices sent by
facsimile transmission or telecommunications device


 


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which Trade Bank
believes come from Borrower. All notices shall be deemed to have been given
upon delivery, in the case of notices personally delivered or delivered by
private delivery service, upon the expiration of 3 calendar days following the
deposit of the notices in the United States mail, in the case of notices
deposited in the United States mail with postage prepaid, or upon receipt, in
the case of notices sent by facsimile transmission.


 


7.2           Waivers.
No delay or failure of Trade Bank in exercising any right, power or remedy
under any of the Loan Documents shall affect or operate as a waiver of such
right, power or remedy; nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, consent or approval by Trade Bank under any of the Loan Documents must be
in writing and shall be effective only to the extent set out in such writing.


 


7.3           Benefit
of Agreement. The provisions of the Loan Documents shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, executors, administrators, beneficiaries and legal representatives of
Borrower and Trade Bank; provided, however, that Borrower may not assign or
transfer any of its rights under any Loan Document without the prior written
consent of Trade Bank, and any prohibited assignment shall be void. No consent
by Trade Bank to any assignment shall release Borrower from its liability for
the Obligations unless such release is specifically given by Trade Bank to
Borrower in writing. Trade Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Trade Bank’s rights and benefits under each of the Loan Documents to an
affiliate of Trade Bank without Borrower’s consent. In connection therewith,
Trade Bank may disclose any information relating to the Facility, Borrower or
its business, or any Guarantor or its business.


 


7.4           Joint and
Several Liability. If Borrower consists of more than one person
or entity, the liability of each of them shall be joint and several, and the compromise
of any claim with, or the release of, any one such Borrower shall not
constitute a compromise with, or a release of, any other such Borrower.


 


7.5           No Third
Party Beneficiaries. This Agreement is made and entered into for
the sole protection and benefit of Borrower and Trade Bank and their respective
permitted successors and assigns, and no other person or entity shall be a
third party beneficiary of, or have any direct or indirect cause of action or
claim in connection with, any of the Loan Documents to which it is not a party.


 


7.6           Governing
Law and Jurisdiction. This Agreement shall, unless provided
differently in any Loan Document, be governed by, and be construed in
accordance with, the internal laws of the State of California, except to the extent
Trade Bank has greater rights or remedies under federal law whether as a
national bank or otherwise. Borrower and Trade Bank (a) agree that all
actions and proceedings relating directly or indirectly to this Agreement shall
be litigated in courts located within California; (b) consent to the
jurisdiction of any such court and consent to service of process in any such
action or proceeding by personal delivery or any other method permitted by law;
and (c) waive any and all rights Borrower may have to object to the
jurisdiction of any such court or to transfer or change the venue of any such
action or proceeding.


 


7.7           Mutual
Waiver of Jury Trial. Borrower and Trade Bank each hereby waive
the right to trial by jury in any action or proceeding based upon, arising out
of, or in any way relating to, (a) any Loan Document, (b) any other
present or future agreement, instrument or document between Trade Bank and
Borrower, or (c) any conduct, act or omission of Trade Bank or Borrower or
any of their directors, officers, employees, agents, attorneys or any other
persons or entities affiliated with Trade Bank or Borrower, which waiver will
apply in all of the mentioned cases whether the case is a contract or tort case
or any other case. Borrower represents and warrants that no officer,
representative or agent of Trade Bank has represented, expressly or otherwise,
that Trade Bank would not seek to enforce this waiver of jury trial.


 


7.8           Severability.
Should any provision of any Loan Document be prohibited by, or invalid under
applicable law, or held by any court of competent jurisdiction to be void or
unenforceable, such defect shall not affect, the validity of the other
provisions of the Loan Documents.


 


7.9           Entire
Agreement; Amendments. This Agreement and the other Loan
Documents are the final, entire and complete agreement between Borrower and
Trade Bank concerning the Credit Extensions and the Facility; supersede all
prior and contemporaneous negotiations and oral representations and agreements.
There are no oral understandings, representations or agreements between the
parties concerning the Credit Extensions or the Facility which are not set
forth in the Loan Documents. This Agreement and the Supplement may not be
waived, amended or superseded except in a writing executed by Borrower and
Trade Bank.


 


8





















 


7.10         Collection
of Payments. Unless otherwise specified in any Loan Document,
other than this Agreement or any Note, all principal, interest and any fees due
to Trade Bank by Borrower under this Agreement, the Addendum, any Supplement,
any Facility Document, any Collateral Document or any Note, will be paid by
Trade Bank having Wells Fargo debit any of Borrower’s accounts with Wells Fargo
and forwarding such amount debited to Trade Bank, without presentment, protest,
demand for reimbursement or payment, notice of dishonor or any other notice
whatsoever, all of which are hereby expressly waived by Borrower. Such debit
will be made at the time principal, interest or any fee is due to Trade Bank
pursuant to this Agreement, the Addendum, any Supplement, any Facility
Document, any Collateral Document or any Note.


 


7.11         Costs,
Expenses and Attorneys’ Fees. Borrower will reimburse Trade Bank
for all costs and expenses, including, but not limited to, reasonable attorneys’
fees and expenses (which counsel may be Trade Bank or Wells Fargo employees),
expended or incurred by Trade Bank in the preparation and negotiation of this
Agreement, the Notes, the Collateral Documents, the Addendum, and the Facility
Documents, in amending this Agreement, the Collateral Documents, the Notes, the
Addendum, or the Facility Documents, in collecting any sum which becomes due
Trade Bank on the Notes, under this Agreement, the Collateral Documents, the Addendum,
the Supplement, or any of the Facility Documents, in the protection,
perfection, preservation and enforcement of any and all rights of Trade Bank in
connection with this Agreement, the Notes, any of the Collateral Documents, the
Supplement, any of the Addendum, or any of the Facility Documents, including,
without limitation, the fees and costs incurred in any out-of-court work out or
a bankruptcy or reorganization proceeding.


 


VIII.  DEFINITIONS


 


8.1           “Accounts
Receivable” means all presently existing and hereafter arising “Rights
to Payment” (as that term is defined in the “Continuing Security Agreement –
Rights to Payment and Inventory” executed by Borrower in favor of Trade Bank)
which arise from the sale, lease or other disposition of Inventory, or from
performance of contracts for service, manufacture, construction or repair,
together with all goods returned by Borrower’s customers in connection with any
of the foregoing.


 


8.2           “Agreement”
means this Agreement and the Addendum attached hereto, as corrected or modified
from time to time by Trade Bank and Borrower.


 


8.3           “Banking
Day” means each day except Saturday, Sunday and a day specified
as a holiday by federal or California statute.


 


8.4           “Closing
Date” means the date on which the first Credit Extension is
made.


 


8.5           “Collateral”
means all property securing the Obligations.


 


8.6           “Collateral
Documents” means those security agreement(s), deed(s) of trust,
guarantee(s), subordination agreement(s), intercreditor agreement(s), and other
credit support documents and instruments required by the Trade Bank to effect
the collateral and credit support requirements set forth in the Supplement with
respect to the Facility.


 


8.7           “Credit
Extension” means each extension of credit under the Facility
(whether funded or unfunded), including, but not limited to, (a) the
issuance of sight or usance commercial letters of credit or commercial letters
of credit supported by back-up letters of credit, (b) the issuance of
standby letters of credit, (c) the issuance of shipping guarantees,
(d) the making of revolving credit working capital loans, (e) the
making of loans against imports for letters of credit, (f) the making of
clean import loans outside letters of credit, (g) the making of advances
against export orders, (h) the making of advances against export letters
of credit, (i) the making of advances against outgoing collections,
(j) the making of term loans, and (k) the entry into foreign exchange
contracts.


 


8.8           “Credit
Limit” means, with respect to the any Facility, the amount
specified under the column labeled “Credit Limit” in the Supplement for that
related Facility.


 


8.9           “Credit
Sublimit” means, with respect to any Subfacility, the amount
specified after the name of that Subfacility under the column labeled “Credit Sublimit”
in the Supplement for the related Facility.


 


9





















 


8.10         “Dollars”
and “$” means United States dollars.


 


8.11         “Facility
Documents” means, with respect to the Facility, those documents
specified in the Supplement for the Facility, and any other documents
customarily required by Trade Bank for said Facility.


 


8.12         “GAAP”
means generally accepted accounting principles, which are applicable to the
circumstances, as of the date of determination, set out in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and in the statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession.


 


8.13         “Inventory”
has the meaning assigned to such term in the “Continuing Security
Agreement – Rights to Payment and Inventory” executed by Borrower in favor of
Trade Bank.


 


8.14         “Loan
Documents” means this Agreement, the Addendum, the Supplement,
the Facility Documents and the Collateral Documents.


 


8.15         “Note”
has the meaning specified in Section 3.1(b)(2) above.


 


8.16         “Obligations”
means (a) the obligation of Borrower to pay principal, interest and fees
on all funded Credit Extensions and fees on all unfunded Credit Extensions, and
(b) the obligation of Borrower to pay and perform when due all other
indebtedness, liabilities, obligations and covenants required under the Loan
Documents.


 


8.17         “Person”
means and includes natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.


 


8.18         “Prime
Rate” means the rate most recently announced by Wells Fargo at
its principal office in San Francisco, California as its “Prime Rate”, with the
understanding that the Prime Rate is one of Wells Fargo’s base rates and serves
as the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof after
its announcement in such internal publication or publications as Wells Fargo
may designate. Any change in an interest rate resulting from a change in the
Prime Rate shall become effective as of 12:01 a.m. of the Banking Day on which
each change in the Prime Rate is announced by Wells Fargo.


 


8.19         “Subsidiary”
means (i) any corporation at least the majority of whose securities having
ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) are at the
time owned by Borrower and/or one or more Subsidiaries, and (ii) any joint
venture or partnership in which Borrower and/or one or more Subsidiaries has a
majority interest.


 


8.20         “Wells
Fargo” means Wells Fargo Bank, N.A.


 


IX. 
ARBITRATION


 


9.1           Arbitration.  The parties hereto agree, upon demand by any
party, to submit to binding arbitration all claims, disputes and controversies
between or among them (and their respective employees, officers, directors,
attorneys, and other agents), whether in tort, contract or otherwise arising
out of or relating to in any way (i) the loan and related loan and security
documents which are the subject of this Agreement and its negotiation,
execution, collateralization, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination; or
(ii) requests for additional credit.


 


9.2           Governing
Rules.  Any arbitration
proceeding will (i) proceed in a location in California selected by the
American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the
parties; and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which case the arbitration shall be conducted in accordance with the AAA’s
optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional


 


10





















 


procedures for large,
complex commercial disputes to be referred to, as applicable, as the “Rules”).  If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth herein shall
control.  Any party who fails or refuses
to submit to arbitration following a demand by any other party shall bear all
costs and expenses incurred by such other party in compelling arbitration of
any dispute.  Nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. §91 or any similar applicable state law.


 


9.3           No Waiver
of Provisional Remedies, Self-Help and Foreclosure.  The arbitration requirement does not limit
the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds
of collateral such as setoff or repossession; or (iii) obtain provisional or
ancillary remedies such as replevin, injunctive relief, attachment or the
appointment of a receiver, before during or after the pendency of any
arbitration proceeding.  This exclusion
does not constitute a waiver of the right or obligation of any party to submit
any dispute to arbitration or reference hereunder, including those arising from
the exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.


 


9.4           Arbitrator
Qualifications and Powers. 
Any arbitration proceeding in which the amount in controversy is
$5,000,000.00 or less will be decided by a single arbitrator selected according
to the Rules, and who shall not render an award of greater than
$5,000,000.00.  Any dispute in which the
amount in controversy exceeds $5,000,000.00 shall be decided by majority vote
of a panel of three arbitrators; provided however, that all three arbitrators
must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator
will determine whether or not an issue is arbitratable and will give effect to
the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in
accordance with the substantive law of California and may grant any remedy or
relief that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to
award recovery of all costs and fees, to impose sanctions and to take such
other action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law. 
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.  The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.


 


9.5           Discovery.  In any arbitration proceeding discovery will
be permitted in accordance with the Rules. 
All discovery shall be expressly limited to matters directly relevant to
the dispute being arbitrated and must be completed no later than 20 days before
the hearing date and within 180 days of the filing of the dispute with the
AAA.  Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery
is essential for the party’s presentation and that no alternative means for
obtaining information is available.


 


9.6           Class
Proceedings and Consolidations. 
The resolution of any dispute arising pursuant to the terms of this
Agreement shall be determined by a separate arbitration proceeding and such
dispute shall not be consolidated with other disputes or included in any class
proceeding.


 


9.7           Payment
Of Arbitration Costs And Fees. 
The arbitrator shall award all costs and expenses of the arbitration proceeding.


 


9.8           Real
Property Collateral; Judicial Reference.  Notwithstanding anything herein to the
contrary, no dispute shall be submitted to arbitration if the dispute concerns
indebtedness secured directly or indirectly, in whole or in part, by any real
property unless (i) the holder of the mortgage, lien or security interest
specifically elects in writing to proceed with the arbitration, or (ii) all
parties to the arbitration waive any rights or benefits that might accrue to
them by virtue of the single action rule statute of California, thereby
agreeing that all indebtedness and obligations of the parties, and all
mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable.  If any such dispute is not submitted to
arbitration, the dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general
reference agreement is intended to be specifically enforceable in accordance
with said Section 638.  A referee
with the qualifications required herein for


 


11





















 


arbitrators shall
be selected pursuant to the AAA’s selection procedures.  Judgment upon the decision rendered by a
referee shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.


 


9.9           Miscellaneous.  To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA.  No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary
course of its business or by applicable law or regulation.  If more than one agreement for arbitration by
or between the parties potentially applies to a dispute, the arbitration
provision most directly related to the documents between the parties or the
subject matter of the dispute shall control. 
This Agreement may be amended or modified only in writing signed by each
party hereto.  If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement. 
This arbitration provision shall survive termination, amendment or
expiration of any of the documents or any relationship between the parties.


 


Borrower and Trade Bank have caused this Agreement to
be executed by their duly authorized officers or representatives on the date
first written above.


 


	
  “BORROWER”

  	
   

  
	
   

  	
   

  
	
  CUTTER & BUCK INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				



 


 


Borrower’s Address:


701 N. 34th Street, Suite 400

Seattle, WA 98103


 


 


“LENDER”


 


WELLS FARGO HSBC TRADE BANK,


NATIONAL ASSOCIATION


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Jennifer Wallis

  
	
  Title:

  	
  Vice President

  



 


 


Lender’s Address:


999 Third Avenue


Seattle, WA 98104


 


12





















 


EXHIBIT A


	
  WELLS FARGO HSBC TRADE BANK

  	
  ADDENDUM TO CREDIT AGREEMENT

  



 


THIS ADDENDUM IS ATTACHED TO THE CREDIT AGREEMENT (“CREDIT
AGREEMENT”) BETWEEN


WELLS FARGO HSBC TRADE BANK AND THE FOLLOWING
BORROWER:


 


NAME OF BORROWER: 
CUTTER & BUCK INC.


 


ADDITIONAL AFFIRMATIVE COVENANTS


 


The following covenants
are part of Article IV of the Credit Agreement:


 


REPORTS.  Borrower will furnish the following
information or deliver the following reports to Trade Bank at the times
indicated below:


 


•      Annual Financial Statements: Not later than one hundred
twenty (120) calendar days after and as of the end of each of Borrower’s fiscal
years, an annual consolidated and consolidating audited financial statement of
Borrower prepared by a certified public accountant acceptable to Trade Bank and
prepared in accordance with GAAP, to include balance sheet, income statement,
statement of cash flow, and source and application of funds statement.


 


•      Quarterly Financial Statements: Not later than forty-five
(45) calendar days after and as of the end of each of Borrower’s fiscal
quarters, a consolidated and consolidating financial statement of Borrower
prepared by Borrower, to include balance sheet, income statement, statement of
cash flow, and source and application of funds statement.


 


Certificate of Compliance: At
the time each financial statement of Borrower required above is delivered to
Trade Bank, a certificate of the president or chief financial officer of
Borrower that said financial statements are accurate and that there exists no
Event of Default under the Agreement nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event
of Default.


 


•      Account Debtors List: Immediately upon each request from
Trade Bank, a list of the names, addresses and phone numbers of all Borrower’s
account debtors and an aged listing of their balances.


 


•      Collateral Examination:  A satisfactory examination of all
Borrower’s collateral to be performed annually by collateral examiners
acceptable to Trade Bank with reimbursement to Trade Bank by Borrower of all
costs and expenses for each examination.


 


•      Insurance: Borrower will maintain in full force and effect insurance
coverage on all Borrower’s property, including, but not limited to, the
following types of insurance coverage:


policies of fire insurance


marine cargo insurance


business personal property insurance


 


All the insurance referred to in the preceding sentence
must be in form, substance and amounts, and issued by companies, satisfactory
to Trade Bank, and cover risks required by Trade Bank and contain loss payable
endorsements in favor of Trade Bank.


 


FINANCIAL COVENANTS. Borrower
will maintain the following (if Borrower has any Subsidiaries which must be
consolidated under GAAP, the following applies to borrower and the consolidated
Subsidiaries):


 


•      Total Liabilities divided by Tangible Net Worth. Not at any
time greater than 1.0 to 1.0. (“Tangible Net Worth” means the aggregate of
total shareholders’ equity determined in accordance with GAAP plus
indebtedness which is subordinated to the Obligations to Trade Bank under a
subordination agreement in form and substance acceptable to Trade Bank or by
subordination language acceptable to Trade Bank in the instrument evidencing
such indebtedness less all assets which would be classified as
intangible assets under GAAP, including but not limited to, goodwill, licenses,
patents, trademarks, trade names, copyrights, capitalized software and
organizational costs, licenses and


 


1





















 


franchises, and (ii) assets which Trade Bank
determines in its business judgment would not be available or would be of
relatively small value in a liquidation of Borrower’s business, including, but
not limited to, loans to officers or affiliates ando ther items, and “Total
Liabilities” excludes indebtedness which is subordinated to the Obligations to
Trade Bank under a subordination agreement in form and substance acceptable to
Trade Bank or by subordination language acceptable to Trade Bank in the
instrument evidencing such indebtedness.)


 


•      Quick Asset Ratio. 
Not at any time less than 1.0 to 1.0. 
(“Quick Asset Ratio” means “Quick Assets”
divided by total current liabilities, and “Quick Assets”
means cash on hand or on deposit in banks, readily marketable securities issued
by the United States, readily marketable commercial paper rated “A-1” by
Standard & Poor’s Corporation (or a similar rating by a similar rating
organization), certificates of deposit and banker’s acceptances, and accounts
receivable (net of allowance for doubtful accounts), and with current
liabilities to include the aggregate outstanding amount of all Credit
Extensions, whether classified as a current or long-term liability per Borrower’s
financial statement.


 


•      Net Income After Taxes. Not less than $100,000 on a
quarterly basis, determined as of the end of each of Borrower’s first and
second fiscal quarters, and not less than $5,000,000 on an annual basis,
determined as of each fiscal year end.


 


BY SIGNING HERE BORROWER AGREES TO THE DESIGNATED
PROVISIONS IN THIS ADDENDUM:


 


CUTTER & BUCK INC.


 


	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				



 


2





















 


EXHIBIT B


	
  WELLS FARGO HSBC TRADE BANK

  	
  REVOLVING CREDIT FACILITY SUPPLEMENT

  



 


THIS SUPPLEMENT IS AN INTEGRAL PART OF THE CREDIT
AGREEMENT BETWEEN WELLS FARGO HSBC TRADE BANK AND THE FOLLOWING BORROWER:


 


NAME OF BORROWER: CUTTER
& BUCK INC.


 


CREDIT LIMIT FOR THIS REVOLVING CREDIT LOAN
FACILITY AND SUBLIMITS: Credit Limit:  $35,000,000 (subject to dollar limitations in
Section 1.2 of Agreement)


 


CREDIT SUBLIMITS: Subject to
the Revolving Credit Facility Credit Limit, the Credit Sublimit for each
Subfacility specified below refers to the aggregate amount which may be
outstanding at any one time under each such Subfacility.


 


	
  •      Sight
  Commercial Letters of Credit

  	
  $

  	
  35,000,000

  	
   

  
	
  •      Usance
  Commercial Letters of Credit

  	
  $

  	
  35,000,000

  	
   

  
	
  (a)       Acceptances

  	
  $

  	
  5,000,000

  	
   

  
	
  •      Standby
  Letters of Credit

  	
  $

  	
  200,000

  	
   

  
	
  •      Shipping
  Guarantees

  	
  $

  	
  300,000

  	
   

  



 


FACILITY DESCRIPTION: Trade
Bank will make the Revolving Credit Facility available to Borrower to finance
Borrower’s working capital requirements. Subject to the credit sublimits
specified above, the Revolving Credit Facility may be supported by (i) a
standby letter of credit in favor of Trade Bank, (ii) a guarantee or
(iii) accounts receivable, inventory or other collateral. Revolving Credit
Loans cannot be used to repay outstanding Revolving Credit Loans or Term Loans
that have matured or to repay amounts due under any other Facilities provided
to Borrower.


 


FACILITY DOCUMENTS:


 


•      Revolving Credit Loans Note: The term and prepayment
conditions of the Loans under Revolving Credit Facility are set forth in
Revolving Credit Loans Note.


 


INTEREST RATES:


 


•      Loans under Revolving Credit Facility: All outstanding Loans
under Revolving Credit Facility will bear interest at the following rate:


 


Prime Rate: The Prime Rate minus
1% per annum.


Other Rate: LIBOR plus 1.50% per
annum


 


Interest Payment Dates: Interest
on all outstanding Loans under Revolving Credit Facility will be paid at least
once each month on the last day of the month.


 


FEES:


 


•      Non-Utilization Fee: Borrower will pay the following
Non-Utilization Fee payable in arrears on a quarterly basis, computed at a rate
per annum of .20% on the average daily amount of the unused portion of the
Overall Credit Limit for each such quarter.


 


•      Sight Commercial Credits and Usance Commercial Credits:


 


Issuance Fees/Fees For Increasing Credit Amounts or
Extending Expiration Dates: (Flat $65)


Payable: At the time each Sight
Commercial Credit or Usance Commercial Credit is issued or increased and at the
time the expiration date of any Sight Commercial Credit or Usance Commercial
Credit is extended.


 


1





















 


Amendment Fees: (Flat $50)


$50 for each amendment, unless the amendment is an
increase in the Sight Commercial Credit or Usance Commercial Credit amount or
an extension of the expiration date, in which case the Issuance Fee above will
substitute for any Amendment Fee.


Payable: At the time each amendment
is issued.


 


Negotiation/Payment/Examination Fees:
(Flat $80)


Payable: At the time any draft or
other documents are negotiated, paid or examined.


 


Acceptance Fees:


1% per annum, calculated on a year of 360 calendar
days for the number of days in the term of each acceptance, on the face amount
of each draft accepted under each Usance Commercial Credit.


Payable: At the time each draft is
accepted.


 


•      Standby Credits:


 


Commission Fees/Fees For Increasing Credit Amounts or
Extending Expiration Dates: (Minimum $410) 1.25% of the
amount of each Standby Credit and of any increase in such amount.


Payable: At the time each Standby
Credit is issued or increased and at the time the expiration date of any
Standby Credit is extended.


 


Amendment Fees: (Minimum $130)


1.25% of the face amount of each drawing under each
Standby Credit, for each amendment, unless the amendment is an increase in the
Standby Credit amount or an extension of the expiration date, in which case the
Commission Fee above will substitute for any Amendment Fee.


Payable: At the time each amendment
is issued.


 


Negotiation/Payment/Examination Fees:
(Minimum $250)


1/4 of 1% of the face amount of each drawing under
each Standby Credit.


Payable: At the time any draft or
other documents are negotiated, paid or examined.


 


•      Shipping Guarantees:


 


Issuance Fee: (Flat $100)


Payable: At the time each shipping
guarantee is issued.


 


COLLATERAL: See Exhibit C -
Collateral/Credit Support Document.


 


SUBFACILITIES DESCRIPTION, PURPOSE, DOCUMENTS,
TERM, AND PREPAYMENTS:


 


•      Sight Commercial Credits:


 


Description And Purpose: Trade Bank
will issue sight commercial letters of credit (each a “Sight Commercial Credit”)
for the account of Borrower for the purpose or purposes stated below. Subject
to the credit sublimits specified above, these Sight Commercial Credits will be
transferable or not transferable and have the goods related to them consigned
to or not consigned to, or controlled by or not controlled by, Trade Bank. The
Sight Commercial Credit Sublimit specified above refers to the aggregate
undrawn amount of all Sight Commercial Credits which may be at any one time
outstanding under this Facility together with the aggregate amount of all
drafts drawn under such Sight Commercial Credits which have not been reimbursed
as provided below at such time.


 


This Subfacility may only be used for the following
purpose: importation of apparel.


 


2





















 


Documents:


Before the first Sight Commercial Credit is issued:


Trade Bank’s standard form Commercial Letter of Credit
Agreement;


 


Before each Sight Commercial Credit is issued:


Trade Bank’s standard form Application For Commercial
Letter of Credit;


 


Before each Sight Commercial Credit is amended:


Trade Bank’s standard form Application For Amendment
To Letter of Credit;


 


Term: No Sight Commercial Credit may
expire more than one hundred eighty (180) calendar days after the date it is
issued.


 


•      Usance Commercial Credits:


 


Description And Purpose: Trade Bank
will issue usance commercial letters of credit (each a “Usance Commercial
Credit”) for the account of Borrower and create bankers’ acceptances from
drafts drawn under these Usance Commercial Credits (“Acceptances”) and, if
indicated above, incur deferred payment obligations from drawings under Usance
Commercial Credits. Subject to the credit sublimits specified above, these
Usance Commercial Credits will be transferable or not transferable and have the
goods related to them consigned to or not consigned to, or controlled by or not
controlled by, Trade Bank. The Usance Commercial Credit Sublimit specified
above refers to the aggregate undrawn amount of all Usance Commercial Credits
together with the aggregate amount of all Acceptances and deferred payment
obligations which may be outstanding at any one time under each subcategory of
the Usance Commercial Credit Sublimit.


 


This Subfacility may only be used for the following
purpose: importation of apparel.


 


Documents:


Before the first Usance Commercial Credit is issued:


Trade Bank’s standard form Commercial Letter of Credit
Agreement;


 


Before each Usance Commercial Credit is issued:


Trade Bank’s standard form Application For Commercial
Letter of Credit;


 


Before each Usance Commercial Credit is amended:


Trade Bank’s standard form Application For Amendment
To Letter of Credit;


 


Term: No Usance Commercial Credit
may expire more than one hundred eighty (180) calendar days after the date it
is issued.


No usance draft may have a term of more than one
hundred twenty (120) calendar days.


 


•      Standby Credits:


 


Description And Purpose: Trade Bank
will issue standby letters of credit (each a “Standby Credit”) for the account
of Borrower the purpose or purposes stated below. Subject to the credit
sublimits specified above, these Standby Credits will be issued to support
Borrower’s open account trade terms, bid and performance bonds, industrial
revenue bonds, worker’s compensation obligations, or the moving of Borrower as
a new customer from another bank to Trade Bank. The Standby Credit Sublimit
specified above refers to the aggregate undrawn amount of all Standby Credits
which may be at any one time outstanding under this Subfacility together with
the aggregate amount of all drafts drawn under such Standby Credits which have
not been reimbursed as provided below at such time.


 


This Subfacility may only be used for the following
purpose: to support performance under leases.


 


Documents:


Before the first Standby Credit is issued:


Trade Bank’s standard form Standby Letter of Credit
Agreement.


 


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Before each Standby Credit is issued:


Trade Bank’s standard form Application For Standby Letter
of Credit.


 


Before each Standby Credit is amended:


Trade Bank’s standard form Application For Amendment
To Letter of Credit.


 


Term: No Standby Credit will expire
more than three hundred sixty-five (365) calendar days after the date it is
issued. Standby Credits will be available by sight drafts only.


 


•      Shipping Guarantees:


 


Description And Purpose: Trade Bank
will issue shipping guarantees for the account of Borrower. These shipping
guarantees will be undertakings for delivery of cargo without surrender of
bills of lading, or any other undertakings, agreements, guarantees,
indemnities, releases, bonds, letters, documents or authorizations to or in
favor of a carrier or other person or entity in order to permit delivery to
Borrower of property. The Shipping Guarantees Credit Sublimit specified above
for this Facility refers to the aggregate amount of all shipping guarantees
which may be outstanding at any one time.


 


Documents: Indemnity For
Undertakings In Connection With Deliveries of Goods or Issuance of Duplicate
Bills of Lading


 


REIMBURSEMENTS FOR SIGHT COMMERCIAL CREDITS,
USANCE COMMERCIAL CREDITS, ACCEPTANCES, STANDBY CREDITS AND SHIPPING GUARANTEES:


 


The amount of each (i) drawing paid by Trade Bank
under a Sight Commercial Credit or Standby Credit, (ii) accepted drawing
paid at its maturity by Trade Bank under a Usance Commercial Credit and
(iii) payment made by Trade Bank under shipping guarantees issued by Trade
Bank for Borrower will be reimbursed to Trade Bank as follows:


 


by Trade Bank having Wells Fargo Bank debit any of
Borrower’s accounts with Wells Fargo Bank and forwarding such amount debited to
Trade Bank; or


 


immediately on demand of Trade Bank; or


 


by treating such amount drawn as an advance to
Borrower under Borrower’s Revolving Credit Facility.


 


DEFAULT INTEREST RATE ON UNREIMBURSED SIGHT
COMMERCIAL CREDITS, ACCEPTANCES AND STANDBY CREDITS:


 


Default interest will accrue at a per annum rate equal
to the Prime Rate plus five percent (5%) (“Default Interest Rate”) and be paid
at least once each month as follows:


 


All drawings (i) under Sight Commercial Credits and
(ii) under Standby Credits, not reimbursed on the day they are paid by Trade
Bank, will bear interest at the Default Interest Rate from the date they are
paid to the date such payment is fully reimbursed.


 


All acceptances created under Usance Commercial
Credits not reimbursed on the day they mature will bear interest at the Default
Interest Rate from the date they mature to the date such reimbursement is made
in full.


 


BY INITIALING HERE BORROWER AGREES TO ALL THE
TERMS OF THIS SUPPLEMENT:    


 


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EXHIBIT C


	
  WELLS FARGO HSBC TRADE BANK

  	
  COLLATERAL/CREDIT SUPPORT DOCUMENT

  



 


•          Personal Property Security From Borrower:


First priority lien in the following assets of
Borrower:


accounts receivable


trademarks


inventory


equipment


Collateral Documents:


Security Agreement: 
Rights to Payment and Inventory


Security Agreement: 
Equipment and Fixtures


UCC-1 Financing Statement


 


BY INITIALING HERE BORROWER AGREES TO ALL THE
TERMS OF THIS EXHIBIT:                                  


 


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