Document:

Exhibit
10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”)
is made and entered into this 22nd day of May, 2007
(the “Effective Date”), by and between Willdan Group, Inc.,
a Delaware corporation (“Company”), and Marc Tipermas, an individual
(“Employee”).

 

RECITALS

 

THE PARTIES ENTER THIS AGREEMENT on the basis of
the following facts, understandings and intentions:

 

A.       Company
desires to employ Employee to carry out the duties and responsibilities
described below on the terms and conditions hereinafter set forth.

 

B.       Employee
desires to accept such employment on such terms and conditions.

 

C.       This
Agreement shall govern the employment relationship between Employee and Company
from and after the Effective Date and supersedes all previous agreements with
respect to such relationship.

 

NOW, THEREFORE, in consideration of the
above recitals incorporated herein and the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                      Retention and Duties.

 

1.1      Retention.  Company hereby
hires, engages and employs Employee for the Employment Period, as defined in Section 2,
on the terms and conditions set forth in this Agreement. Employee hereby
accepts and agrees to such hiring, engagement and employment, on the terms and
conditions so set forth.

 

1.2      Duties.  During the
Employment Period, Employee shall hold the title of President — National
Programs. Employee shall be charged with assisting the President and CEO in
establishing a nationwide presence for the Company, both through expansion into
federal services and expanding the Company’s core business in providing
municipal outsource services and assisting in building the Company’s business
development process. Employee shall identify potential federal services
acquisition targets and assist in pursuing opportunities for expansion through
organic growth. Once the Company acquires a firm providing federal services, Employee’s
primary responsibility will be management of the acquisition and other federal
services provided by the Company, while continuing to assist in growing the
Company’s core business. Employee’s duties may include serving as President
and/or CEO of the acquisition. Additionally, Employee shall perform such other
duties as may be assigned by the President and CEO.

 

1.3      No Other Employment; Minimum Time Commitment.  During the Employment Period, Employee shall both (i) devote
substantially all of Employee’s business

 

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time,
energy and skill to the performance of Employee’s duties for Company, and (ii) hold
no other employment. Employee’s service on the boards of directors (or similar
body) of other business entities, or the provision of other services thereto, is
subject to the prior written approval of the Board, which may not be
unreasonably withheld. Company shall have the right to require Employee to
resign from any board or similar body on which he may then serve if the Board
reasonably determines that Employee’s service on such board or body interferes
with the effective discharge of Employee’s duties and responsibilities to
Company or that any business related to such service is then in competition
with any business of Company or any of its affiliates, successors or assigns. Nothing
in this Section 1.3 shall be construed as preventing Employee from
engaging in the investment of his personal assets. Notwithstanding the
foregoing, Employee may provide outside consulting services with the prior
consent of Company’s Board.

 

1.4      No Breach of Contract.  Employee represents to
Company that: (i) the execution and delivery of this Agreement by Employee
and Company and the performance by Employee of Employee’s duties hereunder
shall not constitute a breach of, or otherwise contravene, the terms of any
other agreement or policy to which Employee is a party or otherwise bound; (ii) Employee
has no information (including, without limitation, confidential information and
trade secrets) relating to any other person or entity which would prevent, or
be violated by, Employee entering into this Agreement or carrying out his
duties hereunder; and (iii) Employee is not bound by any confidentiality, trade
secret or similar agreement with any other person or entity.

 

1.5      Location.  Employee’s principal place
of employment shall be in Washington, D.C. area within 25 miles of the downtown
area. Employee further acknowledges that he will be required to travel from
time to time in the course of performing his duties for Company.

 

2.                                      Employment Period.  The “Employment Period”
shall commence on the Effective Date and end December 31, 2008 (the “Termination
Date”). Following the Employment Period, Employee’s employment shall
continue on an “at-will” basis. Such continued employment shall be subject to
the terms of this Agreement. Should Employee’s employment be terminated by
Company during the Employment Period, without Cause or the Employee resigns for
good reason, Employee shall be paid, as full severance benefits, Base Salary
for the full Employment Period together with an additional six (6) months
of Base Salary. Should Employee’s employment be terminated by Company after the
Employment Period without Cause, or the employee resigns for good reason, Employee
shall be paid a severance of six (6) months Base Salary. All compensation
paid by Company to Employee due to termination shall be paid in bi-weekly
installments on the same schedule as regular employees of the Company are paid,
however, Employee shall not continue to be entitled to any other benefits or
accruals that are provided to regular employees, except health benefits, which
shall be provided and paid out through the employment period and during the
period when severance payments are being paid. Additionally, Employee shall be
entitled to COBRA benefits at his own expense commencing at the conclusion of
the severance period. In the event that Employee’s employment is terminated by
Employee for other than good reason, all compensation shall cease on the
effective date of employment and Employee shall not be entitled to any
severance benefits. Notwithstanding the foregoing, the Employment Period is
subject to earlier termination as provided below in this Agreement. No
termination shall be considered a breach of this Agreement.

 

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3.                                      Compensation.

 

3.1      Base Salary.  Employee’s
base salary (the “Base Salary”) shall be paid in accordance with Company’s
regular payroll practices in effect from time to time (presently bi-weekly), but
not less frequently than in monthly installments. Employee’s Base Salary
through May 31, 2008, shall be at an annualized rate of Two Hundred and
Twenty Thousand Dollars ($220,000). Thereafter, President/CEO will review Employee’s
Base Salary at least annually and may increase, but not decrease, Employee’s
Base Salary from the rate then in effect, based on such review.

 

3.2      Incentive Bonus.  During the
Employment Period, Employee shall be eligible to receive an annual incentive
bonus (“Incentive Bonus”), determined annually by the President/CEO on
the basis of individual and Company performance objectives mutually agreed upon
by the President/CEO and Employee. For the period through May 31, 2008, Employee’s
Incentive Bonus amount shall be a minimum of Twenty-Five Thousand Dollars ($25,000)
up to a maximum of 100% of Employee’s base salary. For each year thereafter, the
Incentive Bonus may range from nothing up to 100% of Employee’s annual Base
Salary. In each case, payment of Employee’s Incentive Bonus is contingent on
Employee’s continued employment with Company through the last day of the
12-month period covered by the bonus, except that payment will be made on a
prorated basis if termination is by the Company without cause or by Employee
with good reason, so long as termination is in the second half of the period
used for determining the bonus, and only if the performance objectives are
achieved on a prorated basis.

 

3.3      Stock
Option Grant.  Company has approved the
grant to Employee, as of the Effective Date, of an option to purchase 25,000
shares of Company’s common stock (“Common Stock”) at an exercise price
per share equal to the closing price of a share of the Common Stock on the
Effective Date (the “Option”). The Option is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”), to the maximum extent possible
within the limitations of the Code. The Option will vest in substantially equal
annual installments over the three-year period following the date of grant. The
vesting of each installment of the Option will occur only if Employee remains
continuously employed with Company through the respective vesting dates, except
that the option will vest entirely and immediately if the employee is
terminated without cause or resigns for Good Reason. The maximum term of the
Option is ten (10) years from the date of grant of the Option, subject to
earlier termination upon the termination of Employee’s employment with Company,
a change in control of Company and similar events. In the event there is a
change in control of Company during Employee’s employment, all Options that
have not already vested shall immediately vest. The Option has been granted
under the Willdan Group, Inc. 2006 Stock Incentive Plan (the “Plan”),
a copy of which has been provided to Employee, is subject to the approval by
the Company’s shareholders of the Plan, and is subject to such further terms
and conditions as set forth in a written stock option agreement to be entered
into by Company and Employee to evidence the Option (the “Option Agreement”).
Such Option Agreement shall be in substantially the form attached hereto as Exhibit A.
Notwithstanding the foregoing provisions of this Section 3.3, the grant of
the Option is subject to approval by the Company’s Compensation Committee and
Board of Directors and approval of the Plan by Company’s stockholders at
Company’s next annual meeting.

 

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3.4      Stock
Purchases.  Employee shall
be provided an opportunity to participate in such other stock purchase plans as
may be established by the Company’s Board of Directors.

 

4.                                 Benefits.

 

4.1      Retirement, Welfare and Fringe Benefits.  During the Employment Period, Employee shall be
entitled to participate in all employee pension and welfare benefit plans and
fringe benefit plans and programs made available by Company to Company’s
employees generally, in accordance with the eligibility and participation
provisions of such plans and as such plans or programs may be in effect from
time to time. Employee shall participate in Company’s long term disability
policy.

 

4.2      Reimbursement of Business Expenses.  During the
Employment Period, Employee is authorized to incur and shall be reimbursed for
all reasonable business expenses in carrying out Employee’s duties for Company
under this Agreement, subject to Company’s expense reimbursement policies (including,
without limitation, any policies concerning proper documentation of such
expenses) in effect from time to time.

 

4.3      Paid and Other Leave.  During the
Employment Period, Employee shall accrue and be entitled to take paid leave in
accordance with Company’s leave policies in effect from time to time. Employee
shall also be entitled to all holiday and leave pay generally available to
other highly compensated Employees of Company. Employee shall accrue 25 days
per year towards the paid leave bank.

 

4.4      Automobile Expenses.  During the
Employment Period, the Company shall provide Employee with an automobile
allowance of $500 per month. This is provided in lieu of any and all other
reimbursements for automobile expenses, except for automobile rental for out-of-town
business related travel.

 

5.                                 Termination.

 

5.1      Termination by Company.  Employee’s
employment by Company, and the Employment Period, may be terminated at any time
by Company: (i) with Cause (as defined in Section 5.5), or (ii) with
no less than thirty (30) days advance notice to Employee, without Cause, or (iii) in
the event of Employee’s death, or (iv) in the event that the Board
determines in good faith that Employee has a Disability (as defined in Section 5.5).

 

5.2      Termination by Employee.  Employee’s
employment by Company, and the Employment Period, may be terminated by Employee
with no less than fourteen (14) days advance notice to Company; provided, however,
that in the case of a termination for Good Reason, Employee may provide
immediate written notice if Company fails to, or cannot, reasonably cure the
event that constitutes Good Reason.

 

5.3      Benefits  Upon Termination.  If Employee’s
employment by Company is terminated during the Employment Period for any reason
by Company or by Employee (in any case, the date that Employee’s employment by
Company terminates is referred to as the “Severance Date”), Company shall
have no further obligation to make or provide to Employee, and Employee shall
have no further right to receive or obtain from Company, any payments or
benefits except as follows:

 

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(a)        Company
shall pay Employee (or, in the event of his death, Employee’s estate) any
Accrued Obligations (as defined in Section 5.5);

 

(b)        If,
during the Employment Period (but not upon the expiration of the Employment
Period or at any time thereafter), Employee’s employment with Company
terminates as a result of an Involuntary Termination (as defined in Section 5.5),
Company shall continue to pay Employee (in addition to the Accrued Obligations),
subject to tax withholding and other authorized deductions and subject to the
release requirement of Section 5.4, an amount equal to his Base Salary at
the annual rate in effect on the Severance Date for the period commencing on
the Severance Date and ending on the Termination Date (the “Severance
Period”), such payments to be made in equal installments on a
bi-weekly basis. In addition, Company shall pay the cost of Employee’s premiums
charged to continue medical coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”), at the same or reasonably
equivalent medical coverage for Employee (and, if applicable, Employee’s
eligible dependents) as in effect immediately prior to the Severance Date, provided
that Company’s obligation to make any payment pursuant to this sentence shall
cease upon the first to occur of the date Employee becomes eligible for medical
coverage with another employer or the last day of the Severance Period.

 

Notwithstanding the foregoing provisions of this Section 5.3, if
Employee breaches his obligations under Section 7 or 8 of this Agreement
at any time, from and after the date of such breach, Employee will no longer be
entitled to, and Company will no longer be obligated to pay, any remaining
unpaid portion of any benefits provided in Section 5.3(b).

 

The foregoing provisions of this Section 5.3 shall not affect: (i) Employee’s
receipt of benefits otherwise due terminated employees under group insurance
coverage consistent with the terms of the applicable Company welfare benefit
plan; (ii) Employee’s rights under COBRA to continue participation in
medical, dental, hospitalization and life insurance coverage; or (iii) Employee’s
receipt of benefits otherwise due in accordance with the terms of Company’s 401(k) plan
(if any). In no event shall Company’s obligations to Employee exceed the sum of
the Accrued Obligations, the benefits provided in Section 5.3(b) and
the benefits contemplated by this paragraph, regardless of the manner of
Employee’s termination.

 

5.4                               Release; Exclusive Remedy.

 

(a)        This
Section 5.4 shall apply notwithstanding anything else contained in this
Agreement or any stock option, restricted stock or other equity-based award
agreement to the contrary. As a condition precedent to any Company obligation
to Employee pursuant to Section 5.3(b) or any obligation to
accelerate vesting of any equity-based award in connection with the termination
of Employee’s employment, Employee shall, upon or promptly following his last
day of employment with Company, provide Company with a valid, executed general
release agreement in a form acceptable

 

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to Company, and such release agreement shall have
not been revoked by Employee pursuant to any revocation rights afforded by
applicable law. Company shall have no obligation to make any payment to
Employee pursuant to Section 5.3(b) (or otherwise accelerate the vesting
of any equity-based award in the circumstances as otherwise contemplated by the
applicable award agreement) unless and until the release agreement contemplated
by this Section 5.4 becomes irrevocable by Employee in accordance with all
applicable laws, rules and regulations.

 

(b)        Employee agrees that the general release
agreement described in Section 5.4(a) will require that Employee
acknowledge, as a condition to the payment of any benefits under Section 5.3(b),
that the payments contemplated by Section 5.3(b) (and any applicable
acceleration of vesting of an equity-based award in accordance with the terms
of such award in connection with the termination of Employee’s employment) shall
constitute the exclusive and sole remedy for any termination of his employment,
and Employee will be required to covenant, as a condition to receiving any such
payment (and any such accelerated vesting), not to assert or pursue any other
remedies, at law or in equity, with respect to any termination of employment. Company
and Employee acknowledge and agree that there is no duty of Employee to
mitigate damages under this Agreement. All amounts paid to Employee pursuant to
Section 5.3 shall be paid without regard to whether Employee has taken or
takes actions to mitigate damages.

 

5.5                               Defined Terms.

 

(a)                        As used herein, “Accrued Obligations” means:

 

(i)         any Base Salary that had accrued but
had not been paid (including accrued and unpaid vacation time) on or before the
Severance Date; and

 

(ii)        any Incentive Bonus payable pursuant to Section 3.2
earned by Employee with respect to any bonus period ending prior to the
Severance Date, to the extent such bonus has not been paid as of the Severance
Date; and

 

(iii)       any reimbursement due to Employee
pursuant to Section 4.2 for expenses incurred by Employee on or before the
Severance Date.

 

(b)                       As used herein, “Cause” shall mean, as reasonably determined by the
Board (excluding Employee, if he is then a member of the Board), (i) any
act of personal dishonesty taken by Employee in connection with his
responsibilities as an employee of Company which is intended to result in
substantial personal enrichment of Employee and is reasonably likely to result
in material harm to Company, (ii) Employee’s commission of a felony, (iii) a
willful act by Employee which constitutes misconduct and is materially
injurious to Company, or (iv) continued willful violations by Employee of
Employee’s obligations to Company after there has been delivered to Employee a
written demand for performance from Company which describes the basis for
Company’s belief that Employee has willfully violated his obligations to
Company. Failure to achieve Company or individual performance objectives shall
not be considered “cause” for the purposes of this section.

 

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(c)      As used herein, “Disability” shall
mean a physical or mental impairment which, as reasonably determined by the
Board and verified by Employee’s receipt of long term disability benefits under
the Company’s long term disability policy, renders Employee unable to perform
the essential functions of his employment with Company, even with reasonable
accommodation that does not impose an undue hardship on Company, for more than
180 days in any 12-month period, unless a longer period is required by federal
or state law, in which case that longer period would apply.

 

(d)      As used herein, “Good Reason” shall
mean the occurrence of any of the following without Employee’s express written
consent: (i) a material reduction of Employee’s duties, position or
responsibilities relative to Employee’s duties, position or responsibilities in
effect immediately prior to such reduction, or the removal of Employee from
such duties, position and responsibilities; (ii) a reduction by Company of
Employee’s Base Salary or Incentive Bonus opportunity as in effect immediately
prior to such reduction; (iii) a material reduction by Company in the kind
or level of employee benefits to which Employee is entitled immediately prior
to such reduction with the result that Employee’s overall benefits package is
materially reduced; (iv) the relocation of Employee to a facility or a location
more than fifty (50) miles from Rockville, MD;(v) a change in control of
the Company, (vi) termination, resignation, disability, or death of the
President/CEO, Thomas Brisbin; (vii) failure to assign Employee management
responsibility for a federal services acquisition pursuant to Section 1.2,
Duties, of this Agreement; or (viii) failure to grant Employee an option
to purchase 25,000 shares of Company’s common stock pursuant to Section 3.3,
Stock Option Grant, of this agreement, and failure to grant Employee two (2) additional
ten (10) year options to purchase a minimum of 25,000 shares (a minimum of
50,000 total additional shares) of the Company’s stock, the first no later than
June 1, 2008 and the second no later than June 1, 2009, provided that
Good Reason shall not exist pursuant to clauses (d)(i) through (d)(viii) above
unless Employee shall have first provided written notice to Company of the
circumstances giving rise to such claim of Good Reason and Company shall have
failed to reasonably cure such circumstances promptly upon (and in no event
more than 30 days after) its receipt of such notice; further provided that any
notice of termination for Good Reason must be made not later than 180 days
after the circumstances giving rise to such claim of Good Reason are first
known to exist (or first reasonably should have been known to exist) by
Employee. Events constituting Good Reason shall not be considered a default or
breach of this Agreement by Company.

 

(e)      As used herein, “Involuntary
Termination” shall mean a termination of Employee’s employment by Company
without Cause or by Employee for Good Reason. For purposes of this Agreement, the
term Involuntary Termination shall not include a termination of Employee’s
employment due to Employee’s death or Disability.

 

5.6.     Notice of Termination.  Any termination
of Employee’s employment under this
Agreement shall be communicated by written notice of termination from the
terminating party to the other party. The notice of termination shall indicate
the specific provision(s) of this Agreement relied upon in effecting the
termination.

 

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5.7          Limitation on Benefits.

 

(a)           Notwithstanding
anything contained in this Agreement to the contrary, to the extent that the
payments and benefits provided under this Agreement and benefits provided to,
or for the benefit of, Employee under any other Company plan or agreement (such
payments or benefits are collectively referred to as the “Benefits”) would be subject to
the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), the Benefits shall be reduced (but not below zero)
if and to the extent that a reduction in the Benefits would result in Employee
retaining a larger amount, on an after-tax basis (taking into account federal,
state and local income taxes and the Excise Tax), than if Employee received all
of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”). Unless
Employee shall have given prior written notice specifying a different order to
Company to effectuate the Limited Benefit Amount, Company shall reduce or
eliminate the Benefits by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits which
are to be paid the farthest in time from the Determination (as hereinafter
defined). Any notice given by Employee pursuant to the preceding sentence shall
take precedence over the provisions of any other plan, arrangement or agreement
governing Employee’s rights and entitlements to any benefits or compensation.

 

(b)           A
determination as to whether the Benefits shall be reduced to the Limited
Benefit Amount pursuant to this Agreement and the amount of such Limited
Benefit Amount shall be made by Company’s independent public accountants or
another certified public accounting firm of national reputation designated by
Company (the “Accounting Firm”) at Company’s expense.
The Accounting Firm shall provide its determination (the “Determination”), together
with detailed supporting calculations and documentation to Company and Employee
within five (5) days of the date of termination of Employee’s employment,
if applicable, or such other time as requested by Company or Employee (provided
Employee reasonably believes that any of the Benefits may be subject to the
Excise Tax), and if the Accounting Firm determines that no Excise Tax is
payable by Employee with respect to any Benefits, it shall furnish Employee
with an opinion reasonably acceptable to Employee that no Excise Tax will be
imposed with respect to any such Benefits. Unless Employee provides written
notice to Company within ten (10) days of the delivery of the
Determination to Employee that he disputes such Determination, the
Determination shall be binding, final and conclusive upon Company and Employee.

 

6.             Confidentiality, Proprietary Information; Inventions and Developments.

 

6.1          Company Information.  Employee
agrees to hold in strictest confidence, and not to use or disclose, except for
the benefit of Company, to any person, firm or corporation, any Confidential
Information of Company or any of its affiliates (Company and its affiliates are
referred to, collectively, as the “The Company Group”). “Confidential
Information” means any of The Company Group proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
products, services, customer lists and customers 

 

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(including,
but not limited to, customers of The Company Group on whom Employee calls or
with whom Employee becomes acquainted during the Employment Term), markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering data, hardware configuration information, marketing,
financial or other business information which are (a) disclosed to
Employee by The Company Group either directly or indirectly in writing, orally
or by drawings or observation of parts or equipment, or (b) developed by
Employee on behalf of The Company Group. All inventions and developments on the
part of Employee during the Employment Term shall be “works for hire” on behalf
of The Company Group and shall be the sole property of The Company Group.
Confidential Information does not include any of the foregoing items which has
become publicly known or made generally available through no wrongful act of
Employee or of others who were under confidentiality obligations as to the item
or items involved or improvements or new versions thereof.

 

6.2          Former
Employer Information.  Employee will not, during
the Employment Term improperly use or disclose any proprietary information or
trade secrets of any former or concurrent employer or other person or entity
and that Employee will not bring onto the premises of Company any unpublished
document or proprietary information belonging to any such employer, person or
entity unless consented to in writing by such employer, person or entity.

 

6.3          Third Party
Information.  Employee recognizes that The
Company Group has received and in the future will receive from third parties
their confidential or proprietary information subject to a duty on The Company
Group’s part to maintain the confidentiality of such information and to use it
only for certain limited purposes. Employee agrees to hold all such
confidential or proprietary information in the strictest confidence and not to
disclose it to any person, firm or corporation or to use it except as necessary
in carrying out Employee’s work for the Company consistent with The Company
Group’s agreement with such third party.

 

7.             Protective
Covenant.  Employee acknowledges and
recognizes the highly competitive nature of the businesses of Company, the
amount of sensitive and confidential information involved in the discharge of
Employee’s position with Company, and the harm to Company that would result if
such knowledge or expertise was disclosed or made available to a competitor.
Based on that understanding, Employee hereby expressly agrees that he will not,
directly or indirectly, at any time during the Employment Period and for a
period of six (6) months thereafter, (i) engage in any business for
Employee’s own account or otherwise derive any personal benefit from any
business that competes directly with the business of The Company Group, (ii) enter
the employ of, or render any services to, any person engaged in any business
that competes directly with the business of any entity within The Company
Group, or (iii) acquire a financial interest in any person engaged in any
business that competes directly with the business of any entity within The
Company Group as an individual, partner, member, shareholder, officer,
director, principal, agent, trustee or consultant. For purposes of this
Agreement, businesses in competition with The Company Group shall include,
without limitation, businesses which any entity within The Company Group
conducts operations as of Employee’s Severance Date, and any businesses that
any entity within The Company Group has specific and realistically achievable
plans to conduct operations in the future and as to which Employee is aware of
such planning, whether or not such businesses have or have not as of the
Severance Date commenced operations. Notwithstanding the foregoing, Employee
may, directly or indirectly, own, solely as an investment, securities of any
person which are publicly traded on

 

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a
national or regional stock exchange or on an over-the-counter market if
Employee (i) is not a controlling person of, or a member of a group which
controls, such person, and (ii) does not, directly or indirectly,
beneficially own more than five percent (5%) or more of any class of securities
of such person. In addition, subject to approval by the Board, Employee shall
be entitled to purchase securities of a business in competition with The
Company Group if such securities are offered to investors irrespective of any
employment or other participation in such business by the investor.

 

8.             Anti-Solicitation.

 

8.1          Business
Relationships.  Employee agrees that during
the Employment Period and for a period of six (6) months thereafter,
Employee will not, directly or indirectly, individually or as a consultant to,
or as an employee, officer, stockholder, director or other owner or participant
in any business, influence or attempt to influence existing or realistically
prospective customers, vendors, suppliers, joint venturers, associates,
consultants, agents, or partners of The Company Group, either directly or
indirectly, to divert their business away from The Company Group, to any
individual, partnership, firm, corporation or other entity then in competition
with the business of any entity within The Company Group, and Employee will not
otherwise materially interfere with any business relationship of any entity
within The Company Group.

 

8.2          Employees.  Employee agrees that during
the Employment Period and for a period of one (1) year thereafter,
Employee will not, directly or indirectly, individually or as a consultant to,
or as an employee, officer, stockholder, director or other owner of or
participant in any business, solicit (or assist in soliciting) any person who
is then, or at any time within six (6) months prior thereto was, an
employee of an entity within The Company Group who earned annually $25,000 or
more as an employee of such entity during the last six (6) months of his
or her own employment to work for (as an employee, consultant or otherwise) any
business, individual, partnership, firm, corporation, or other entity whether
or not engaged in competitive business with any entity in The Company Group.

 

9.             Acknowledgements;
Remedies.  Employee represents that he (i) is
familiar with the foregoing covenants not to compete and not to solicit set
forth in Sections 7 and 8, (ii) is fully aware of his obligations
hereunder, (iii) agrees to the reasonableness of the length of time, scope
and geographic coverage of the foregoing covenants not to compete and not to
solicit, and (iv) agrees that such covenants are necessary to protect
Company’s confidential and proprietary information, good will, stable
workforce, and customer relations. Employee agrees that a breach of any of the
foregoing covenants in Sections 7 and
8 would cause immediate and irreparable harm to Company that would be difficult
or impossible to measure, and that damages to Company for any such injury would
therefore be an inadequate remedy for any such breach. Accordingly, Employee
agrees that if Employee breaches any term of any of the covenants set forth in such
sections, Company shall be entitled, in addition to and without limitation upon
all other remedies Company may have under this Agreement, at law or otherwise,
to obtain injunctive or other appropriate equitable relief to restrain any such
breach upon a showing by Company of the legal requirements to obtain such
relief.

 

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10.          Required
Approvals.  If
required by law, this Agreement shall be subject to prior approval of Company’s
Compensation Committee and Board of Directors.

 

11.          Withholding
Taxes.  Notwithstanding
anything herein to the contrary, Company may withhold (or cause there to be
withheld, as the case may be) from any amounts otherwise due or payable under
or pursuant to this Agreement such federal, state and local income, employment,
or other taxes as may be required to be withheld pursuant to any applicable law
or regulation.

 

12.          Assignment.  This
Agreement is personal in its nature and neither of the parties hereto shall,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder; provided, however, that in the
event of a merger, consolidation, or transfer or sale of all or substantially
all of the assets of Company with or to any other individual(s) or entity,
this Agreement shall, subject to the provisions hereof, be binding upon and
inure to the benefit of such successor and such successor shall discharge and
perform all the promises, covenants, duties, and obligations of Company
hereunder.

 

13.          Section Headings;
Number and Gender.  The
section headings of, and titles of paragraphs and subparagraphs contained in
this Agreement are for the purpose of convenience only, and they neither form a
part of this Agreement nor are they to be used in the construction or
interpretation thereof. As used herein, where the context requires, the
singular shall include the plural, the plural shall include the singular, and
any gender shall include all other genders.

 

14.          Governing
Law. 
This Agreement, and all questions relating to
its validity, interpretation, performance and enforcement, as well as the legal
relations hereby created between the parties hereto, shall be governed by and
construed under, and interpreted and enforced in accordance with, the laws of the
State of California, notwithstanding any California or other conflict of law
provision to the contrary. Jurisdiction and venue of any action pertaining to
the Agreement shall be in Orange County, California.

 

15.          Severability.  If
any provision of this Agreement or the application thereof is held invalid, the
invalidity shall not affect other provisions or applications of this Agreement
which can be given effect without the invalid provisions or applications and to
this end the provisions of this Agreement are declared to be severable.

 

16.          Entire
Agreement.  This
Agreement, together with the Option Agreement, embodies the entire agreement of
the parties hereto respecting the matters within its scope. This Agreement
supersedes all prior and contemporaneous agreements of the parties hereto that
directly or indirectly bears upon the subject matter hereof. Any prior
negotiations, correspondence, agreements, proposals or understandings relating
to the subject matter hereof shall be deemed to have been merged into this
Agreement, and to the extent inconsistent herewith, such negotiations,
correspondence, agreements, proposals, or understandings shall be deemed to be
of no force or effect. There are no representations, warranties, or agreements,
whether express or implied, or oral or written, with respect to the subject
matter hereof, except as expressly set forth herein.

 

11

 

17.          Modifications.  This
Agreement may not be amended, modified or changed, in whole or in part, except
by a formal, definitive written agreement expressly referring to this
Agreement, which agreement is executed by both of the parties hereto.

 

18.          Waiver.  Neither
the failure nor any delay on the part of a party to exercise any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any right, remedy,
power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.

 

19.          Notices.

 

(a)            All
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given
and made if (i) delivered by hand, (ii) otherwise delivered against
receipt therefor, or (iii) sent by registered or certified mail, postage
prepaid, return receipt requested. Any notice shall be duly addressed to the
parties as follows:

 

(i)            if
to Company:

 

Willdan Group, Inc.

2401 E. Katella Avenue, Ste. 300 

Anaheim, CA 92806

Attn: Board of Directors

 

with a copy to:

 

Robert L. Lavoie, Esq.

LAVOIE, McCAIN & JARMAN 

2401 E. Katella Ave., Ste 310 

Anaheim, CA 92806

 

(ii)           if
to Employee, to the address most recently on file in the payroll records of
Company.

 

(b)            Any
party may alter the address to which communications or copies are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 21 for the giving of notice. Any communication shall be
effective when delivered by hand, when otherwise delivered against receipt
therefor, or five (5) business days after being mailed in accordance with
the foregoing.

 

20.          Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original as against any party whose signature appears thereon, and
all of which together shall constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories. Photographic copies of such signed
counterparts may be used in lieu of the originals for any purpose.

 

12

 

21.          Legal
Counsel; Mutual Drafting.  Each party recognizes that
this is a legally binding contract and acknowledges and agrees that they have
had the opportunity to consult with legal counsel of their choice. Each party
has cooperated in the drafting, negotiation and preparation of this Agreement.
Hence, in any construction to be made of this Agreement, the same shall not be
construed against either party on the basis of that party being the drafter of
such language. Employee agrees and acknowledges that he has read and
understands this Agreement, is entering into it freely and voluntarily, and has
been advised to seek counsel prior to entering into this Agreement and has had
ample opportunity to do so.

 

22.          Code Section 409A.

 

(a)            It is intended that any
amounts payable under this Agreement and Company’s and Employee’s exercise of
authority or discretion hereunder shall comply with Section 409A of the
Code (including the Treasury regulations and other published guidance relating
thereto) (“Code Section 409A”) so as not to subject Employee to
payment of any interest or additional tax imposed under Code Section 409A.
To the extent that any amount payable under this Agreement would trigger the
additional tax imposed by Code Section 409A, the Agreement shall be
modified to avoid such additional tax yet preserve (to the nearest extent
reasonably possible) the intended benefit payable to Employee.

 

(b)            Notwithstanding any
provision of this Agreement to the contrary, if Employee is a “specified
employee” as defined in Code Section 409A, Employee shall not be entitled
to any payments upon a termination of his employment until the earlier of (i) the
date which is six (6) months after his termination of employment for any
reason other than death, or (ii) the date of Employee’s death.
Furthermore, with regard to any benefit to be provided upon a termination of
employment, to the extent required by Code Section 409A, Employee shall
pay the premium for such benefit during the aforesaid period and be reimbursed
by the Corporation therefor promptly after the end of such period. Any amounts
otherwise payable to Employee following a termination of his employment that
are not so paid by reason of this Section 24(b) shall be paid as soon
as practicable after the date that is six (6) months after the termination
of Employee’s employment (or, if earlier, the date of Employee’s death). The
provisions of this Section 24(b) shall only apply if, and to the extent,
required to comply with Code Section 409A.

 

IN WITNESS WHEREOF, Company and Employee have
executed this Agreement as of the Effective Date.

 

	
  “COMPANY”

  	
   

  	
  “EMPLOYEE”

  
	
   

  	
   

  	
   

  
	
  Willdan
  Group, Inc.,

  	
   

  	
   

  
	
  a
  Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Thomas D. Brisbin

  	
   

  	
  /s/ Marc Tipermas

  
	
   

  	
  Thomas D. Brisbin

  	
   

  	
  Marc
  Tipermas

  
	
   

  	
  President

  	
   

  	
   

  

 

13Exhibit 10.16

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered
into as of June 10, 2009, by and between ZUMIEZ INC., a Washington
corporation (“Borrower”), and WELLS FARGO HSBC TRADE BANK, NATIONAL ASSOCIATION
(“Bank”).  All references to Wells Fargo
Bank in this Agreement shall mean Wells Fargo Bank, National Association.

 

RECITALS

 

Borrower has requested that
Bank extend or continue credit to Borrower as described below, and Bank has
agreed to provide such credit to Borrower on the terms and conditions contained
herein.

 

NOW, THEREFORE, for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.                                 LINE OF CREDIT.

 

(a)                                            Line of Credit.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including September 1, 2011, not to exceed at any time the
aggregate principal amount of Twenty Five Million Dollars ($25,000,000.00) (“Line
of Credit”), the proceeds of which shall be used first, to refinance Borrower’s
outstanding credit accommodations from Bank, and second to refinance Borrower’s
working capital requirements.  Borrower’s
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note dated as of June 10, 2009 (“Line of Credit Note”), all
terms of which are incorporated herein by this reference.

 

(b)                                           Commercial
Letter of Credit Subfeature.  As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue sight letters of credit for the account of Borrower to
finance Borrower’s importation of goods (“Subfeature Commercial LCs”); provided
however, that the aggregate undrawn amount of all outstanding Subfeature
Commercial LCs shall not at any time exceed Ten Million Dollars
($10,000,000.00). The form and substance of each Subfeature Commercial LC shall
be subject to approval by Bank, in its sole discretion.  Each Subfeature Commercial LC shall be issued
for a term not to exceed one hundred and twenty (120) days, as designated by
Borrower; provided however, that no Subfeature Commercial LC shall have an
expiration date subsequent to the maturity date of the Line of Credit.  The undrawn amount of all Subfeature
Commercial LCs shall be reserved under the Line of Credit and shall not be
available for borrowings thereunder. 
Each Subfeature Commercial LC shall be subject to the additional terms
and conditions of 

 

 

Bank’s standard Commercial Letter of Credit
agreement and all applications and related documents required by Bank in
connection with the issuance thereof. 
Each drawing paid under a Subfeature Commercial LC shall be deemed an
advance under the Line of Credit and shall be repaid by Borrower in accordance
with the terms and conditions of this Agreement applicable to such advances;
provided however, that if advances under the Line of Credit are not available,
for any reason, at the time any drawing is paid, then Borrower shall
immediately pay to Bank the full amount drawn, together with interest thereon
from the date such drawing is paid to the date such amount is fully repaid by
Borrower, at the rate of interest applicable to advances under the Line of Credit.

 

(c)                                            Standby Letter
of Credit Subfeature.  As a
subfeature under the Line of Credit, Bank agrees from time to time during the
term thereof to issue or cause an affiliate to issue standby letters of credit
for the account of Borrower to support lease and other obligations of Borrower
(“Subfeature Standby LCs”); provided however, that the aggregate undrawn amount
of all outstanding Subfeature Standby LCs shall not at any time exceed Five
Million Dollars ($5,000,000.00).  The
form and substance of each Subfeature Standby LC shall be subject to approval
by Bank, in its sole discretion.  Each
Subfeature Standby LC shall be issued for a term not to exceed three hundred
sixty five (365) days, as designated by Borrower; provided however, that no
Subfeature Standby LC shall have an expiration date subsequent to the maturity
date of the Line of Credit.  The undrawn
amount of all Subfeature Standby LCs shall be reserved under the Line of Credit
and shall not be available for borrowings thereunder.  Each Subfeature Standby LC shall be subject
to the additional terms and conditions of Bank’s standard Standby Letter of
Credit agreement and all applications and related documents required by Bank in
connection with the issuance thereof. 
Each drawing paid under a Subfeature Standby LC shall be deemed an
advance under the Line of Credit and shall be repaid by Borrower in accordance
with the terms and conditions of this Agreement applicable to such advances;
provided however, that if advances under the Line of Credit are not available,
for any reason, at the time any drawing is paid, then Borrower shall
immediately pay to Bank the full amount drawn, together with interest thereon
from the date such drawing is paid to the date such amount is fully repaid by
Borrower, at the rate of interest applicable to advances under the Line of
Credit.

 

(d)                                           Borrowing and
Repayment.  Borrower
may from time to time during the term of the Line of Credit borrow, partially
or wholly repay its outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions contained herein or in the Line of Credit
Note or any other document or instrument required hereby; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

 

SECTION 1.2.                                 INTEREST/FEES.

 

(a)                                            Interest.  The outstanding principal balance of each
credit subject hereto issued shall bear interest from the date such drawing is
paid to the date such amount is fully repaid by Borrower at the rate of
interest set forth in each promissory note or other instrument of document
executed in correction therewith.

 

 

(b)                                           Computation and
Payment.  Interest shall be computed on
the basis of a 360-day year, actual days elapsed.  Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document
required hereby.

 

(c)                                            Commitment Fee.  Borrower shall pay to Bank a non-refundable
commitment fee for the line of credit equal to Seven Thousand Five Hundred
Dollars ($7,500.00), which fee shall be due and payable in full upon the
execution of this Agreement.

 

SECTION 1.3.                                 COLLECTION OF
PAYMENTS.  Except to the extent expressly
specified otherwise in any Loan Document (as defined in Section 2.2
hereof) other than this Agreement, Borrower authorizes Bank to collect all
amounts due to Bank from Borrower under this Agreement or any other Loan
Document (whether for principal, interest or fees, or as reimbursement of
drafts paid or other payments made by Bank under any credit subject to this
Agreement) by charging any deposit account maintained by Borrower with Wells
Fargo Bank for the full amount thereof. 
Should there be insufficient funds in Borrower’s deposit accounts with
Wells Fargo Bank to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.

 

SECTION 1.4.                                 COLLATERAL.

 

As security for all
indebtedness and other obligations of Borrower to Bank subject hereto,  Borrower hereby grants to Bank security
interests of first priority in all Borrower’s accounts receivable and other
rights to payment, general intangibles, inventory, equipment and fixtures.

 

All of the foregoing shall be evidenced by and
subject to the terms of such security agreements, financing statements, deeds
or mortgages, and other documents as Bank shall reasonably require, all in form
and substance satisfactory to Bank.  Borrower shall
pay to Bank immediately upon demand the full amount of all charges, costs and
expenses (to include fees paid to third parties and all allocated costs of Bank
personnel), expended or incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and recording fees and
costs of appraisals, audits and title insurance.

 

ARTICLE II

REPRESENTATIONS AND
WARRANTIES

 

Borrower makes the following
representations and warranties to Bank, which representations and warranties
shall survive the execution of this Agreement and shall continue in full force
and effect until the full and final payment, and satisfaction and discharge, of
all obligations of Borrower to Bank subject to this Agreement.

 

SECTION 2.1.                                 LEGAL
STATUS.  Borrower is a corporation, duly
organized and existing and in good standing under the laws of Washington, and
is qualified or licensed 

 

 

to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so
licensed could have a material adverse effect on Borrower.

 

SECTION 2.2.                                 AUTHORIZATION
AND VALIDITY.  This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the “Loan
Documents”) have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

 

SECTION 2.3.                                 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 any breach of or default
under any contract, obligation, indenture or other instrument to which Borrower
is a party or by which Borrower may be bound.

 

SECTION 2.4.                                 LITIGATION.  There are no pending, or to the best of
Borrower’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5.                                 CORRECTNESS OF
FINANCIAL STATEMENT.  The annual
financial statement of Borrower dated January 31, 2009, and all interim
financial statements delivered to Bank since said date, true copies of which
have been delivered by Borrower to Bank prior to the date hereof, (a) are
complete and correct and present fairly the financial condition of Borrower, (b) disclose
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) have been prepared in
accordance with generally accepted accounting principles consistently
applied.  Since the dates of such
financial statements there has been no material adverse change in the financial
condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in
favor of Bank or as otherwise permitted by Bank in writing.

 

SECTION 2.6.                                 INCOME TAX
RETURNS.  Borrower has no knowledge of
any pending assessments or adjustments of its income tax payable with respect
to any year.

 

SECTION 2.7.                                 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.

 

 

SECTION 2.8.                                 PERMITS,
FRANCHISES.  Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is
now engaged in compliance with applicable law.

 

SECTION 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 generally accepted accounting principles.

 

SECTION 2.10.                           OTHER
OBLIGATIONS.  Borrower is not in default
on any obligation for borrowed money, any purchase money obligation or any
other material lease, commitment, contract, instrument or obligation.

 

SECTION 2.11.                           ENVIRONMENTAL
MATTERS.  Except as disclosed by Borrower
to Bank in writing prior to the date hereof, Borrower is 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 of Borrower’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, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time.  None of the operations of Borrower 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.  Borrower has no material contingent liability
in connection with any release of any toxic or hazardous waste or substance
into the environment.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1.                                 CONDITIONS OF
INITIAL EXTENSION OF CREDIT.  The
obligation of Bank to extend any credit contemplated by this Agreement is
subject to the fulfillment to Bank’s satisfaction of all of the following
conditions:

 

(a)                                            Approval of
Bank Counsel.  All legal
matters incidental to the extension of credit by Bank shall be satisfactory to
Bank’s counsel.

 

 

(b)                                           Documentation.  Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed:

 

(i)                                   This
Agreement and each promissory note or other instrument or document required
hereby.

(ii)                               Corporate
Resolution: Borrowing.

(iii)                            Certificate
of Incumbency.

(iv)                            Security
Agreement: Equipment and Fixtures

(v)                               Continuing
Security Agreement: Rights to payment and Inventory.

(vi)                            Fax
Transmission and Acceptance of Requests, Instructions, Documents and
Information.

(vii)                         Facsimile
Transmissions of Applications For Issuance of, and Amendments to, Letters of
Credit.

(viii)                      Commercial
Letter of Credit Agreement.

(ix)                             Standby
Letter of Credit Agreement

(x)                                Such
other documents as Bank may require under any other Section of this
Agreement.

 

(c)                                            Financial
Condition.  There shall
have been no material adverse change, as determined by Bank, in the financial
condition or business of Borrower, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower.

 

(d)                                           Insurance.  Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower’s property, in form, substance,
amounts, covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank, including
without limitation, policies of marine cargo insurance, accounts receivable
insurance and business personal property insurance.

 

SECTION 3.2.                                 CONDITIONS OF
EACH EXTENSION OF CREDIT.  The obligation
of Bank to make each extension of credit requested by Borrower hereunder shall
be subject to the fulfillment to Bank’s satisfaction of each of the following
conditions:

 

(a)                                            Compliance.  The representations and warranties contained
herein and in each of the other Loan Documents shall be true on and as of the
date of the signing of this Agreement and on the date of each extension of
credit by Bank pursuant hereto, with the same effect as though such
representations and warranties had been made on and as of each such date, and
on each such date, no Event of Default as defined herein, and no condition,
event or act which with the giving of notice or the passage of time or both
would constitute such an Event of Default, shall have occurred and be
continuing or shall exist.

 

(b)                                           Documentation.  Bank shall have received all additional
documents which may be required in connection with such extension of credit,
including without limitation, the following:

 

 

(i)                                   For
the issuance of a commercial letter of credit under any credit subject to this
Agreement, Bank’s standard Application for Commercial Letter of Credit.

 

(ii)                                For
the issuance of a standby letter of credit under any credit subject to this
Agreement, Bank’s standard Application for Standby Letter of Credit.

 

(c)                                            Payment of Fees.  Bank shall have received payment in full of
any fee required by any of the Loan Documents to be paid at the time such
credit extension is made.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that so
long as Bank remains committed to extend credit to Borrower pursuant hereto, or
any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing:

 

SECTION 4.1.                                 PUNCTUAL
PAYMENTS.  Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein.

 

SECTION 4.2.                                 ACCOUNTING
RECORDS.  Maintain adequate books and
records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.

 

SECTION 4.3.                                 FINANCIAL
STATEMENTS.  Provide to Bank all of the
following, in form and detail satisfactory to Bank:

 

(a)                                            not later than
90 days after and as of the end of each fiscal year, an unqualified audited
financial statement of Borrower on a consolidated and consolidating basis,
prepared by a certified public accountant acceptable to Bank in accordance with
generally accepted accounting principles, to include balance sheet, income
statement, statement of cash flow, and source and application of funds;

 

(b)                                           not later than
45 days after and as of the end of each fiscal quarter, a financial statement
of Borrower on a consolidated and consolidating basis, prepared by Borrower, to
include balance sheet, income statement, and statement of cash flows;

 

(c)                                            contemporaneously
with each annual and fiscal quarter end financial statement of Borrower
required hereby, 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 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;

 

(d)                                           from time to
time such other information as Bank may reasonably request.

 

SECTION 4.4.                                 COMPLIANCE.  Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s
continued existence and with the requirements of all laws, rules, regulations
and orders of any governmental authority applicable to Borrower and/or its
business.

 

SECTION 4.5.                                 INSURANCE.  Maintain and keep in force, for each business
in which Borrower is engaged, insurance of the types and in amounts customarily
carried in similar lines of business, including but not limited to fire,
extended coverage, public liability, flood, property damage and workers’
compensation, with all such insurance carried with companies and in amounts
satisfactory to Bank, and deliver to Bank from time to time at Bank’s request
schedules setting forth all insurance then in effect.

 

SECTION 4.6.                                 FACILITIES.  Keep all properties useful or necessary to
Borrower’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.                                 TAXES AND OTHER
LIABILITIES.  Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) 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 Bank’s satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.

 

SECTION 4.8.                                 FINANCIAL
CONDITION.  At any time an advance is
requested under the Line of Credit and at all times any amounts are outstanding
under any of the Loan Documents, maintain Borrower’s financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower’s
financial statements for the period ending May 2, 2009:

 

(a)                                            Quick Ratio not
less than 1.25 to 1.0 at each fiscal quarter end, with “Quick Ratio” defined as
the aggregate of cash, cash equivalents, marketable securities and accounts
receivables divided by the total amount outstanding under the Line of Credit.

 

(b)                                           Net loss after
taxes not greater than $10,000,000 on a trailing four-quarter basis determined
as of each fiscal quarter end and based on the sum of the results of four 

 

 

consecutive quarters consisting of the present
quarter and the three preceding quarters; provided, that, there shall be added
to net income all charges for impairment of goodwill and store assets on the
balance sheet of the Borrower not to exceed $5,000,000 in the aggregate for the
relevant period.

 

SECTION 4.9.                                 NOTICE TO
BANK.  Promptly (but in no event more
than five (5) days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: 
(a) the occurrence of any Event of Default, or any condition, event
or act which with the giving of notice or the passage of time or both would
constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) 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; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants
that so long as Bank remains committed to extend credit to Borrower pursuant
hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not without Bank’s prior written consent:

 

SECTION 5.1.                                 USE OF
FUNDS.  Use any of the proceeds of any
credit extended hereunder except for the purposes stated in Article I
hereof.

 

SECTION 5.2.                                 OTHER
INDEBTEDNESS.  Create, incur, assume or
permit to exist any indebtedness or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except (a) the liabilities
of Borrower to Bank, and (b) any other liabilities of Borrower existing as
of, and disclosed to Bank prior to, the date hereof.

 

SECTION 5.3.                                 MERGER,
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 an other entity where the aggregate value of consideration for such
acquisition is greater than $25,000,000; 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.

 

SECTION 5.4.                                 GUARANTIES.  Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security
for, any liabilities or obligations of any other person or entity, except any
of the foregoing in favor of Bank.

 

 

SECTION 5.5.                                 LOANS,
ADVANCES, INVESTMENTS.  Make any loans or
advances to or investments in any person or entity, except any of the foregoing
existing as of, and disclosed to Bank prior to, the date.

 

SECTION 5.6.                                 PLEDGE OF
ASSETS.  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 Bank or which is existing as of, and disclosed to Bank in writing
prior to, the date hereof.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.                                 The occurrence
of any of the following shall constitute an “Event of Default” under this
Agreement:

 

(a)                                            Borrower shall
fail to pay when due any principal, interest, fees or other amounts payable
under any of the Loan Documents.

 

(b)                                           Any financial
statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

 

(c)                                            Any default in
the performance of or compliance with any obligation, agreement or other
provision contained herein or in any other Loan Document (other than those
specifically described as an “Event of Default” in this section 6.1), and with
respect to any such default that by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.

 

(d)                                           Any default in
the payment or performance of any obligation, or any defined event of default,
under the terms of any contract, instrument or document (other than any of the
Loan Documents) pursuant to which Borrower, any guarantor hereunder or any
general partner or joint venturer in Borrower if a partnership or joint venture
(with each such guarantor, general partner and/or joint venturer referred to
herein as a “Third Party Obligor”) has incurred any debt or other liability to
any person or entity, including Bank.

 

(e)                                            Borrower or any
Third Party Obligor shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any Third Party Obligor shall file a voluntary petition in
bankruptcy, or seeking 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; or Borrower or any Third Party Obligor shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower or any Third Party Obligor shall be
adjudicated a bankrupt, or an order for relief shall be entered against
Borrower or any Third Party Obligor 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.

 

(f)                                              The filing of a
notice of judgment lien against Borrower or any Third Party Obligor; or the
recording of any abstract of judgment against Borrower or any Third Party
Obligor in any county in which Borrower or such Third Party Obligor 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 any Third Party Obligor; or the entry of a judgment against Borrower or any
Third Party Obligor; or 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 or any Third Party Obligor.

 

(g)                                           There shall
exist or occur any event or condition that Bank in good faith believes impairs,
or is substantially to impair, the prospect of payment or performance by
Borrower, any Third Party Obligor, or the general partner of either if such
entity is a partnership, of its obligations under any of the Loan Documents.

 

(h)                                           The death or
incapacity of Borrower or any Third Party Obligor if an individual. The
dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.

 

SECTION 6.2.                                 REMEDIES.  Upon the occurrence of any Event of
Default:  (a) all indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Bank’s option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by Borrower; (b) the obligation, if
any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights,
powers and remedies available under each of the Loan Documents, or accorded by
law, including without limitation the right to resort to any or all security
for any credit subject hereto and to exercise any or all of the rights of a beneficiary
or secured party pursuant to applicable law. 
All rights, powers and remedies of Bank may be exercised at any time by
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.

 

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.           NO WAIVER.  No delay, failure or discontinuance of 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, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.

 

SECTION 7.2.           NOTICES.  All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:

 

	
  BORROWER:

  	
  ZUMIEZ INC.

  
	
   

  	
  6300 Merrill
  Creek Parkway, Suite B

  
	
   

  	
  Everett, WA
  98203

  
	
   

  	
   

  
	
  BANK:

  	
  WELLS FARGO
  HSBC TRADE BANK, NATIONAL ASSOCIATION

  
	
   

  	
  999 Third
  Ave., 12th Floor

  
	
   

  	
  Seattle, WA
  98104

  

 

or to such other address as any party may designate by written notice
to all other parties.  Each such notice,
request and demand shall be deemed given or made as follows:  (a) if sent by hand delivery, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage
prepaid; and (c) if sent by telecopy, upon receipt.

 

SECTION 7.3.           COSTS, EXPENSES AND
ATTORNEYS’ FEES.  Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of Bank’s in-house counsel),
expended or incurred by Bank in connection with (a) the negotiation and
preparation of this Agreement and the other Loan Documents, Bank’s continued
administration hereof and thereof, and the preparation of any amendments and
waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or
the collection of any amounts which become due to Bank under any of the Loan
Documents, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to Borrower or any other person or entity.

 

 

SECTION 7.4.           SUCCESSORS,
ASSIGNMENT.  This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interests or rights hereunder
without Bank’s prior written consent. 
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank’s rights and
benefits under each of the Loan Documents. 
In connection therewith, Bank may disclose all documents and information
which Bank now has or may hereafter acquire relating to any credit subject
hereto, Borrower or its business, or any collateral required hereunder.

 

SECTION 7.5.           ENTIRE AGREEMENT;
AMENDMENT.  This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof.  This Agreement may be amended or
modified only in writing signed by each party hereto.

 

SECTION 7.6.           NO THIRD PARTY
BENEFICIARIES.  This Agreement is made
and entered into for the sole protection and benefit of the parties hereto 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, this Agreement or any other of the
Loan Documents to which it is not a party.

 

SECTION 7.7.           TIME.  Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.

 

SECTION 7.8.           SEVERABILITY OF
PROVISIONS.  If any provision of this
Agreement shall 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.

 

SECTION 7.9.           COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to
be an original, and all of which when taken together shall constitute one and
the same Agreement.

 

SECTION 7.10.         GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.

 

SECTION 7.11.         ARBITRATION.

 

(a)           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 in any way
arising out of or relating to (i) any credit subject hereto, or any of the
Loan Documents, and their negotiation, execution,

 

 

collateralization, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination; or (ii) requests
for additional credit.

 

(b)           Governing
Rules.  Any arbitration proceeding
will (i) proceed in a location in Washington 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 procedures for large, complex
commercial disputes to be referred to herein, 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.

 

(c)           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.

 

(d)           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 Washington or a neutral retired judge of the state or
federal judiciary of Washington, 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 Washington 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 Washington 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.

 

(e)           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.  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.

 

(f)            Class Proceedings
and Consolidations.  No party hereto shall be entitled to join or
consolidate disputes by or against others in any arbitration, except parties
who have executed any Loan Document, or to include in any arbitration any
dispute as a representative or member of a class, or to act in any arbitration
in the interest of the general public or in a private attorney general
capacity.

 

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

 

(h)           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 Loan Documents or the subject matter of
the dispute shall control.  This arbitration
provision shall survive termination, amendment or expiration of any of the Loan
Documents or any relationship between the parties.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.

 

	
   

  	
   

  	
  WELLS FARGO
  HSBC TRADE BANK,

  
	
  ZUMIEZ INC.

  	
   

  	
  NATIONAL
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Chris Casey

  
	
  Title:

  	
   

  	
   

  	
   

  
						

 

 

REVOLVING LINE OF CREDIT NOTE

 

	
  $25,000,000.00

  	
    Seattle, Washington

  
	
   

  	
  June 10, 2009

  

 

FOR VALUE RECEIVED, the undersigned ZUMIEZ INC., a Washington
corporation (“Borrower”) promises to pay to the order of WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”) at its office at 999 Third Avenue, Seattle, WA
98104, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Twenty Five Million Dollars ($25,000,000.00), or so much
thereof as may be advanced and be outstanding, with interest thereon, to be
computed on each advance from the date of its disbursement as set forth herein.

 

DEFINITIONS:

 

As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:

 

(a)           “Business
Day” means any day except a Saturday, Sunday or any other day on which
commercial banks in Washington are authorized or required by law to close.

 

(b)           “Daily
One Month LIBOR” means for any day, the rate of interest equal to LIBOR then in
effect for delivery for a one (1) month period.

 

(c)           “Fixed
Rate Term” means a period commencing on a Business Day and continuing for 1, 2,
3 or 6 months, as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may be selected
for a principal amount less than Two Hundred Fifty Thousand Dollars
($250,000.00); and provided further, that no Fixed Rate Term shall extend
beyond the scheduled maturity date hereof. 
If any Fixed Rate Term would end on a day which is not a Business Day,
then such Fixed Rate Term shall be extended to the next succeeding Business
Day.

 

(d)           “LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8 of 1%) and determined pursuant to the following formula:

 

	
  LIBOR =

  	
   

  	
  Base LIBOR

  	
   

  
	
   

  	
   

  	
  100% - LIBOR Reserve Percentage

  	
   

  

 

(i)           “Base LIBOR” means the rate per annum for
United States dollar deposits quoted by Bank (A) for the purpose of
calculating effective rates of interest for loans

 

 

making reference to LIBOR, as the Inter-Bank
Market Offered Rate, with the understanding that such rate is quoted by Bank
for the purpose of calculating effective rates of interest for loans making
reference thereto, on the first day of a Fixed Rate Term for delivery of funds
on said date for a period of time approximately equal to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term applies, or (B) for the purpose of calculating
effective rates of interest for loans making reference to the Daily One Month
LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from time to time
for delivery of funds for one (1) month in amounts approximately equal to
the principal amount of such loans. 
Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

(ii)  “LIBOR Reserve Percentage” means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D
of the Federal Reserve Board, as amended), adjusted by Bank for expected
changes in such reserve percentage during the applicable term of this Note.

 

INTEREST:

 

(a)           Interest.  The outstanding principal balance of this
Note shall bear interest (computed on the basis of a 360-day year, actual days
elapsed) either (i) at a fluctuating rate per annum determined by Bank to
be one percent (1%) above the Daily One Month LIBOR Rate in effect from time to
time, or (ii) at a fixed rate per annum determined by Bank to be one
percent (1%) above LIBOR in effect on the first day of the applicable Fixed
Rate Term.  When interest is determined
in relation to the Daily One Month LIBOR Rate, each change in the interest rate
shall become effective each Business Day that the Bank determines that the Daily
One Month LIBOR Rate has changed.  Bank
is hereby authorized to note the date, principal amount and interest rate
applicable thereto and any payments made thereon on Bank’s books and records
(either manually or by electronic entry) and/or on any schedule attached to
this Note, which notations shall be prima facie evidence of the accuracy of the
information noted.

 

(b)           Selection
of Interest Rate Options.  At any
time any portion of this Note bears interest determined in relation to LIBOR
for a Fixed Rate Term, it may be continued by Borrower at the end of the Fixed
Rate Term applicable thereto so that all or a portion thereof bears interest
determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a new
Fixed Rate Term designated by Borrower. 
At any time any portion of this Note bears interest determined in
relation to the Daily One Month LIBOR Rate, Borrower may at any time convert
all or a portion thereof so that it bears interest determined in relation to
LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance
hereunder or wishes to select an interest rate determined in relation to the
Daily One Month LIBOR Rate or a Fixed
Rate Term for all or a portion of the outstanding principal balance
hereof, and at the end of each Fixed Rate

 

 

Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection for a Fixed Rate Term, the length of the applicable Fixed Rate
Term.  Any such notice may be given by
telephone (or such other electronic method as Bank may permit) so long as, with
respect to each LIBOR selection for a
Fixed Rate Term, (A) if requested by Bank, Borrower provides to
Bank written confirmation thereof not later than three (3) Business Days
after such notice is given, and (B) such notice is given to Bank prior to
10:00 a.m. on the first day of the Fixed Rate Term, or at a later time
during any Business Day if Bank, at its sole option but without obligation to
do so, accepts Borrower’s notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a
fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent
LIBOR request from Borrower shall be subject to a redetermination by Bank of
the applicable fixed rate.  If no
specific designation of interest is made at the time any advance is requested
hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Daily One Month LIBOR Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.

 

(c)           Taxes
and Regulatory Costs.  Borrower shall
pay to Bank immediately upon demand, in addition to any other amounts due or to
become due hereunder, any and all (i) withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any domestic or foreign governmental authority and related in any manner to
LIBOR, and (ii) future, supplemental, emergency or other changes in the
LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit
Insurance Corporation, or similar requirements or costs imposed by any domestic
or foreign governmental authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are
attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.

 

(d)           Payment
of Interest.  Interest accrued on
this Note shall be payable on the last day of each month, commencing July 1,
2009.

 

(e)           Default Interest.  From
and after the maturity date of this Note, or such earlier date as all principal
owing hereunder becomes due and payable by acceleration or otherwise, or at
Bank’s option upon the occurrence, and during the continuance of an Event of
Default, the outstanding principal balance of this Note shall bear interest at
an increased rate per annum (computed on the basis of a 360-day year, actual
days elapsed) equal to four percent (4%) above the rate of interest from time
to time applicable to this Note.

 

 

BORROWING AND
REPAYMENT:

 

(a)           Borrowing
and Repayment.  Borrower may from
time to time during the term of this Note borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this
obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the
holder.  The outstanding principal
balance of this Note shall be due and payable in full on September 1,
2011.

 

(b)           Advances.  Advances hereunder, to the total amount of
the principal sum stated above, may be made by the holder at the oral or written
request of (i) Richard M. Brooks, Trevor Lang, Thomas Campion, Derek
Baxter or Brian Leith, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the
credit of any deposit account of Borrower, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account.  The holder shall have no obligation to
determine whether any person requesting an advance is or has been authorized by
Borrower.

 

(c)           Application
of Payments.  Each payment made on
this Note shall be credited first, to any interest then due and second, to the
outstanding principal balance hereof. 
All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Daily One Month LIBOR Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

 

PREPAYMENT:

 

(a)           Daily
One Month LIBOR Rate.  Borrower may
prepay principal on any portion of this Note which bears interest determined in
relation to the Daily One Month LIBOR Rate at any time, in any amount and
without penalty.

 

(b)           LIBOR.  Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to LIBOR at any time
and in the minimum amount of Two Hundred Fifty Thousand Dollars ($250,000.00);
provided however, that if the outstanding principal balance of such portion of
this Note is less than said amount, the minimum prepayment amount shall be the
entire outstanding principal balance thereof. 
In consideration of Bank providing this prepayment option to Borrower,
or if any such portion of this Note shall become due and payable at any time
prior to the last

 

 

day of the Fixed Rate Term applicable thereto by acceleration or
otherwise, Borrower shall pay to Bank immediately upon demand a fee which is
the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:

 

	
  (i)

  	
  Determine the amount of interest which would
  have accrued each month on the amount prepaid at the interest rate applicable
  to such amount had it remained outstanding until the last day of the Fixed
  Rate Term applicable thereto.

  
	
   

  	
   

  
	
  (ii)

  	
  Subtract from the amount determined in
  (i) above the amount of interest which would have accrued for the same
  month on the amount prepaid for the remaining term of such Fixed Rate Term at
  LIBOR in effect on the date of prepayment for new loans made for such term
  and in a principal amount equal to the amount prepaid.

  
	
   

  	
   

  
	
  (iii)

  	
  If the result obtained in (ii) for any month is greater than
  zero, discount that difference by LIBOR used in (ii) above.

  

 

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities.  Borrower, therefore, agrees
to pay the above-described prepayment fee and agrees that said amount
represents a reasonable estimate of the prepayment costs, expenses and/or
liabilities of Bank.  If Borrower fails
to pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum four percent (4%) above
the Daily One Month LIBOR Rate in effect from time to time (computed on the
basis of a 360-day year, actual days elapsed).

 

EVENTS OF
DEFAULT:

 

This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of June 10, 2009, as amended from time to time (the “Credit Agreement”).  Any default in the payment or performance of
any obligation under this Note, or any defined event of default under the
Credit Agreement, shall constitute an “Event of Default” under this Note.

 

MISCELLANEOUS:

 

(a)           Remedies.  Upon the occurrence of any Event of Default,
the holder of this Note, at the holder’s option, may declare all sums of
principal and interest outstanding hereunder to be immediately due and payable
without presentment, demand, notice of nonperformance, notice of protest,
protest or notice of dishonor, all of which are expressly waived by Borrower,
and the obligation, if any, of the holder to extend any

 

 

further credit hereunder shall immediately cease and terminate.  Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of the holder’s in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder’s rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

 

(b)           Obligations
Joint and Several.  Should more than
one person or entity sign this Note as a Borrower, the obligations of each such
Borrower shall be joint and several.

 

(c)           Governing
Law.  This Note shall be governed by
and construed in accordance with the laws of the State of Washington.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS
WHEREOF, the undersigned has executed this Note as of the date first written
above.

 

	
  ZUMIEZ INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

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