EXHIBIT 10.14
-------------
================================================================================
BUSINESS LOAN AGREEMENT
BORROWER: DIRECT FOCUS, INC. LENDER: U.S. BANK NATIONAL ASSOCIATION
2200 N.E. 65TH AVENUE CORPORATE BANKING DIVISION
VANCOUVER, WA 98661 PL-7 COMMERCIAL LOAN SERVICE WEST
555 S.W. OAK
PORTLAND, OR 97204
- --------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT BETWEEN DIRECT FOCUS, INC. ("BORROWER") AND U.S.
BANK NATIONAL ASSOCIATION ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS
AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUAL AS THE "LOAN"
AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN
GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT: (B)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE
SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL
BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.
TERM. This Agreement shall be effective as of June 15, 2001, and shall continue
thereafter until all indebtedness of Borrower to lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
BORROWER. The word "Borrower" means DIRECT FOCUS, INC. The word
"Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security interest, mortgage, deed
of trust, assignment, pledge, chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without imitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a Guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become barred
by any statue of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means U.S. Bank National Association, its
successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand
plus Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether nor or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described here in or described on any exhibit or schedule attached to
this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefore.
PERMITTED LIENS. The words "Permitted Liens" mean; (a) liens and
security interests securing Indebtedness owed by Borrower to lender;
(b) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and security obligations which are not yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to security Indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract or
otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note; (b)
Security Agreements granting to lender security interests in the
Collateral; (c) Financing Statements perfecting lender's Security
Interests; (d) evidence of insurance as required below; and (d) any
other documents required under this Agreement or by lender or its
counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute of Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the state of
Borrower's incorporation and is validly existing and in good standing
in all states in which Borrower is doing business. Borrower has the
full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to
engage. Borrower also is duly qualified as a foreign corporation and is
in good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision or its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financial statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financial
statement under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," and the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., or other applicable state or
Federal laws, rules or regulations adopted pursuant to any of the
foregoing or intended to protect human health or the environment
"Environmental Laws"). Except as disclosed to and acknowledged by
Lender in writing Borrower represents and warrants that: (a) During the
period of Borrower's ownership of the properties, there has been no
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person
on, under, about or from any of the properties; (b) Borrower has no
knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about
or from the properties b any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters; and (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of
any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under,
about or from any of the properties, and any such activity shall be
conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation
Environmental Laws. Borrower authorizes Lender and its agents to enter
upon the properties to make such inspections and tests as Lender may
deem appropriate to determine compliance of the properties with this
section of the Agreement. Any inspections or tests made by Lender shall
be at Borrower's expense and for lender's purposes only and shall not
be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste and hazardous
substances. Borrower hereby: (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (b)
agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened
release of a hazardous waste or substance on the properties or as a
result of a violation of any Environmental Laws. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or
expiration of this agreement and shall not be effective by Lender's
acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower, as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event or Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan; (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so; (iii) no steps have been taken to
terminate any such plan; and (iv) there are no unfounded liabilities
other than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's chief executive office, if Borrower has more
than one place of business, is located at 2200 N.E. 65th Avenue,
Vancouver, Washington 98661. Unless Borrower has designated otherwise
in writing, this location is also the office or offices where Borrower
keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
Financial Records. MAINTAIN ITS BOOKS AND RECORDS IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, APPLIED ON A CONSISTENT
BASIS, AND PERMIT LENDER TO EXAMINE AND AUDIT BORROWER'S BOOKS AND
RECORDS AND HAVE ITS MANAGEMENT MEET WITH LENDER AT ALL REASONABLE
TIMES.
Financial Statements. FURNISH LENDER WITH, AS SOON AS AVAILABLE, BUT IN
NO EVENT LATER THAN NINETY (90) DAYS AFTER THE END OF EACH FISCAL YEAR
(A) BORROWER'S BALANCE SHEET AND INCOME STATEMENT FOR THE YEAR ENDED,
AUDITED BY A CERTIFIED PUBLIC ACCOUNTANT SATISFACTORY TO LENDER AND (B)
A COPY OF BORROWER'S 10K FILED WITH THE S.E.C.; AND AS SOON AS
AVAILABLE, BUT IN NO EVENT LATER THAN FORTY-FIVE (45) DAYS AFTER THE
END OF EACH FISCAL QUARTER, (A) BORROWER'S BALANCE SHEET AND PROFIT AND
LOSS STATEMENT FOR THE PERIOD ENDED, PREPARED AND CERTIFIED AS CORRECT
TO THE BEST KNOWLEDGE AND BELIEF BY BORROWER'S CHIEF FINANCIAL OFFICER
OR OTHER OFFICER OR PERSON ACCEPTABLE TO LENDER AND (B) A COPY OF
BORROWER'S 10Q FILED WITH THE S.E.C. ALL FINANCIAL REPORTS REQUIRED TO
BE PROVIDED UNDER THIS AGREEMENT SHALL BE PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, APPLIED ON A CONSISTENT
BASIS, AND CERTIFIED BY BORROWER AS BEING TRUE AND CORRECT.
Additional Information. FURNISH SUCH ADDITIONAL INFORMATION AND
STATEMENTS, LISTS OF ASSETS AND LIABILITIES, AGINGS OF RECEIVABLES AND
PAYABLES, INVENTORY SCHEDULES, BUDGETS, FORECASTS, TAX RETURNS, AND
OTHER REPORTS WITH RESPECT TO BORROWER'S FINANCIAL CONDITION AND
BUSINESS OPERATIONS AS LENDER MAY REQUEST FROM TIME TO TIME.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Net Worth Ratio. MAINTAIN A RATIO OF TOTAL LIABILITIES TO
TANGIBLE NET WORTH OF LESS THAN 1.25 to 1.00.
Current Ratio. MAINTAIN A RATIO OF CURRENT ASSETS TO CURRENT
LIABILITIES IN EXCESS OF 2.00 to 1.00.
THE FOLLOWING PROVISIONS SHALL APPLY FOR PURPOSES OF DETERMINING
COMPLIANCE WITH THE FOREGOING FINANCIAL COVENANTS AND RATIOS:
Compliance with the foregoing ratios/amounts shall be determined by
calculating the ratios/amounts as of the end of each quarter. EXCEPT AS
PROVIDED ABOVE, ALL COMPUTATIONS MADE TO DETERMINE COMPLIANCE WITH THE
REQUIREMENTS CONTAINED IN THIS PARAGRAPH SHALL BE MADE IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, APPLIED ON A CONSISTENT
BASIS, AND CERTIFIED BY BORROWER AS BEING TRUE AND CORRECT.
Insurance. MAINTAIN FIRE AND OTHER RISK INSURANCE, PUBLIC LIABILITY
INSURANCE, AND SUCH OTHER INSURANCE AS LENDER MAY REQUIRE WITH RESPECT
TO BORROWER'S PROPERTIES AND OPERATIONS, IN FORM, AMOUNTS, COVERAGES,
AND WITH INSURANCE COMPANIES REASONABLY ACCEPTABLE TO LENDER. BORROWER,
UPON REQUEST OF LENDER, WILL DELIVER TO LENDER FROM TIME TO TIME THE
POLICIES OR CERTIFICATES
OF INSURANCE IN FORM SATISFACTORY TO LENDER, INCLUDING STIPULATIONS
THAT COVERAGES WILL NOT BE CANCELLED OR DIMINISHED WITHOUT AT LEAST TEN
(10) DAYS' PRIOR WRITTEN NOTICE TO LENDER. EACH INSURANCE POLICY ALSO
SHALL INCLUDE AN ENDORSEMENT PROVIDING THAT COVERAGE IN FAVOR OF LENDER
WILL NOT BE IMPAIRED IN ANY WAY BY ANY ACT, OMISSION OR DEFAULT OF
BORROWER OR ANY OTHER PERSON. IN CONNECTION WITH ALL POLICIES COVERING
ASSETS IN WHICH LENDER HOLDS OR IS OFFERED A SECURITY INTEREST FOR THE
LOANS, BORROWER WILL PROVIDE LENDER WITH SUCH LOSS PAYABLE OR OTHER
ENDORSEMENTS AS LENDER MAY REQUIRE.
Insurance Reports. FURNISH TO LENDER, UPON REQUEST OF LENDER, REPORTS
ON EACH EXISTING INSURANCE POLICY SHOWING SUCH INFORMATION AS LENDER
MAY REASONABLY REQUEST, INCLUDING WITHOUT LIMITATION, THE FOLLOWING:
(A) THE NAME OF THE INSURER; (B) THE RISKS INSURED; (C) THE AMOUNT OF
THE POLICY; (D) THE PROPERTIES INSURED; (E) THE THEN CURRENT PROPERTY
VALUES ON THE BASIS OF WHICH INSURANCE HAS BEEN OBTAINED, AND THE
MANNER OF DETERMINING THOSE VALUES; AND (F) THE EXPIRATION DATE OF THE
POLICY.
Other Agreements. COMPLY WITH ALL TERMS AND CONDITIONS OF ALL OTHER
AGREEMENTS, WHETHER NOW OR HEREAFTER EXISTING, BETWEEN BORROWER AND ANY
OTHER PARTY AND NOTIFY LENDER IMMEDIATELY IN WRITING OF ANY DEFAULT IN
CONNECTION WITH ANY OTHER SUCH AGREEMENTS.
Loan Fees and Charges. IN ADDITION TO ALL OTHER AGREED UPON FEES AND
CHARGES, PAY THE FOLLOWING: Borrower agrees to pay Lender, prior to or
contemporaneously with the initial advance of Loan proceeds, a
nonrefundable loan fee in the amount of .25% of the Loan amount per
annum, payable quarterly in arrears, standby letters of credit at 1.0%
per annum per letter of credit amount (minimum of $250.00) due upon
issuance of letter of credit, and commercial letters of credit at U.S.
Bank's published rates and charges.
Loan Proceeds. USE ALL LOAN PROCEEDS SOLELY FOR THE BORROWER'S BUSINESS
OPERATIONS, UNLESS SPECIFICALLY CONSENTED TO THE CONTRARY BY LENDER IN
WRITING.
Taxes, Charges and Liens. PAY AND DISCHARGE WHEN DUE ALL OF ITS
INDEBTEDNESS AND OBLIGATIONS, INCLUDING WITHOUT LIMITATION ALL
ASSESSMENTS, TAXES, GOVERNMENTAL CHARGES, LEVIES AND LIENS OF EVERY
KIND AND NATURE, IMPOSED UPON BORROWER OR ITS PROPERTIES, INCOME OR
PROFITS, PRIOR TO THE DATE ON WHICH PENALTIES WOULD ATTACH, AND ALL
LAWFUL CLAIMS THAT, IF UNPAID, MIGHT BECOME A LIEN OR CHARGE UPON ANY
OF BORROWER'S PROPERTIES, INCOME, OR PROFITS. PROVIDED HOWEVER,
BORROWER WILL NOT BE REQUIRED TO PAY AND DISCHARGE ANY SUCH ASSESSMENT,
TAX, CHARGE, LEVY, LIEN OR CLAIM SO LONG AS (A) THE LEGALITY OF THE
SAME SHALL BE CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS, AND
(B) BORROWER SHALL HAVE ESTABLISHED ON ITS BOOKS ADEQUATE RESERVES WITH
RESPECT TO SUCH CONTESTED ASSESSMENT, TAX, CHARGE, LEVY, LIEN, OR CLAIM
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRACTICES. BORROWER,
UPON DEMAND OF LENDER, WILL FURNISH TO LENDER EVIDENCE OF PAYMENT OF
THE ASSESSMENTS, TAXES, CHARGES, LEVIES, LIENS AND CLAIMS, AND WILL
AUTHORIZE THE APPROPRIATE GOVERNMENTAL OFFICIAL TO DELIVER TO LENDER AT
ANY TIME A WRITTEN STATEMENT OF ANY ASSESSMENTS, TAXES, CHARGES,
LEVIES, LIENS AND CLAIMS AGAINST BORROWER'S PROPERTIES, INCOME, OR
PROFITS.
Performance. PERFORM AND COMPLY WITH ALL TERMS, CONDITIONS, AND
PROVISIONS SET FORTH IN THIS AGREEMENT AND IN THE RELATED DOCUMENTS IN
A TIMELY MANNER, AND PROMPTLY NOTIFY LENDER IF BORROWER LEARNS OF THE
OCCURRENCE OF ANY EVENT WHICH CONSTITUTES AN EVENT OF DEFAULT UNDER
THIS AGREEMENT OR UNDER ANY OF THE RELATED DOCUMENTS.
Operations. MAINTAIN EXECUTIVE AND MANAGEMENT PERSONNEL WITH
SUBSTANTIALLY THE SAME QUALIFICATIONS AND EXPERIENCE AS THE PRESENT
EXECUTIVE AND MANAGEMENT PERSONNEL; PROVIDE WRITTEN NOTICE TO LENDER OF
ANY CHANGE IN EXECUTIVE AND MANAGEMENT PERSONNEL; CONDUCT ITS BUSINESS
AFFAIRS IN A REASONABLE AND PRUDENT MANNER AND IN COMPLIANCE WITH ALL
APPLICABLE FEDERAL, STATE AND MUNICIPAL LAWS, ORDINANCES, RULES AND
REGULATIONS RESPECTING ITS PROPERTIES, CHARTERS, BUSINESSES AND
OPERATIONS, INCLUDING WITHOUT LIMITATION, COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES ACT AND WITH ALL MINIMUM FUNDING STANDARDS
AND OTHER REQUIREMENTS OF ERISA AND OTHER LAWS APPLICABLE TO BORROWER'S
EMPLOYEE BENEFIT PLANS.
Inspection. PERMIT EMPLOYEES OR AGENTS OF LENDER AT ANY REASONABLE TIME
TO INSPECT AY AND ALL COLLATERAL FOR THE LOAN OR LOANS AND BORROWER'S
OTHER PROPERTIES AND TO EXAMINE OR AUDIT BORROWER'S BOOKS, ACCOUNTS,
AND RECORDS AND TO MAKE COPIES AND MEMORANDA OF BORROWER'S BOOKS,
ACCOUNTS, AND RECORDS. IF BORROWER NOW, OR AT ANY TIME HEREAFTER,
MAINTAINS ANY RECORDS (INCLUDING WITHOUT LIMITATION COMPUTER GENERATED
RECORDS AND COMPUTER SOFTWARE PROGRAMS FOR THE GENERATION OF SUCH
RECORDS) IN THE POSSESSION OF A THIRD PARTY, BORROWER, UPON REQUEST OF
LENDER, SHALL NOTIFY SUCH PARTY TO PERMIT LENDER FREE ACCESS TO SUCH
RECORDS AT ALL REASONABLE TIMES AND TO PROVIDE LENDER WITH COPIES OF
ANY RECORDS IT MAY REQUEST, ALL AT BORROWER'S EXPENSE.
Compliance Certificate. UNLESS WAIVED IN WRITING BY LENDER, PROVIDE
LENDER WITH AT LEAST QUARTERLY, DUE WITHIN SIXTY (60) DAYS OF QUARTER
END AND AT THE TIME OF EACH DISBURSEMENT OF LOAN PROCEEDS WITH A
CERTIFICATE EXECUTED BY BORROWER'S CHIEF FINANCIAL OFFICER, OR OTHER
OFFICER OR PERSON ACCEPTABLE TO LENDER, CERTIFYING THAT THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT ARE TRUE AND
CORRECT AS OF THE DATE OF THE CERTIFICATE AND FURTHER CERTIFYING THAT,
AS OF THE DATE OF THE CERTIFICATE, NO EVENT OF DEFAULT EXISTS UNDER
THIS AGREEMENT.
Environmental Compliance and Reports. BORROWER SHALL COMPLY IN ALL
RESPECTS WITH ALL ENVIRONMENTAL PROTECTION FEDERAL, STATE AND LOCAL
LAWS, STATUES, REGULATIONS AND ORDINANCES; NOT CAUSE OR PERMIT TO
EXIST, AS A RESULT OF AN INTENTIONAL OR UNINTENTIONAL ACTION OR
OMISSION ON ITS PART OR ON THE PART OF ANY THIRD PARTY, ON PROPERTY
OWNED AND/OR OCCUPIED BY BORROWER, ANY ENVIRONMENTAL ACTIVITY WHERE
DAMAGE MAY RESULT TO THE ENVIRONMENT, UNLESS SUCH ENVIRONMENTAL
ACTIVITY IS PURSUANT TO AND IN COMPLIANCE WITH THE CONDITIONS OF A
PERMIT ISSUED BY THE APPROPRIATE FEDERAL, STATE OR LOCAL GOVERNMENTAL
AUTHORIZES; SHALL FURNISH TO LENDER PROMPTLY AND IN ANY EVENT WITHIN
THIRTY (30) DAYS AFTER RECEIPT THEREOF A COPY OF ANY NOTICE, SUMMONS,
LIEN, CITATION, DIRECTIVE, LETTER OR OTHER COMMUNICATION FROM ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY CONCERNING ANY INTENTIONAL OR
UNINTENTIONAL ACTION OR OMISSION ON BORROWER'S PART IN CONNECTION WITH
ANY ENVIRONMENTAL ACTIVITY WHETHER OR NOT THERE IS DAMAGE TO THE
ENVIRONMENT AND/OR OTHER NATURAL RESOURCES.
Additional Assurances. MAKE, EXECUTE AND DELIVER TO LENDER SUCH
PROMISSORY NOTES, MORTGAGES, DEEDS OF TRUST, SECURITY AGREEMENTS,
FINANCING STATEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER AGREEMENTS AS
LENDER OR ITS ATTORNEYS MAY REASONABLY REQUEST TO EVIDENCE AND SECURE
THE LOANS AND TO PERFECT ALL SECURITY INTERESTS.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
CAPITAL EXPENDITURES. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of
$20,000,000.00 or incur liability for rentals of property (including
both real and personal property) in an amount which, together with
capital expenditures, shall in any fiscal year exceed such sum.
INDEBTEDNESS AND LIENS. Sell with recourse any of Borrower's accounts,
except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease all operations, liquidate, transfer, or consolidate
with any other entity, change ownership, dissolve or transfer or sell
Collateral out of the ordinary course of business.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
ACCESS LAWS. Without limiting the generality of any provision of this Agreement
requiring Borrower to comply with applicable laws, rules, and regulations,
Borrower agrees that it will, at all times, comply with applicable laws relating
to disabled access including, but not limited to, all applicable titles of the
Americans with Disabilities Act of 1990.
ADDITIONAL DEFINITIONS.
CURRENT ASSETS. The words "Current Assets" mean Borrower's cash on hand plus
Borrower's receivables plus inventory.
CURRENT LIABILITIES. The words "Current Liabilities" mean all Borrower's notes
payable plus borrower's accounts payable plus Borrower's income taxes payable
plus Borrower's accruals plus Borrower's current portion of long-term debt.
CURRENT RATIO. The words "Current Ratio" mean Borrower's total Current Assets
divided by Borrower's total Current Liabilities.
OUT OF DEBT PERIOD. Borrower agrees with Lender that Borrower shall rest the
Line of Credit Facility with no outstanding principal balance (not including
outstanding standby letters of credit) for a minimum of thirty (30) consecutive
days during the term of the loan.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges and transfers to Lender all
Borrower's right, title and interest in and to Borrower's accounts with Lender
(whether checking, savings, or some other account), including, without
limitation, all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute of Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor of person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERAL. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest)
at ay time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default on the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This agreement has been delivered to Lender and
accepted by Lender in the State of Oregon. If there is a lawsuit, Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts of
Multnomah County, the State of Oregon. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. This Agreement shall be governed by
and construed in accordance with the laws of the State of Oregon.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchaser of such
participation interests. Borrower also agrees that the purchasers of ay
such participation interests will be considered as the absolute owners
of such interests in the Loans and will have all the rights granted
under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the enforcement, modification and collection of this
Agreement or in connection with the Loans made pursuant to this
Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrowers will keep Lender informed at
all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and affiliates
of Borrower. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sold
discretion of Lender.
UNDER OREGON LAW, MOST AGREEMENTS PROMISES AND COMMITMENTS MADCE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE.
BORROWER ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MAY
15, 2001.
BORROWER:
DIRECT FOCUS, INC.
X___________________________________
LENDER:
U.S. BANK NATIONAL ASSOCIATION
BY: ________________________________
AUTHORIZED OFFICER