CREDIT AGREEMENT
Between
USANA, Inc.
and
BANK OF AMERICA, N.A.
dated September 20, 1999
TABLE OF CONTENTS
Article 1 : Definitions..................................................1
1.1 General Provisions............................................1
1.2 Advances........................................................1
1.3 Available Amount................................................1
1.4 Business Day....................................................1
1.5 Consolidated....................................................1
1.6 Credit Limit....................................................1
1.7 Debt............................................................1
1.8 EBITDA..........................................................1
1.9 ERISA...........................................................1
1.10 Funded Debt.....................................................1
1.11 GAAP............................................................1
1.12 Leverage Ratio..................................................1
1.13 Loan Documents..................................................1
1.14 Margin..........................................................2
1.15 Notes...........................................................2
1.16 Obligations.....................................................2
1.17 Person..........................................................2
1.18 Plan............................................................2
1.19 Swap Contract...................................................2
1.20 Swap Obligations................................................2
1.21 Tangible Net Worth..............................................2
1.22 Termination Date................................................2
Article 2 : Revolving Loan...............................................3
2.1 Revolving Loan Facility.......................................3
2.2 Revolving Note..................................................3
2.3 Procedure for Advances..........................................3
2.4 Nonusage Fee....................................................3
Article 3 : Term Loan....................................................3
Article 4 : Collateral Security..........................................3
4.1 Collateral....................................................3
4.2 Maintenance of Security.........................................3
4.3 Negative Pledge.................................................3
4.4 Setoff..........................................................4
Article 5 : Conditions of Lending........................................4
5.1 Authorization.................................................4
5.2 Documentation...................................................4
5.3 Loan Fee........................................................4
5.4 Proof of Insurance..............................................4
5.5 Representations and Warranties..................................4
5.6 Compliance......................................................4
Article 6 : Representations and Warranties...............................4
6.1 Existence.....................................................4
6.2 Enforceability..................................................4
6.3 No Legal Bar....................................................4
6.4 Financial Information...........................................4
6.5 Liens and Encumbrances..........................................5
6.6 Litigation......................................................5
6.7 Payment of Taxes................................................5
6.8 Location of Borrower............................................5
6.9 Employee Benefit Plan...........................................5
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6.10 Misrepresentations..............................................5
6.11 No Default......................................................5
6.12 Year 2000 Compliance............................................5
6.13 No Burdensome Restrictions......................................5
Article 7 : Affirmative Covenants........................................5
7.1 Use of Proceeds...............................................5
7.2 Tangible Net Worth..............................................5
7.3 Leverage Ratio..................................................6
7.4 Fixed Charge Coverage Ratio.....................................6
7.5 Financial Information...........................................6
7.6 Maintenance of Existence........................................6
7.7 Books and Records...............................................6
7.8 Access to Premises and Records..................................6
7.9 Notice of Events................................................6
7.10 Payment of Debts and Taxes......................................7
7.11 Insurance.......................................................7
Article 8 : Negative Covenants...........................................7
8.1 Debt..........................................................7
8.2 Liens and Encumbrances..........................................7
8.3 Guaranties......................................................8
8.4 Disposition of Assets...........................................8
8.5 Mergers.........................................................8
8.6 Restricted Payments.............................................8
8.7 Wage and Hour Laws..............................................8
8.8 ERISA...........................................................8
8.9 Dissolution.....................................................8
8.10 Business Activities.............................................8
8.11 Permissible Loans and Investments...............................8
Article 9 : Events and Consequences of Default...........................9
9.1 Events of Default.............................................9
9.2 Remedies Upon Default..........................................10
Article 10 : Miscellaneous..............................................10
10.1 Manner of Payments...........................................10
10.2 Notices........................................................10
10.3 Documentation and Administration Expenses......................11
10.4 Collection Expenses............................................11
10.5 Waiver.........................................................11
10.6 Assignment.....................................................11
10.7 Merger.........................................................11
10.8 Amendments.....................................................11
10.9 Jurisdiction and Venue.........................................11
10.10 Mandatory Arbitration..........................................12
10.11 Construction...................................................12
10.12 Counterparts...................................................12
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is made between USANA, Inc., a Utah
corporation ("Borrower"), and Bank of America, N.A., a national banking
association ("Bank"). The parties agree as follows:
Article 1: Definitions
1.1 General Provisions. All terms defined below shall have the meaning
indicated. All references in this Agreement to:
(a) "dollars" or "$" shall mean U.S. dollars;
(b) "Article," "Section," or "Subsection" shall mean articles, sections,
and subsections of this Agreement, unless otherwise indicated;
(c) terms defined in the Washington version of the Uniform Commercial Code,
R.C.W. 62A.9-101, et seq., and not otherwise defined in this Agreement,
shall have the meaning given in the UCC; and
(d) an accounting term not otherwise defined in this Agreement shall have
the meaning assigned to it under GAAP.
1.2 Advances shall mean the disbursement of loan proceeds under the Revolving
Loan. An Advance shall not constitute a payment order under R.C.W.
ss.62A.4A-103.
1.3 Available Amount shall mean at any time the amount of the Credit Limit minus
the unpaid balance of the Revolving Note.
1.4 Business Day shall mean any day other than a Saturday, Sunday, or other day
on which commercial banks in Washington, are authorized or required by law to
close.
1.5 Consolidated shall refer to consolidated financial reporting of Borrower and
its subsidiaries.
1.6 Credit Limit shall mean $15,000,000.
1.7 Debt shall mean all Consolidated obligations, on a GAAP basis, included in
the liability section of a balance sheet of Borrower.
1.8 EBITDA shall mean earnings before interest expense, taxes, depreciation, and
amortization. For the quarter ending October 2, 1999, EBITDA shall exclude up to
$4,000,000 of one-time charges relating to shutting down Borrower's United
Kingdom facilities and other one-time expenses.
1.9 ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.10 Funded Debt shall mean, as of the date of determination, the aggregate
principal amount of all Debt for (a) borrowed money (other than trade
indebtedness incurred in the ordinary course of business for value received)
having a final maturity of one year or more from the date of determination; (b)
installment purchases of real or personal property; (c) capital leases; and (d)
guaranties of Funded Debt of others, without duplication.
1.11 GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States and as consistently applied by Borrower.
1.12 Leverage Ratio shall mean the ratio of Funded Debt to EBITDA, determined on
a four-quarter trailing basis.
1.13 Loan Documents shall mean collectively this Agreement, the Notes, and all
other mortgages, deeds of trust, security agreements, guaranties, documents,
instruments, and other agreements now or later executed in connection with this
Agreement.
1.14 Margin shall mean (a) as to Floating Rate Loans the "Floating Rate Margin"
as determined by the following chart; (b) as to LIBOR Rate Loans, the "LIBOR
Rate Margin" as determined by the following chart; and (c) as to the calculation
of the commitment fee under Section 2.4, the "Fee Margin" as determined by the
following chart:
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------------------------------ ---------------------------- --------------------------- ----------------------------
Leverage Ratio* Floating Rate Margin LIBOR Rate Margin Fee Margin
------------------------------ ---------------------------- --------------------------- ----------------------------
< 0.5 to 1 -0- 1.75% 0.25%
------------------------------ ---------------------------- --------------------------- ----------------------------
> 0.5 to 1 but <1.0 to 1 0.25% 2.00% 0.375%
-
------------------------------ ---------------------------- --------------------------- ----------------------------
> 1.0 to 1 but <1.5 to 1 0.50% 2.25% 0.50%
-
------------------------------ ---------------------------- --------------------------- ----------------------------
=> 1.5 to 1 0.75% 2.50% 0.50%
------------------------------ ---------------------------- --------------------------- ----------------------------
* as determined based on the most recently delivered quarterly Consolidated
financial statement of Borrower.
Upon receipt of a quarterly financial statement showing a decrease or increase
in Leverage Ratio which places Borrower in a new pricing category, the Notes and
nonusage fee shall begin being calculated at the higher or lower margin, as the
case may be, for the period beginning two Business Days after receipt by Bank of
such quarterly statement.
1.15 Notes shall mean the Revolving and Term Notes.
1.16 Obligations shall mean the Notes, all Swap Obligations, and all fees,
costs, expenses, and indemnifications due to Bank under this Agreement.
1.17 Person shall mean any individual, partnership, corporation, limited
liability company, business trust, unincorporated organization, joint venture,
or any governmental entity, department, agency, or political subdivision.
1.18 Plan shall mean any employee benefit plan or other plan maintained for
Borrower's employees and covered by Title IV of ERISA, excluding any plan
created or operated by or for any labor union.
1.19 Swap Contract shall mean any interest rate swap transaction, forward rate
transaction, interest rate cap, floor or collar transaction, swaption, bond or
bond price swap, option or forward, treasury lock, any similar transaction, any
option to enter into any of the foregoing and any combination of the foregoing,
which agreements may be oral or in writing including, without limitation, any
master agreement relating to or governing any or all of the foregoing any
related schedule or confirmations.
1.20 Swap Obligations shall mean all indebtedness and obligations of Borrower to
Bank under any Swap Contract, as any or all of them may from time to time be
modified, amended, extended, renewed and restated.
1.21 Tangible Net Worth shall mean the excess of Consolidated total assets over
Consolidated total liabilities, excluding, however, from the determination of
total assets (a) all assets which should be classified as intangible assets
(such as goodwill, patents, trademarks, copyrights, franchises, and deferred
charges, including unamortized debt discount and research and development
costs), (b) cash held in a sinking or other similar fund established for the
purpose of redemption or other retirement of capital stock, (c) to the extent
not already deducted from total assets, reserves for depreciation, depletion,
obsolescence, or amortization of properties and other reserves or appropriations
of retained earnings which have been or should be established in connection with
the business of Borrower and its subsidiaries, and (d) any revaluation or other
write-up in book value of assets subsequent to the fiscal year of Borrower last
ended at the date Tangible Net Worth is being measured.
1.22 Termination Date shall mean September 1, 2002, or such earlier date upon
which Bank's commitment to lend is terminated pursuant to Subsection 9.2(a).
Article 2: Revolving Loan
2.1 Revolving Loan Facility. Subject to the terms and conditions of this
Agreement, Bank shall make Advances to Borrower from time to time, until the
Termination Date ("Revolving Loan"), with the aggregate principal amount at any
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one time outstanding not to exceed the Credit Limit. Borrower may use the
Revolving Loan by borrowing, prepaying, and reborrowing the Available Amount, in
whole or in part.
2.2 Revolving Note. The obligation of Borrower to repay the Revolving Loan shall
be evidenced by a promissory note (including all renewals, modifications, and
extensions thereof, the "Revolving Note") made by Borrower to the order of Bank,
and shall bear interest as provided in the Revolving Note. The Revolving Note
shall be secured as provided in Article 4 and shall be in a form satisfactory to
Bank.
2.3 Procedure for Advances. Borrower may borrow under the Revolving Loan on any
Business Day. Borrower shall give Bank irrevocable notice (written or oral)
specifying the amount to be borrowed and the requested borrowing date. Bank must
receive such notice on or before 11:30 a.m., Seattle time, on the day borrowing
is requested, or by such earlier time as may be required under the Revolving
Note. All Advances shall be discretionary to the extent notification by Borrower
is given subsequent to that time. Borrower agrees that each Advance will be
automatically deposited into Borrower's account number 00000000 at Bank, or such
other of Borrower's accounts with Bank as designated in writing by Borrower.
2.4 Nonusage Fee. On the last Business Day of each December, March, June, and
September, and on the Termination Date, Borrower shall pay to Bank in arrears a
per annum commitment fee equal to (a) the Fee Margin, multiplied by (b) the
difference between the Credit Limit and the average daily outstanding principal
balance of the Revolving Note.
Article 3: Term Loan
Bank shall make to Borrower a term loan in the original principal
amount of $10,000,000 ("Term Loan"). The Term Loan shall be available in a
single advance until September 30, 1999, at which time Bank's commitment to make
the Term Loan shall terminate. The Term Loan shall have repayment terms as
provided in a promissory note made by Borrower to the order of Bank, in a form
satisfactory to Bank (including all renewals, modifications, and extensions
thereof, the "Term Note"). The Term Note shall be secured as provided in Article
4 and shall bear interest as provided in the Term Note.
Article 4: Collateral Security
4.1 Collateral. As security for the prompt payment and performance of all
Obligations, Borrower has granted or will grant to Bank a first lien security
interest in the following collateral (the "Collateral"): all of Borrower's
accounts, inventory, equipment, general intangibles, and all proceeds thereof.
4.2 Maintenance of Security. Borrower shall execute and deliver to Bank,
whenever requested, such security instruments as Bank deems necessary, in its
sole opinion, for the preservation of its security interest or to ensure the
priority of each security interest, and deliver to Bank all Collateral or
proceeds of Collateral, the perfection of which requires possession by Bank.
Borrower shall upon demand by Bank take whatever additional action is necessary
for Bank continuously to maintain a perfected first-lien security interest in
all Collateral. Borrower hereby irrevocably appoints Bank as its
attorney-in-fact, solely for the purpose of executing on Borrower's behalf any
financing statement or other security document deemed necessary by Bank to carry
out the purposes of this Article, which appointment shall continue so long as
this Agreement remains in effect or any Obligations remain outstanding.
4.3 Negative Pledge. So long as any amount is payable by Borrower under this
Agreement, Borrower shall not allow any Collateral to be transferred or
encumbered, except in the ordinary course of business or to secure the
obligations under this Agreement.
4.4 Setoff. Bank may exercise the right of setoff, assert its banker's lien, or
counterclaim against any interest of Borrower in each deposit account which
Borrower may now or later have with Bank, or any property which is now or shall
later be in Bank's possession.
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Article 5: Conditions of Lending
Bank's obligation to make the Term Loan and make the initial Advance is
subject to the conditions precedent listed in Sections 5.1 through 5.3, and to
make subsequent Advances is subject to the conditions precedent listed in
Sections 5.5 and 5.6 unless waived by Bank in writing:
5.1 Authorization. Borrower shall have delivered to Bank a certified copy of the
resolution of Borrower's board of directors authorizing the transactions
contemplated by this Agreement and the execution, delivery, and performance of
all Loan Documents, together with appropriate certificates of incumbency.
5.2 Documentation. Borrower shall have executed and delivered to Bank all
documents to reflect the existence of the Obligations and to perfect, as a first
lien, the security interests granted to Bank.
5.3 Loan Fee. Borrower shall have paid to Bank a loan fee to be agreed to
between Borrower and Bank.
5.4 Proof of Insurance. Proof of insurance as required by Section 7.11
shall have been provided to Bank.
5.5 Representations and Warranties. The representations and warranties made by
Borrower in the Loan Documents and in any certificate, document, or financial
statement furnished at any time shall continue to be true and correct, except to
the extent that such representations and warranties expressly relate to an
earlier date.
5.6 Compliance. No Default or other event which, upon notice or lapse of time or
both would constitute a Default, shall have occurred and be continuing, or shall
exist after giving effect to the advance of credit to be made.
Article 6: Representations and Warranties
To induce Bank to enter into this Agreement, Borrower represents,
warrants, and covenants to Bank as follows:
6.1 Existence. Borrower is in good standing as a corporation under the laws of
the State of Utah, and has the power, authority, and legal right to own and
operate its property or lease the property it operates and to conduct its
current business; and is qualified to do business and is in good standing in all
other jurisdictions where the ownership, lease, or operation of its property or
the conduct of its business requires such qualification.
6.2 Enforceability. The Loan Documents, when executed and delivered by Borrower,
shall be enforceable against Borrower in accordance with their respective terms.
6.3 No Legal Bar. The execution, delivery, and performance by Borrower of the
Loan Documents, and the use of the loan proceeds, shall not violate any existing
law or regulation applicable to Borrower; any ruling applicable to Borrower of
any court, arbitrator, or governmental agency or body of any kind; Borrower's
organizational documents; any security issued by Borrower; or any mortgage,
indenture, lease, contract, undertaking, or other agreement to which Borrower is
a party or by which Borrower or any of its property may be bound.
6.4 Financial Information. By submitting each of the financial statements
required by Subsection 7.5(a) and 7.5(b), Borrower is deemed to represent and
warrant that: (a) such statement is complete and correct and fairly presents the
Consolidated financial condition of Borrower as of the date of such statement;
(b) such statement discloses all Consolidated liabilities of Borrower that are
required to be reflected or reserved against under GAAP, whether liquidated or
unliquidated, fixed or contingent; and (c) such statement has been prepared in
accordance with GAAP. As of this date, there has been no adverse change in
Borrower's financial condition since preparation of the last such financial
statements delivered to Bank which would materially impair Borrower's ability to
repay the Obligations.
6.5 Liens and Encumbrances. As of this date, Borrower has good and marketable
title to its property free and clear of all security interests, liens,
encumbrances, or rights of others, except as disclosed in writing to Bank, and
4
except for taxes which are not yet delinquent and for conditions, restrictions,
easements, and rights of way of record which do not materially affect the use of
any of Borrower's property.
6.6 Litigation. Except as disclosed in writing to Bank, there is no threatened
(to Borrower's knowledge) or pending litigation, investigation, arbitration, or
administrative action which may materially adversely affect Borrower's business,
property, operations, or financial condition.
6.7 Payment of Taxes. Borrower has timely filed or caused to be filed all tax
returns when required to be filed; and has timely paid all taxes, assessments,
fees, licenses, excise taxes, franchise taxes, governmental liens, penalties,
and other charges levied or assessed against Borrower or any of its property
imposed on it by any governmental authority, agency, or instrumentality that are
due and payable (other than those returns or payments of which the amount,
enforceability, or validity are contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP are
provided on Borrower's books).
6.8 Location of Borrower. Borrower's place of business (or, if Borrower has more
than one place of business, its chief executive office) is located at the
address listed in this Agreement as Borrower's address for notice purposes.
6.9 Employee Benefit Plan. Borrower is in compliance in all respects with the
provisions of ERISA and the regulations and published interpretations
thereunder. Borrower has not engaged in any acts or omissions which would make
Borrower liable to the Plan, to any of its participants, or to the Internal
Revenue Service, under ERISA.
6.10 Misrepresentations. No information, exhibits, data, or reports furnished by
Borrower or delivered to Bank in connection with Borrower's application for
credit misstates any material fact, or omits any fact necessary to make such
information, exhibits, data, or reports not misleading.
6.11 No Default. Borrower is not in default in any Loan Document, or
in any contract, agreement, or instrument to which it is a party.
6.12 Year 2000 Compliance. On the basis of a comprehensive review and assessment
of Borrower's systems and equipment and inquiry made of Borrower's material
suppliers, vendors, and customers, Borrower reasonably believes that the "Year
2000 problem" (that is, the inability of computers, as well as embedded
microchips in non-computing devices, to perform properly date-sensitive
functions with respect to certain dates prior to and after December 31, 1999),
including costs of remediation, will not result in a material adverse change in
the operations, business, properties, condition (financial or otherwise) or
prospects of Borrower. Borrower has developed feasible contingency plans
adequately to ensure uninterrupted and unimpaired business operation in the
event of failure of its own or a third party's systems or equipment due to the
Year 2000 problem, including those of vendors, customers, and suppliers, as well
as a general failure of or interruption in its communications and delivery
infrastructure. 6.13 No Burdensome Restrictions. No contract or other instrument
to which Borrower is a party, or order, award, or decree of any court,
arbitrator, or governmental agency, materially impairs Borrower's ability to
repay the Obligations.
Article 7: Affirmative Covenants
So long as this Agreement shall remain in effect, or any liability
exists under the Loan Documents, Borrower shall:
7.1 Use of Proceeds. Use the proceeds of the Revolving Loan and the Term Loan to
buy back capital stock of Borrower and for other general corporate purposes.
7.2 Tangible Net Worth. Maintain a Tangible Net Worth of not less than
$30,000,000, measured as of each fiscal quarter end, excluding the effect of any
permitted stock repurchases.
7.3 Leverage Ratio. Maintain a Leverage Ratio of not more than 2.0 to 1,
on a four-quarter trailing basis.
7.4 Fixed Charge Coverage Ratio. Maintain the following totals in a
ratio of not less than 1.3 to 1, on a four-quarter trailing basis:
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(a) EBITDA minus the sum of (i) capital expenditures, and (ii) taxes, to
(b) The sum of (i) interest expense plus (ii) current portion of long-term Debt.
7.5 Financial Information. Maintain a standard system of accounting in
accordance with GAAP, and furnish to Bank the following:
(a) Quarterly Financial Statements. As soon as available and, in any
event, within 45 days after the end of each except the last fiscal
quarter of each fiscal year, a copy of the Consolidated statement of
income and retained earnings of Borrower for the quarter and for the
current fiscal year through such quarter, and for each such quarter a
copy of the Consolidated balance sheet, Consolidated statement of
shareholders' equity, and Consolidated statement of cash flows of
Borrower as of the end of such quarter, setting forth, in each case,
in comparative form, figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and satisfactory in
scope to Bank, prepared under the supervision of the chief financial
officer of Borrower, and in form and substance satisfactory to Bank;
(b) Annual Financial Statements. As soon as available and, in any event,
within 120 days after the end of each fiscal year, a copy of the
Consolidated balance sheet, Consolidated statement of income and
retained earnings, Consolidated statement of shareholders' equity, and
Consolidated statement of cash flows of Borrower for such year,
setting forth in each case, in comparative form, corresponding figures
from the preceding annual statements, each audited by independent
certified public accountants of recognized standing selected by
Borrower and satisfactory to Bank certifying that such statement is
complete and correct, fairly presents without qualification the
financial condition of Borrower for such period, is prepared in
accordance with GAAP, and has been audited in conformity with
generally accepted auditing standards;
(c) SEC Reporting. As soon as made available to the Securities and Exchange
Commission or Borrower's shareholders, copies of all 10Q and 10K
filings or their equivalent;
(d) Compliance Certificate. With each of the statements delivered
pursuant to Subsections 7.5(a) and (b) above, a certificate in the
form of Exhibit A attached; and
(e) Other Information. Such other reports and information as Bank shall
reasonably request from time to time.
7.6 Maintenance of Existence. Preserve and maintain its existence, powers, and
privileges in the jurisdiction of its formation, and qualify and remain
qualified in each jurisdiction in which its presence is necessary or desirable
in view of its business, operations, or ownership of its property. Borrower
shall also maintain and preserve all of its property which is necessary or
useful in the proper course of its business, in good working order and
condition, ordinary wear and tear excepted.
7.7 Books and Records. Keep accurate and complete books, accounts, and records
in which complete entries shall be made in accordance with GAAP, reflecting all
financial transactions of Borrower.
7.8 Access to Premises and Records. At all reasonable times and as often as Bank
may reasonably request, permit any authorized representative designated by Bank
to have access to the premises, property, and financial records of Borrower,
including all records relating to the finances, operations, and procedures of
Borrower, and to make copies of or abstracts from such records.
7.9 Notice of Events. Furnish Bank prompt written notice of:
(a) Proceedings. Any proceeding instituted by or against Borrower in any
court or before any commission or regulatory body, or any proceeding
threatened against it in writing by any governmental agency which if
adversely determined would have a material adverse effect on Borrower's
business, property, or financial condition, or where the amount
involved is $100,000 or more and not covered by insurance;
(b) Material Development. Any material development in any such proceeding
referred to in Subsection 7.9(a);
6
(c) Defaults. Any accident, event, or condition which is or, with notice or
lapse of time or both, would constitute a Default, or a default under
any other agreement to which Borrower is a party; and
(d) Adverse Effect. Any other action, event, or condition of any nature
which could result in a material adverse effect on the business,
property, or financial condition of Borrower.
7.10 Payment of Debts and Taxes. Pay all Debt and perform all obligations
promptly and in accordance with their terms, and pay and discharge promptly all
taxes, assessments, and governmental charges or levies imposed upon Borrower,
its property, or revenues prior to the date on which penalties attach thereto,
as well as all lawful claims for labor, material, supplies, or otherwise which,
if unpaid, might become a lien or charge upon Borrower's property. Borrower
shall not, however, be required to pay or discharge any such tax, assessment,
charge, levy, or claim so long as its enforceability, amount, or validity is
contested in good faith by appropriate proceedings.
7.11 Insurance. Maintain commercially adequate levels of coverage with
financially sound and reputable insurers, including, without limitation:
(a) Property Insurance. Insurance on all property of a character usually
insured by organizations engaged in the same or similar type of
business as Borrower against all risks, casualties, and losses through
extended coverage or otherwise and of the kind customarily insured
against by such organizations, with such policy or policies covering
tangible collateral to name Bank as loss payee, as its interests may
appear ;
(b) Liability Insurance. Public liability insurance against tort claims
which may be asserted against Borrower; and
(c) Additional Insurance. Such other insurance as may be required by law.
Article 8: Negative Covenants
So long as this Agreement shall remain in effect, or any liability
shall exist under the Loan Documents, Borrower shall not, without prior written
consent of Bank, which consent shall not be unreasonably withheld:
8.1 Debt. Create, incur, assume, permit to exist, or otherwise become
committed for any Debt except any:
(a) Unsecured Trade Credit. Unsecured, short-term Debt arising from
current operations by purchasing on credit goods, services, supplies,
or merchandise and not constituting borrowings;
(b) Existing Obligations. Debt owing to Bank, or in existence as of
this date and disclosed to Bank, and all renewals, modifications, and
extensions thereof;
(c) Lease Agreements. Debt incurred in connection with capital leases
calling for payments in the aggregate not exceeding $100,000 in any
one fiscal year; and
(d) Ordinary Course. Debt incurred in the ordinary course of business and
appearing on the liability section of the balance sheet of Borrower,
prepared in accordance with GAAP, including, without limitation,
accrued liabilities and taxes payable.
8.2 Liens and Encumbrances. Create, incur, or assume, or agree to create, incur,
or assume any lien, whether consensual or nonconsensual, on any of its property,
or to enter into any lease with respect to any of its property except:
(a) Existing Liens. Liens in effect as of this date;
(b) Liens of Bank. Liens in favor of Bank;
(c) Tax Liens. Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings; and
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(d) Incidental Liens. Other liens incidental to the conduct of its business
or the ownership of its property which are not incurred in connection
with the borrowing of money or the obtaining of credit, and which do
not in the aggregate materially impair the value or use of property.
8.3 Guaranties. Assume, guaranty, endorse, become a surety for, indemnify, or
otherwise in any fashion become responsible for, directly or indirectly, any
obligation of any Person, except:
(a) Negotiable Instruments. Endorsements on negotiable instruments for
deposit or collection in the ordinary course of business; and
(b) Performance Bonds. Performance bonds as required in the ordinary course of
Borrower's business.
8.4 Disposition of Assets. Sell, transfer, lease, or otherwise assign or dispose
of a substantial portion of its property to any Person, outside the ordinary
course of business, other than the sale of Borrower's United Kingdom
distribution facility, which shall be permitted in any event.
8.5 Mergers. Become a party to any merger, consolidation, or like structural
change, or make any substantial transfer or contribution to, or material
investment in, stock, shares, or licenses of any Person.
8.6 Restricted Payments. Repurchase Borrower's stock, pay dividends, make
shareholder loans, or make any other similar distributions ("Restricted
Payments"), except for (a) the repurchase of up to $30,000,000 of its common
stock to be partially funded by the Revolving Loan and Term Loan, and (b)
Restricted Payments which will not cause the Leverage Ratio for the quarter in
which such Restricted Payment is made or accrued to exceed 1.5 to 1.
8.7 Wage and Hour Laws. Engage in any material violation of the federal Fair
Labor Standards Act or any comparable state wage and hour law.
8.8 ERISA. Engage in any act or omission which would make Borrower materially
liable under ERISA to the Plan, to any of its participants, or to the Internal
Revenue Service.
8.9 Dissolution. Adopt any agreement or resolution for dissolving, terminating,
or substantially altering Borrower's present business activities.
8.10 Business Activities. Engage or enter into any activity which is
unusual to Borrower's existing business.
8.11 Permissible Loans and Investments. Make any loan or advance to any Person
other than in the ordinary course of business, or make any investment outside
the ordinary course of Borrower's business, except:
(a) Certificates of Deposit. Investments in certificates of deposit
maturing within one year from the date of acquisition from any one or
more of the top 000 xxxxxxxxxx xxxxx xx xxx Xxxxxx Xxxxxx;
(b) Money Market. Money market mutual funds, bankers' acceptances,
eurodollar investments, repurchase agreements, and other short-term
money market investments acceptable to Bank;
(c) Commercial Paper. Prime commercial paper with maturities of less than
one year; and
(d) U. S. Government Paper. Obligations issued or guaranteed by the
United States Government or its agencies.
Article 9: Events and Consequences of Default
9.1 Events of Default. Any of the following events shall, at the option of Bank
and at any time without regard to any previous knowledge on the part of Bank,
constitute a default by Borrower under the terms of this Agreement, the Notes,
and all other Loan Documents ("Default"):
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(a) Nonpayment. Any payment or reimbursement due or demanded under this
Agreement or any Loan Document is not made within three days of the
date when due;
(b) Breach of Warranty. Any representation or warranty made in connection
with this Agreement or any other Loan Document, or any certificate,
notice, or report furnished pursuant hereto, is determined by Bank to
be false in any respect when made, and is relied upon by Bank to its
detriment, or any of Borrower's representations regarding the "Year
2000 problem" cease to be true, whether or not true when made, and as a
result Bank reasonably believes that Borrower's financial condition or
its ability to pay its debts as they come due will thereby be
materially impaired;
(c) Failure to Perform. Any other term, covenant, or agreement contained in
any Loan Document is not performed or satisfied, and, if remediable,
such failure continues unremedied for 30 days after written notice
thereof has been given to Borrower by Bank;
(d) Collateral. Bank fails to have a valid, enforceable, and perfected
first lien security interest in the Collateral, and such failure
continues for 30 days after Borrower receives written notice thereof
from Bank;
(e) Defaults on Other Obligations. There exists a default in the
performance of any other agreement or obligation for the payment of
borrowed money, for the deferred purchase price of property or
services, or for the payment of rent under any lease, whether by
acceleration or otherwise, which would permit such obligation to be
declared due and payable prior to its stated maturity; and such default
continues for 30 days after Borrower receives written notice thereof
from the creditor so affected;
(f) Loss, Destruction, or Condemnation of Property. A portion of Borrower's
property is affected by any uninsured loss, damage, destruction, theft,
sale, or encumbrance other than created herein or is condemned, seized,
or appropriated, the effect of which materially impairs Borrower's
financial condition or its ability to pay its debts as they come due;
(g) Attachment Proceedings and Insolvency. Borrower or any of Borrower's
property is affected by any:
(i) Judgment lien, execution, attachment, garnishment, general
assignment for the benefit of creditors, sequestration, or
forfeiture, to the extent Borrower's financial condition or
its ability to pay its debts as they come due is thereby
materially impaired; or
(ii) Proceeding under the laws of any jurisdiction relating to
receivership, insolvency, or bankruptcy, whether brought
voluntarily or involuntarily by or against Borrower,
including, without limitation, any reorganization of assets,
deferment or arrangement of debts, or any similar proceeding,
and, if such proceeding is involuntarily brought against
Borrower, it is not dismissed within 60 days;
(h) Judgments. Final judgment on claims not covered by insurance which,
together with other outstanding final judgments against Borrower,
exceeds $500,000, is rendered against Borrower and is not discharged,
vacated, or reversed, or its execution stayed pending appeal, within 60
days after entry, or is not discharged within 60 days after the
expiration of such stay; or
(i) Government Approvals. Any governmental approval, registration, or
filing with any governmental authority, now or later required in
connection with the performance by Borrower of its obligations under
the Loan Documents, is revoked, withdrawn, or withheld, or fails to
remain in full force and effect, except Borrower shall have 60 days
after notice of any such event to take whatever action is necessary to
obtain all necessary approvals, registrations, and filings.
9.2 Remedies Upon Default. If any Default occurs under Subsection 9.1(g), Bank's
commitment to make Advances shall immediately and automatically terminate, and
all Obligations, including all accrued interest, shall immediately and
automatically become due and payable, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived by Borrower, and
Bank may immediately exercise any or all of the following remedies for Default;
and if any other Default occurs and is continuing, Bank may, upon notice to
Borrower:
9
(a) Terminate Commitments. Terminate Bank's commitment to make Advances;
(b) Suspend Commitments. Refuse to make Advances until any Default has
been cured;
(c) Accelerate. Declare all or any of the Notes, together with all accrued
interest, to be immediately due and payable without presentment,
demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower;
(d) Collateral. Proceed to realize on any or all Collateral by any
available means; and/or
(e) Setoff. Exercise its right of setoff against deposit accounts of
Borrower with Bank, or place an administrative freeze on any such
accounts; and/or
(f) All Remedies. Pursue any other available legal and equitable remedies.
All of Bank's rights and remedies in all Loan Documents shall be cumulative and
can be exercised separately or concurrently.
Article 10: Miscellaneous
10.1 Manner of Payments.
(a) Payments on Nonbusiness Days. Whenever any event is to occur or any
payment is to be made under any Loan Document on any day other than a
Business Day, such event may occur or such payment may be made on the
next succeeding Business Day and such extension of time shall be
included in computation of interest in connection with any such
payment.
(b) Payments. All payments and prepayments to be made by Borrower shall be
made to Bank when due, at Bank's office as may be designated by Bank,
without offsets or counterclaims for any amounts claimed by Borrower to
be due from Bank, in U.S. dollars and in immediately available funds.
Borrower agrees that all principal and interest payments may be
deducted automatically on the due date from Borrower's account number
00000000 at Bank, or such other of Borrower's accounts with Bank as
designated in writing by Borrower. Bank will debit the account on the
dates the payments become due. If a due date does not fall on a
Business Day, Bank will debit the account on the first Business Day
following the due date.
(c) Application of Payments. All payments made by Borrower shall be applied
first against fees, expenses, and indemnities due; second, against
interest due; and third, against principal, with Bank having the right,
after a Default which is continuing, to apply any payments or
collections received against any one or more of the Obligations in any
manner which Bank may choose.
(d) Recording of Payments. Bank is authorized to record on a schedule or
computer-generated statement the date and amount of each Advance, all
changes in interest rates, and all payments of principal and interest.
All such schedules or statements shall constitute prima facie evidence
of the accuracy of the information so recorded.
10.2 Notices. Bank may make Advances, and make conversions between interest
rates, based on telephonic, telex, and oral requests made by any one or more of
Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, or Xxxxxxxx Xxxxxxxxxx. All other notices,
demands, and other communications to be given pursuant to any of the Loan
Documents shall be in writing and shall be deemed received the earlier of when
actually received, or two days after being mailed, postage prepaid and addressed
as follows, or as later designated in writing:
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Bank: Borrower:
BANK OF AMERICA USANA, Inc.
Commercial Banking 0000 Xxxx Xxxxxxx Xxxxxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx Xxxx Xxxx Xxxx, Xxxx 00000
Xxxxxxx, XX 00000 Attention: Xxxxxxx Xxxxxx
Attention: Xxxx Xxxxxxx
10.3 Documentation and Administration Expenses. Borrower shall pay, reimburse,
and indemnify Bank for all of Bank's reasonable costs and expenses, including,
without limitation, all accounting, appraisal, and report preparation fees or
expenses, all attorneys' fees (including the allocated cost of in-house
counsel), legal expenses, and recording or filing fees, incurred in connection
with the negotiation, preparation, execution, and administration of this
Agreement and all other Loan Documents, and all amendments, supplements, or
modifications thereto, and the perfection of all security interests, liens, or
encumbrances that may be granted to Bank. Borrower acknowledges that any legal
counsel retained or employed by Bank acts solely on Bank's behalf and not on
Borrower's behalf, despite Borrower's obligation to reimburse Bank for the cost
of such legal counsel, and that Borrower has had sufficient opportunity to seek
the advice of its own legal counsel with regard to this Agreement.
10.4 Collection Expenses. The nonprevailing party shall, upon demand by the
prevailing party, reimburse the prevailing party for all of its costs, expenses,
and reasonable attorneys' fees (including the allocated cost of in-house
counsel) incurred in connection with any controversy or claim between said
parties relating to this Agreement or any of the other Loan Documents, or to an
alleged tort arising out of the transactions evidenced by this Agreement,
including those incurred in any action, bankruptcy proceeding, arbitration or
other alternative dispute resolution proceeding, or appeal, or in the course of
exercising any judicial or nonjudicial remedies.
10.5 Waiver. No failure to exercise and no delay in exercising, on the part of
Bank, any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power, or privilege. Further, no waiver or
indulgence by Bank of any Default shall constitute a waiver of Bank's right to
declare a subsequent similar failure or event to be a Default.
10.6 Assignment. This Agreement is made expressly for the sole benefit of
Borrower and for the protection of Bank and its successors and assigns. The
rights of Borrower hereunder shall not be assignable by operation of law or
otherwise, without the prior written consent of Bank.
10.7 Merger. The rights and obligations set forth in this Agreement shall not
merge into or be extinguished by any of the Loan Documents, but shall continue
and remain valid and enforceable. This Agreement and the other Loan Documents
constitute Bank's entire agreement with Borrower with regard to the Revolving
Loan and the Term Loan, and supersede all prior writings and oral negotiations.
Upon execution of this Agreement, any prior loan agreement between Borrower and
Bank shall be deemed superseded by this Agreement, and amounts outstanding under
such prior agreement and its related loan documents shall be deemed Advances
under the Revolving Loan. No oral or written representation, covenant,
commitment, waiver, or promise of either Bank or Borrower shall have any effect,
whether made before or after the date of this Agreement, unless contained in
this Agreement or another Loan Document, or in an amendment complying with
Section 10.8. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE
UNDER WASHINGTON LAW.
10.8 Amendments. Any amendment or waiver of, or consent to any departure by
Borrower from any provision of, this Agreement shall be in writing signed by
each party to be bound thereby, and shall be effective only in the specific
instance and for the specific purpose for which given.
10.9 Jurisdiction and Venue. Borrower irrevocably consents to the personal
jurisdiction of the state and federal courts located in the State of Washington
in any action brought under this Agreement or any other Loan Document, and any
action based upon the transactions encompassed by this Agreement, whether or not
based in contract. Venue of any such action shall be laid in King County,
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Washington, unless some other venue is required for Bank to fully realize upon
the assets of Borrower, or any collateral or guaranties.
10.10 Mandatory Arbitration.
(a) At the request of either Bank or Borrower, any controversy or claim
between Bank and Borrower, arising from or relating to this Agreement
or any of the other Loan Documents, or arising from an alleged tort,
shall be settled by arbitration in Seattle, Washington. The United
States Arbitration Act shall apply even though this Agreement is
otherwise governed by Washington law. The proceedings shall be
administered by the American Arbitration Association under its
commercial rules of arbitration. Any controversy over whether an issue
is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction
over the parties. The institution and maintenance of an action for
judicial relief or pursuit of an ancillary or provisional remedy shall
not constitute a waiver of the right of either party, including the
plaintiff, to submit the controversy or claim to arbitration if such
action for judicial relief is contested. For purposes of the
application of the statute of limitations, the filing of an
arbitration pursuant to this subsection is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be
arbitrated under this subsection is subject to any applicable statute
of limitations. The arbitrator(s) will have the authority to decide
whether any such claim or controversy is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis. The
parties consent to the joinder of any guarantor, hypothecator, or
other party having an interest relating to the claim or controversy
being arbitrated in any proceedings under this Section.
(b) Notwithstanding the provisions of subsection (a), no controversy or
claim shall be submitted to arbitration without the consent of all
parties if at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation secured by real property.
(c) No provision of this subsection shall limit the right of Borrower or
Bank to exercise self-help remedies such as set-off, foreclosure,
retention or sale of any collateral, or obtaining any ancillary,
provisional, or interim remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration proceeding.
The exercise of any such remedy does not waive the right of either
party to request arbitration.
10.11 Construction. Each term of this Agreement and each Loan Document shall be
binding to the extent permitted by law and shall be governed by the laws of the
State of Washington, excluding its conflict of laws rules. If one or more of the
provisions of this Agreement should be invalid, illegal, or unenforceable in any
respect, the remaining provisions of this Agreement shall remain effective and
enforceable. If there is a conflict among the provisions of any Loan Documents,
the provisions of this Agreement shall be controlling. The captions and
organization of this Agreement are for convenience only, and shall not be
construed to affect any provision of this Agreement.
10.12 Counterparts. This Agreement and each Loan Document may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures to such counterparts were upon the same instrument.
DATED as of the 20th day of September, 1999.
Borrower: Bank:
USANA, Inc. BANK OF AMERICA, N.A.
By By
Xxxxxxx X. Xxxxxx, SVP & CFO Xxxxxxx X. Xxxxxxx, Vice President
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EXHIBIT A TO CREDIT AGREEMENT
[Form of Certificate to be sent with financial reports]
[Date]
Bank of America, N.A.
Commercial Banking
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Re: Certificate of Chief Financial Officer
Ladies and Gentlemen:
With respect to that certain Credit Agreement between USANA, Inc. ("Borrower"),
and Bank of America, N.A. ("Bank") dated as of September 21, 1999 (the
"Agreement"), we hereby represent to you the following (capitalized terms used
in this certificate shall have the same meaning as in the Agreement):
1. Enclosed are financial statements required by Section 7.5 of the Agreement.
2. As of the date of such financial statements, Borrower's Tangible Net Worth is
$__________________.
3. The cumulative amount of stock repurchased during the reporting period is
$_______________.
4. As of the date of such financial statements, Borrower's Leverage Ratio,
as defined in Section 7.3, is ______ to 1.
5. As of the date of such financial statements, Borrower's ratio of Fixed
Charge Coverage Ratio, as defined in Section 7.4, is ______ to 1.
6. Such financial statements are complete and correct, fairly present,
without qualification, the Consolidated financial condition of Borrower
for such period, and are prepared in accordance with GAAP;
7. No Default exists, nor any event which, with lapse of time or upon the
giving of notice would constitute a Default under the Agreement.
Sincerely,
---------------------------
Chief Financial Officer
USANA, Inc.
