<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 19, 1999
REHABILICARE INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA (NO. 0-9407) 41-0985318
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(State or other jurisdiction of Commission File No. (I.R.S. Employer
incorporation or organization) Identification No.)
1811 Old Highway 8
New Brighton, MN 55112
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(Address of principal executive offices) (Zip Code)
(651) 638-0590
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(Registrant's telephone number, including area code)
<PAGE>
CERTAIN STATEMENTS IN THIS CURRENT REPORT ON FORM 8-K REGARDING THE
EXPECTATIONS AND BELIEFS OF THE COMPANY ARE NOT STATEMENTS OF HISTORICAL FACT
AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING THE RISKS
INHERENT IN INTEGRATING AN ACQUIRED BUSINESS, THE RISKS RELATED TO OPERATION
OF BUSINESSES OVERSEAS, THE RISKS OF NEW PRODUCT ACCEPTANCE AND DISTRIBUTION,
AND THE RISKS OF EMPLOYEE RETENTION AND COMMUNICATION.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 19, 1999, Rehabilicare Inc. (the "Company") completed the
acquisition of all of the outstanding capital stock of Compex SA ("Compex"),
a Swiss company that designs, develops and markets home use electrotherapy
products for the medical, sports and fitness markets in Europe. Pursuant to
the Share Purchase Agreement (the "Agreement") between Rehabilicare and the
shareholders of Compex (the "Shareholders"), Rehabilicare paid the
Shareholders $11,000,000 of cash at closing, less prepaid expenses of
$73,725. Of the purchase price, $500,000 represented indebtedness of Compex
to the Shareholders. In addition, the Company agreed to pay the Shareholders
up to $2,000,000 of additional consideration based on net revenue generated
by Compex in the 1999 and 2000 calendar years.
The purchase price was financed through a new credit facility with a
commercial bank that incorporated the Company's existing credit facilities.
The new facility included a $15 million term loan (the proceeds of which were
used to acquire Compex and to refinance the Company's existing indebtedness)
and a $5 million revolving credit facility (to be used for working capital
needs). The term loan matures July 2004; is repayable, with interest, in
installments of $400,000 (increasing over time to $600,000) plus 50% of
excess cash flow per quarter, bears interest at a premium to prime or LIBOR
of up to .5% and 2.75%, respectively; and is secured by substantially all of
the Company's assets. The revolving credit facility matures July 2001; bears
a .375% unused line fee; bears interest at .25% less than the term loan and
is also collateralized by substantially all of the Company's assets.
Compex was founded in 1986 and introduced its first stimulation
product to the European medical markets in 1988. Compex's current stimulation
technology was introduced in 1994 and is marketed to rehabilitation centers,
sports physicians and physical therapists. Compex's most rapid revenue growth
has come from sports products that are sold directly to athletes for
strengthening and training muscles and assisting in muscle recovery after
strenuous workouts. The sports products are customized for both elite
athletes and "weekend athletes." They are endorsed by well-known European
athletes and sold at specialty sporting goods shops.
The Company entered into long-term employment contracts with
Compex's management team, which will remain with Compex. In addition to new
products and product markets, the Company believes that Compex will allow
expanded distribution in European markets and that Compex's experienced
engineering staff will enhance the Company's product development capabilities.
Compex will operate as a wholly-owned subsidiary of Rehabilicare.
Its products will continue to be marketed under the Compex name.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements of the business acquired
Financial statements required by this item will be filed by
amendment to this initial report no later than September
28, 1999.
b) Pro forma financial information
Pro forma financial information required by this item will
be filed by amendment to this initial report no later than
September 28, 1999.
c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<S> <C>
2.1 Share Purchase Agreement dated July 19, 1999
between the Shareholders of Compex SA and
Rehabilicare Inc.
4.1 Credit Agreement dated July 14, 1999 between
Rehabilicare Inc. and U.S. Bank National
Association.
4.2 Security Agreement dated July 14, 1999 between
Rehabilicare Inc. and U.S. Bank National
Association.
4.3 Stock Pledge Agreement dated July 19, 1999
between Rehabilicare Inc. and U.S. Bank National
Association covering all shares of capital stock
in Compex SA owned by Rehabilicare Inc.
4.4 Guarantee dated July 19, 1999 executed by Compex
SA in favor of U.S. Bank National Association.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
REHABILICARE INC.
By /s/ W. GLEN WINCHELL
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W. Glen Winchell, Vice President of
Finance
Dated: July 30, 1999
<PAGE>
SHARE PURCHASE AGREEMENT
(the "AGREEMENT")
between
THE SHAREHOLDERS OF COMPEX AS PER SCHEDULE 1
hereinafter the "SELLERS"
and
REHABILICARE INC.
hereinafter the "PURCHASER"
regarding
COMPEX SA
hereinafter the "COMPANY"
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Share Purchase Agreement 2
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TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS................................................................................4
ARTICLE I - PURCHASE AND SALE OF SHARES....................................................6
I.1 PURCHASE AND SALE................................................................6
I.2 PURCHASE PRICE...................................................................7
I.3 PURCHASE PRICE COMPUTATION.......................................................7
I.4 PURCHASE PRICE PAYMENT...........................................................7
I.5 DELIVERY OF AUDITORS' STATEMENT..................................................8
I.6 OBJECTION TO EARN OUT AMOUNT.....................................................8
ARTICLE II - CLOSING.......................................................................9
II.1 PLACE AND DATE...................................................................9
II.2 CLOSING DOCUMENTS................................................................9
II.2.1 At Closing, Sellers Deliver to Purchaser......................................9
II.2.2 At Closing, Purchaser Delivers to Sellers.....................................9
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLERS....................................9
(a) Ownership of Shares..........................................................10
(b) Organisation of Company......................................................10
(c) Capitalisation...............................................................10
(d) Share Capital Paid up........................................................10
(e) Organisation of the Group....................................................10
(f) Ownership of Group Companies.................................................10
(g) Organisation of the Group Companies..........................................11
(h) No Contractual Rights of Third Party over Equity Interest....................11
(i) Financial Statements.........................................................11
(j) No Undisclosed Liabilities...................................................11
(k) Accounts Receivable..........................................................12
(l) Capital Improvements.........................................................12
(m) Absence of Change............................................................12
(n) Insolvency...................................................................13
(o) Taxes........................................................................14
(p) Environment..................................................................15
(q) Leases;......................................................................15
(r) Condition of Assets; Sufficiency.............................................16
(s) Intellectual Property Rights.................................................16
(t) Contracts....................................................................17
(u) Litigation...................................................................17
(v) Compliance with Laws.........................................................17
(w) Insurance....................................................................18
(x) Product Liability............................................................18
(y) Employees....................................................................18
(z) Professional and Social Welfare..............................................19
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Share Purchase Agreement 3
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(aa) No Collective Bargaining.....................................................19
(bb) Bank Accounts................................................................19
(cc) Millennium...................................................................19
(dd) Accuracy of Information......................................................20
(ee) Termination of Agreements between the Company and the Sellers................20
ARTICLE IV - COVENANTS....................................................................20
IV.1 AGREEMENTS......................................................................20
IV.2 COVENANT NOT TO COMPETE AND NOT TO SOLICIT......................................20
IV.3 FIDUCIARY AGREEMENT.............................................................21
ARTICLE V - INDEMNIFICATION...............................................................21
V.1 PRINCIPLE OF THE WARRANTY INDEMNIFICATION.......................................21
V.2 LIMITATION IN TIME..............................................................21
V.3 CAP; THRESHOLD..................................................................22
V.4 INDEMNIFICATION BY PURCHASER....................................................22
V.5 THIRD PARTY CLAIMS..............................................................22
V.6 ADJUSTMENT OF INDEMNITY PAYMENT.................................................23
V.7 EXCLUSIVE REMEDY................................................................23
V.8 EFFECTS OF INSURANCE ON INDEMNITY PAYMENT.......................................23
ARTICLE VI - MISCELLANEOUS................................................................24
VI.1 NOTICES.........................................................................24
VI.2 ENTIRE AGREEMENT................................................................25
VI.3 SEVERABILITY OF PROVISIONS......................................................25
VI.4 BINDING EFFECT, BENEFIT.........................................................25
VI.5 ASSIGNABILITY...................................................................25
VI.6 AMENDMENT AND MODIFICATION; WAIVER..............................................25
VI.7 ANNOUNCEMENTS...................................................................26
(a) Employees....................................................................26
(b) Press Release................................................................26
VI.8 CONFIDENTIALITY..............................................................26
VI.9 ADVISER'S FEES; EXPENSES.....................................................26
VI.10 APPLICABLE LAW...............................................................26
VI.11 ARBITRATION..................................................................26
LIST OF ANNEXES...........................................................................29
LIST OF SCHEDULES.........................................................................30
</TABLE>
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Share Purchase Agreement 4
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WHEREAS the Company is a company incorporated in Switzerland, having its
registered office at Zone Industrielle "Larges Pieces", 1024 Ecublens,
Switzerland; and
WHEREAS the Company has a fully paid-up share capital of CHF 600'000.-,
divided into 600 registered shares with a par value of CHF 1'000.- each; and
WHEREAS the Sellers are currently the owners of the entire outstanding share
capital; and
WHEREAS the Company is the parent company of the Group Companies as defined
below; and
WHEREAS the Sellers desire to sell all of the outstanding shares of the
Company, and in reliance upon the representations, warranties and
undertakings set out in this Agreement, the Purchaser desires to purchase all
of the outstanding shares on the terms and conditions set out in this
Agreement;
NOW THEREFORE, the parties hereto agree as follows:
DEFINITIONS
"ACCOUNTS" shall mean the financial statements (composed of the income
statement, the balance sheet, the cash-flow statement and notes to the
financial statements) and the audited annual report if applicable of each of
the Company and the Group Companies as well as the consolidated financial
statements of the Company.
"ACCOUNTS RECEIVABLE" shall mean any and all accounts receivable, trade
receivables, notes receivable and other receivables arising out of the
Business.
"BEST KNOWLEDGE" shall mean knowledge after having made due and careful
inquiries.
"BUSINESS" shall mean the business carried on by the Company and the Group
Companies as of the date hereof, in particular the development, design, sale
and distribution of portable, low electrical consumption electrotherapy
devices to physical therapists, therapy centres, athletes, beauty parlours
and fitness centres, mainly in Europe.
"CHF" shall mean the lawful currency of Switzerland.
"CLOSING" shall have the meaning set forth in Article III.1.
"CLOSING DATE" shall have the meaning set forth in Article III.1.
"CORPORATE DOCUMENTS" shall mean the shares or share certificates
representing the Sale Shares, the share register of the Company and each
Group Company, minutes of general shareholders' meetings of the Company and
each Group Company for the last five years, minutes of the board of
directors' meetings of the Company and each Group Company for the last five
years (as far as existing), the report of the auditors to the shareholders
for the last five years and up-to-date copies of the articles of association
of the Company and each Group Company.
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Share Purchase Agreement 5
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"DUE DILIGENCE REPORTS" shall mean a legal due diligence report by Lenz &
Staehelin, dated 1st July 1999, attached hereto as SCHEDULE 4, and an
accounting and tax due diligence report by PricewaterhouseCoopers, dated June
1999, attached hereto as SCHEDULE 5.
"EARN OUT AMOUNT" shall mean USD 2'000'000.- (two million United States
dollars).
"AGREEMENTS" shall mean the agreements among the Company on the one hand and
the Key Persons on the other hand, entered into immediately upon Closing on
appropriate commercial terms mutually satisfactory to both parties,
substantially in the formS set out in SCHEDULE 2.
"ENVIRONMENT LAW" shall mean any and all applicable laws or regulation
regarding the protection of the environment and of nature or human health and
safety.
"FIDUCIARY AGREEMENT" shall mean the fiduciary agreement and covenant for
indemnity among the Purchaser and Mr. Alain Nicod, substantially in the form
set out in Schedule 6.
"FINANCIAL REPORTS" shall mean the unaudited management accounts including
the income statement prepared by the management of the Company and the Group
Companies for internal purposes only.
"GROUP" means the Company and the Group Companies.
"GROUP COMPANIES" means the following companies:
- Compex France Sarl;
- Brain Box Sarl;
- Compex Medical GmbH;
- Medicompex Iberica.
"INTELLECTUAL PROPERTY RIGHTS" shall mean all trademarks and trademark
applications, all copyrights; all registrations and applications and renewals
for any of the foregoing; all trade names, trade secrets, confidential
information, ideas, formulae, compositions, know-how, technical and computer
data, documentation and software, financial, business and marketing plans,
customer and supplier lists and related information, marketing and
promotional materials and all other information and intellectual property
rights and all tangible embodiments thereof.
"KEY PERSONS" shall mean Messrs. Frederic Koehn, Pierre Rigaux and
Pierre-Yves Muller.
"NET REVENUES" shall mean the aggregate amount of unit sale revenues and unit
rental revenues plus after sale service revenues of the Group, minus shipping
and other logistic expenses of the type excluded from Net Revenues in the
past and minus discounts, rebates and commissions paid to third parties not
employed by the Company; it being understood (i) that the Net Revenues of the
Company and all Group Companies are included, irrespective of potential
future reorganisation and (ii) that all revenue generating transactions be
carried out in good faith in the ordinary course of business by parties with
independent interests.
"PENSION FUND CERTIFICATE" shall mean the document described in Article
IV.2.2, attached hereto as ANNEX IV.2.2(ii).
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Share Purchase Agreement 6
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"PROJECTED NET REVENUES 1999" shall mean the amount of CHF 20'271'086.-
(twenty million two hundred and seventy-one hundred thousand eighty-six Swiss
francs) in the calendar year 1999.
"PROJECTED NET REVENUES 2000" shall mean the amount of CHF 27'254'769.-
(twenty seven million two hundred and fifty-four thousand seven hundred and
sixty-nine Swiss francs) in the calendar year 2000.
"PURCHASE PRICE" shall have the meaning set forth in I.2.
"SALE SHARES" shall mean all issued 600 registered shares of the Company with
a par value of CHF 1'000.- (one thousand Swiss francs) each.
"SHAREHOLDERS' LOANS" shall mean loans granted by Messrs. Alain Nicod, Pascal
Nicod and Jean-Francois Nicod and Heritage Finance & Trust Co to the Company
in the aggregate amount of CHF 797'251,18 (seven hundred and ninety-seven
thousand two hundred and fifty-one hundred Swiss francs and eighteen
centimes) as of the date hereof.
"SOCIAL SECURITY CONTRIBUTIONS" shall mean the mandatory contributions to the
old-age pension insurance scheme (AVS), pension fund scheme (LPP), invalidity
insurance (AI), loss of salary insurance (Allocation pour pertes de gain) and
unemployment insurance (Assurance chomage), or any equivalent or similar
contributions and any other social security contributions (including health
insurance contributions as the case may be) applicable in the jurisdictions
in which any Group Company is situated, together with any interest or any
penalty imposed by any social security authority with respect thereto.
"TAXES" shall mean all income, profits, capital gains, capital, stamp,
anticipatory, gross receipts, sales, value added, use, real property and
other taxes (whether payable directly or by withholding), assessed by Swiss
or foreign authorities, together with any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
"USD" shall mean the lawful currency of the United States of America.
"YEAR 2000 PROBLEMS" shall mean errors or impaired operation or performance
in data processing, in the output of data or in the operation of any
machinery or process controlled by any hardware or software, in the output of
data or in the operation of any equipment or software which relate to the
failure of any computer system, software or other processing equipment used
by the Company to give due chronological recognition to calendar dates
before, on or after January 1, 2000, when processing data, or controlling or
operating any machinery or process.
ARTICLE I - PURCHASE AND SALE OF SHARES
I.1 PURCHASE AND SALE
In accordance with the terms of this Agreement, Sellers sell to Purchaser and
Purchaser purchases from Sellers the Sale Shares, all free and clear of all
liens, charges and encumbrances, with effect as of January 1, 1999.
<PAGE>
Share Purchase Agreement 7
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I.2 PURCHASE PRICE
The purchase price for the Sale Shares (hereinafter the "PURCHASE PRICE") is
composed of the following elements:
I.2.1 a cash payment of USD 10'926'275.-; such cash payment shall be applied
(i) to repay in full the Shareholders' Loan and (ii) the balance for
the Sale Shares.
I.2.2 a certain deferred portion of the Purchase Price, which should never be
an amount of more than the Earn Out Amount.
Such deferred portion of the Purchase Price shall be as follows:
(a) an amount of USD equal to the lesser of (i) the Earn Out Amount and
(ii) USD 1.00 time the result of (x) the amount of 1999 Net Revenues in
excess of 85% of Projected Net Revenues 1999, divided by (y) 2.0271086;
(b) an amount of USD equal to (a) the lesser of (i) the Earn Out Amount and
(ii) USD 1.00 time the result of (x) the amount of 2000 Net Revenues in
excess of 80% of Projected Net Revenues 2000, divided by (y) 2.7254769,
minus (b) any payment made pursuant to (a).
For purposes of calculation of the Earn Out, the Parties have agreed to refer
to SCHEDULE 1.2.
I.3 PURCHASE PRICE COMPUTATION
The Purchase Price has been determined between the Parties based on the 1998
Accounts of the Company by using the following computation methods (at an
exchange rate USD / CHF of 1,49): (i) 20,9 times the net income of an amount
of USD 622'561.-, (ii) 1,6 times the revenues of an amount of USD 8'168'925.-
and (iii) 13,3 times the EBITDA of an amount of USD 977'985.-.
I.4 PURCHASE PRICE PAYMENT
At Closing, Purchaser shall pay by wire transfer of immediately available
funds to the account No 215461-81 of Bourgeois, Muller, Pidoux et Associes,
Lausanne with Credit Suisse Private Banking, Lausanne on behalf of each of
the Sellers, an amount equal to the Purchase Price, less (i) the amount of
the Shareholders' Loan and (ii) the Earn Out Amount.
The amount equal to the Shareholders' Loan shall be paid on behalf of the
Company and in full settlement of the Shareholders' Loan at Closing to the
account mentioned in the preceding paragraph.
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Share Purchase Agreement 8
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The Sellers and the creditors to the Shareholders' Loan confirm herewith that
payment of USD 10'926'275.- by the Purchaser to the account mentioned in the
first paragraph of this section I.4 will fully discharge (i) the Purchaser of
the obligation to pay the Purchase Price as per I.2.1 and (ii) the Company
from its obligation to repay the Shareholders' Loan.
The division of the amount paid will be made by the Sellers and the creditors
to the Shareholders' Loan among themselves and will not have any effect on
the final discharge given hereby to the Purchaser.
Prior to February 28, 2000 and 2001, respectively, the Purchaser shall pay to
the Sellers an amount estimated to be the Earn Out Amount, on the basis of
the Net Revenue of the respective calendar year, as certified by the chief
financial officer of the Purchaser.
I.5 DELIVERY OF AUDITORS' STATEMENT
As soon as reasonably practicable after the end of the 1999 and 2000 business
years ending June 30, 2000 and 2001, respectively, of the Company, but not
later than three months after such business year end, the Purchaser shall
cause to be prepared and delivered to the Sellers a certificate from the
Company's auditors setting forth the amount of the Earn Out as derived by the
Company's auditors from the Company's Accounts (such certificate being
hereinafter referred to as the "AUDITORS' STATEMENT").
I.6 OBJECTION TO EARN OUT AMOUNT
In the event that the Sellers object in good faith to the Auditors'
Statement, the Sellers shall so advise the Purchaser by delivery to the
Purchaser of a written notice (hereinafter the "OBJECTION NOTICE"). The
Objection Notice shall set out the reasons for such objections and details of
the calculation of the Earn Out Amount.
In the event that the Parties agree on a resolution of the dispute set out in
the Objection Notice, the Parties shall confirm this resolution in the
writing and shall thereafter be bound by such resolution.
In the event that the Parties are unable to settle any dispute with respect
to the relevant Earn Out Amount within 30 (thirty) days after the delivery by
the Sellers to the Purchaser of the Objection Notice, the final determination
of the dispute shall be submitted to Atag Ernst & Young SA in Lausanne
(hereinafter the "ACCOUNTING FIRM"), forthwith and in any event, not later
than 60 (sixty) business days after delivery by the Sellers to the Purchaser
of the Objection Notice.
The determination of the Earn Out Amount by the Accounting Firm shall be made
within 30 (thirty) days after the date on which the dispute was submitted to
the Accounting Firm, and the determination of the Accounting Firm shall be
final and binding on the Parties. The Accounting Firm shall act as an expert
arbitrator (EXPERT-ARBITRE) and shall decide the matter in its reasonable
discretion. The Accounting Firm shall give the Parties the right to be heard
and shall set forth the reasons for its decisions in writing. The costs and
expenses of the Accounting Firm shall be borne equally by the Sellers and the
Purchaser.
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Share Purchase Agreement 9
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Within 5 (five) days after resolution, by agreement of the Parties, of the
dispute which was the subject of the Objection Notice or, failing such
resolution, within 5 (five) days after the final determination of the
Accounting Firm, the Purchaser shall pay a shortfall, if any, of the
estimated Earn Out Amount, paid as per I.4, last paragraph above, and the
Earn Out Amount determined as per I.5 and, as the case may be, I.6 above. If
the estimated Earn Out Amount paid exceeds the Earn Out Amount, the Sellers
shall repay the excess within the same time period.
ARTICLE II - CLOSING
II.1 PLACE AND DATE
The closing of the transaction contemplated herein (hereinafter the
"CLOSING") shall take place contemporaneously with the signing of this
Agreement at the offices of Lenz & Staehelin, Geneva (hereinafter the
"CLOSING DATE").
II.2 CLOSING DOCUMENTS
II.2.1 AT CLOSING, SELLERS DELIVER TO PURCHASER
(a) the certificates representing the Sale Shares duly endorsed in blank;
(b) a resolution of the Company's board of directors authorising the
Purchaser's registration in the Company's share registry;
(c) the Company's share registry, evidencing the registration of the
Purchaser;
(d) letters of resignation of all members of the board of directors of the
Company (except Mr. Alain Nicod), each containing a statement of the
resigning director that he has been fully compensated for his services
rendered to the Company and the Group Companies and that he has no
claim of whatever nature against the Company and the Group Companies;
and
(e) the Pension Fund Certificate pursuant to Article III(z).
II.2.2 AT CLOSING, PURCHASER DELIVERS TO SELLERS
(a) evidence of payment of the Purchase Price pursuant to Article I.4.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers hereby jointly and severally make the representations and
warranties contained in this Article IV to the Purchaser, each of which is
true and correct as of the date hereof.
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Share Purchase Agreement 10
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The Sellers do not make any representations nor give any warranties other
than the representations and warranties contained in this Article III. The
Sellers expressly exclude any and all other representations and warranties.
Furthermore, it is expressly agreed that all facts, which are set out in the
Due Diligence Reports and which amount to a breach of representations and
warranties contained in this Article III shall not give rise to
indemnification pursuant to Article V of this Agreement.
(a) OWNERSHIP OF SHARES
Sellers hold, and Purchaser receives, good and valid title to the Sale
Shares, including those shares held in a fiduciary capacity by any
director of the Company. The Sale Shares are free and clear of all
encumbrances, mortgages, charges, liens, security interests or any
other right of any third party.
The Shares listed in SCHEDULE 1 are the only shares of the Company
issued and outstanding and the Sellers are all and the only
shareholders of the Company at the date hereof.
(b) ORGANISATION OF COMPANY
The Company is duly organised and validly existing under the laws of
Switzerland, has the corporate power to own and operate its properties
and to carry on its Business as now being conducted. The articles of
association of the Company, which are attached hereto as ANNEX III(b)
are true, correct and up-to-date.
(c) CAPITALISATION
The Company's capital structure consists in a paid-up share capital of
CHF 600'000.- (six hundred thousand Swiss francs), divided into 600
registered shares with a par value of CHF 1'000.- (one thousand Swiss
francs) each.
(d) SHARE CAPITAL PAID UP
All the issued and outstanding shares of the Company are duly and
validly authorised, issued and fully paid up.
(e) ORGANISATION OF THE GROUP
The Group is structured and organised as set out in ANNEX III(e).
ANNEX III(e) is a correct representation of the Group structure and
contains a complete list of all Group Companies and apart from the
Group Companies, the Group holds no other share capital in any
corporate entity.
(f) OWNERSHIP OF GROUP COMPANIES
ANNEX III(f)(I) is a correct representation of the share capital and
the outstanding shares of each of the Group Companies and the voting
rights pertaining thereto. The Company owns, directly or indirectly,
its interest in the capital in the Group
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Share Purchase Agreement 11
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Companies as set out in ANNEX III(f)(i) free and clear of all
encumbrances, mortgages, charges, liens, security interests, or any
other right of any third party, except as set out in ANNEX III(f)(ii).
ANNEX III(f)(iii) contains a correct and complete list of all
shareholders in the Group Companies listed on ANNEX III(f)(ii),
including the number of shares held by each respective shareholder and
the voting rights pertaining to his respective shareholding.
(g) ORGANISATION OF THE GROUP COMPANIES
The Group Companies are duly organised, validly existing and in good
standing under the laws of the jurisdiction in which they have been
incorporated.
The Corporate Documents of the Group Companies, which are attached
hereto as ANNEX III(g) are true, correct and up-to-date.
All of the issued and outstanding shares of capital stock of each Group
Company are validly issued, fully paid-up and non assessable.
(h) NO CONTRACTUAL RIGHTS OF THIRD PARTY OVER EQUITY INTEREST
There is no option, warrant, conversion privilege, right of
pre-emption, right to acquire, right of first refusal over or affecting
any of the Sale Shares or shares of the Group Companies, nor is there
any commitment to give or create any of the foregoing, and no person
has claimed to be entitled to any of the foregoing.
(i) FINANCIAL STATEMENTS
The Sellers have delivered to the Purchaser the Accounts for the last
five financial years as well as the Financial Reports for the period
from January 1, 1999, through May 31, 1999 as set forth in ANNEX
III(i).
The Accounts for the last five financial years have each been prepared
in accordance with the provisions of the laws of the relevant
jurisdictions and generally accepted accounting principles in such
jurisdiction applied on a consistent basis throughout the last five
financial years. The Accounts for the last five financial years are
each correct and complete.
The Financial Reports have been prepared in good faith for the purposes
of management support in accordance with the accounting principles of
the Company and the Group Companies consistently applied.
(j) NO UNDISCLOSED LIABILITIES
The Accounts for the last five financial years and notes thereto
contain all actual, conditional and contingent liabilities that,
according to the provisions of the laws of the relevant jurisdictions
and generally accepted accounting principles in such jurisdiction need
to be contained therein. As of the date hereof, there exist no other
liabilities, with the exception of liabilities which have been incurred
in the ordinary course of business since December 31, 1998.
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Share Purchase Agreement 12
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(k) ACCOUNTS RECEIVABLE
ANNEX III(k) sets forth a true, accurate and complete aging schedule of
all Accounts Receivable of the Company and the Group Companies as at
the dates specified. All Accounts Receivable of the Company and the
Group Companies are valid and not subject to any set-off or
counterclaim and are collectible net of the consolidated respective
reserves made for Accounts Receivable in the Accounts and Financial
Reports of the Company and the Group Companies. They have arisen out of
bona fide transactions in the ordinary course of business and, as of
the date hereof, the necessary provisions have been made in the
Accounts of the Company and the Group Companies in accordance with the
laws of the relevant jurisdictions and generally accepted accounting
principles in such jurisdiction or have been booked in the books of the
Company and the Group Companies up to the date hereof.
All Accounts Receivable on the basis of invoices issued by the Company
or the Group Companies on or prior to Closing, shall be collected on
the latest 240 days after due date of each Account Receivable, provided
that it cannot be covered by a provision specifically booked for the
payment of Accounts Receivable remaining unpaid at that date. Upon
payment of any amount by the Sellers for breach of this representation,
the Purchaser shall, at the request of the Sellers, cause the Company
to assign to Alain Nicod on behalf of all the Sellers, any uncollected
Account Receivable up to the amount of the payment made by the Sellers.
(l) CAPITAL IMPROVEMENTS
ANNEX III(l) completely and accurately describes all of the capital
improvements or purchases or other capital expenditures in excess of
CHF 100'000.- (one hundred thousand Swiss francs) per item (as
determined in accordance with the provisions of the laws of the
relevant jurisdictions and generally accepted accounting principles in
such jurisdiction) which the Company and the Group Companies have
committed to or contracted for and which have not been completed prior
to the date hereof and the costs and expenses reasonably estimated to
complete such work and purchases.
(m) ABSENCE OF CHANGE
Except as set forth on ANNEX III(m), since December 31, 1998, there
have not been:
(i) any material changes in the financial condition, assets,
liabilities, personnel or operations of the Company and the
Group Companies or in their relationships with suppliers,
customers, lessors or others, other than changes in the
ordinary course of business;
(ii) (a) any indebtedness for borrowed money incurred by the
Company or any of the Group Companies becoming or becoming
capable of being declared repayable earlier than the due date
for payment or (b) any forgiveness or cancellation of
indebtedness owing to the Company or any of the Group
Companies or waiver of any claims or rights by the Company or
any of the Group Companies with regard to such indebtedness;
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Share Purchase Agreement 13
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(iii) any increase in the compensation or benefits paid or to become
payable by the Company or any of the Group Companies to any of
its officers or employees or agreement to do the same, except
for scheduled increases in the ordinary course of business
consistent with past practice to employees who are not
officers of the Company or any of the Group Companies;
(iv) any dividends or distributions or any transfer, lease, license
or other disposition of assets of the Company or any of the
Group Companies to Sellers;
(v) any encumbrances (other than liens arising in the ordinary
course of business) placed on or created or extended over any
of the assets of the Company or any of the Group Companies;
(vi) any change in the collection, payment or credit practices of
the Company or any of the Group Companies or in the accounting
practices, procedures or methods of the Company or any of the
Group Companies;
(vii) any agreement, arrangement or transaction, other than in the
ordinary course of business consistent with past practice and
of an entirely arm's length nature, between (i) the Company or
any of the Group Companies and (ii) the Sellers or any officer
or employee of the Company or any of the Group Companies.
(n) INSOLVENCY
(i) No order has been notified and no resolution has been passed
for the winding up of the Company or any of the Group
Companies or for a provisional liquidator to be appointed in
respect of the Company or any of the Group Companies and no
petition has been presented and no meeting has been convened
for the purpose of winding up the Company or any of the Group
Companies.
(ii) No administration order has been made and no petition for such
an order has been presented in respect of the Company or any
of the Group Companies.
(iii) No receiver (which expression shall include an administrative
receiver) has been appointed in respect of the Company or any
of the Group Companies or all or any of its assets.
(iv) Neither the Company nor any of the Group Companies are
insolvent, or unable to pay their debts, or have stopped
paying their debts as they fall due.
(v) No unsatisfied judgement is outstanding against the Company or
any of the Group Companies.
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Share Purchase Agreement 14
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(o) TAXES
(i) Filing of Returns
The Company and each Group Company has filed correct and accurate
returns for Taxes and has otherwise complied in all respects with
requirements relating to the filing of Tax returns and the supply of
all information required to be supplied to any tax authority.
(ii) Payment of Taxes
The Company and each Group Company has complied with all and any
requirements relating to the payment of Taxes, of whatever nature,
including interest and penalties, if any.
(iii) Tax Provisions
The Company and each Group Company has paid and, if not paid,
established adequate provisions in its respective latest Accounts for
all Taxes of whatever nature taken as a whole that may be assessed or
computed on the results, operations or transactions of the Company and
any Group Company for all periods prior to December 31, 1998,
regardless of the financial period during which such Taxes may become
due and payable.
For the Company and each Group Company, the amount of the provision for
deferred Taxes in its latest Accounts was adequate and fully in
accordance with the provisions of the laws of the relevant jurisdiction
and generally accepted accounting principles in such jurisdiction.
The Company and each Group Company have duly submitted all claims and
disclaimers which have been assumed to have been made for the purposes
of its latest Accounts.
(iv) No Dispute
Neither the Company nor any of the Group Companies are subject to
formal proceedings or investigations related to Tax (except for
requests for additional information) by the respective authorities and,
to the Best Knowledge of the Shareholders, the Company and each Group
Company, no such proceedings are threatened against the Company and/or
any of the Group Companies.
(v) No Withholding Tax on Dividends
Neither the Company nor any of the Group Companies have distributed or
caused to be distributed, any hidden dividend, nor distributed or
granted any other benefit to the Sellers or any other person which
could lead to the imposition of any withholding taxes on dividends or
constructive dividends.
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Share Purchase Agreement 15
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(p) ENVIRONMENT
The Company and each Group Company conducts and has always conducted
its activities in conformity with Environment Law. Until and including
the date hereof, the Company and each Group Company has complied with
and not violated any Environment Law at the time when such law was
applicable. No action has been undertaken or, to the Best Knowledge of
the Shareholders, the Company and the Group Companies, threatened to be
undertaken by Swiss or foreign authorities with respect to Environment
Law which could have a material adverse effect on the Company and the
Group Companies taken as a whole. No facts, events or conditions in
existence on or prior to the date hereof and relating to the past or
present facilities, properties or operations of the Company and the
Group Companies will give rise to any material investigatory, remedial
or corrective obligations pursuant to Environment Law, or give rise to
any other liabilities for onsite or offsite releases of hazardous
materials, substances or wastes, personal injury, contamination of
soil, water, air or groundwater, property damage or damage to natural
resources, pursuant to Environment Law.
(q) LEASES;
ANNEX III(q) sets forth a complete and correct list of all premises
that are leased in whole or in part by the Company and the Group
Companies. The Company and the Group Companies do not own any real
property.
The lease contracts to which the Company and the Group Companies are a
party allow unencumbered use of the leased property in accordance with
the terms and conditions of such lease contracts.
Each lease of premises utilised by the Company and each Group Company
is legal, valid and binding, as between the Company and the Group
Companies and the other party or parties thereto, and the Company or
the Group Companies is tenant or possessor in good standing thereunder,
free of any default or breach and quietly enjoy the premises provided
for therein. Each rental and other payment due from the Company and the
Group Companies thereunder has been duly paid; each material act
required to be performed by the Company and the Group Companies which
if not performed would constitute a material breach thereof has been
duly performed; and no act forbidden to be performed by the Company and
the Group Companies has been performed thereunder.
The Company and the Group Companies own, or hold a valid leasehold
interest in such premises, free and clear (except for rights of
landlords with respect to fixtures and leasehold improvements, if any,
with respect to leased premises) of all encumbrances in respect of each
improvement, fixture or item of equipment located in or on each of the
properties and premises owned, leased or occupied by it; no
improvement, fixture, or equipment on any such premises is in violation
of any law, including without limitation any zoning, building, safety,
health, Environment Law or other law, and each of such premises and
properties is zoned for the purposes for which such premises or
properties are currently being used.
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Share Purchase Agreement 16
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(r) CONDITION OF ASSETS; SUFFICIENCY
The equipment and other tangible assets (other than inventory) owned by
the Company and the Group Companies are owned, free of third party
rights (except the moulds which are owned at 50%) and are in good
repair and operating condition, normal wear and tear excepted, have
been maintained regularly in accordance with past practice of the
Company and the Group Companies and may be used for their intended
purpose in the normal course of the Business. The assets of the Company
and the Group Companies include all assets which have been used by the
Company and the Group Companies to conduct the Business or are required
for the purpose of carrying on the Business.
ANNEX III(r) sets forth a complete and correct list of all inventory.
This list contains details about the number of units hold in stock and
the location of such units. All assets used or physically held by the
Company and the Group Companies, irrespective of the value they may be
assigned in the Accounts, are owned by the Company or the respective
Group Company or are object of a valid lease agreement, if any.
In the Accounts of the last five financial years of the Company and of
each of the Group Companies, the assets and the inventory included
among the assets of the Company and the Group Companies are valued in
accordance with applicable accounting principles consistently applied,
and the assets and the inventory are not over-valued.
(s) INTELLECTUAL PROPERTY RIGHTS
ANNEX III(s) sets forth a complete and correct list and brief
description of all Intellectual Property Rights owned by the Company
and the Group Companies or used by the Company and the Group Companies
in connection with the Business, including all licenses and other
rights granted by the Company and the Group Companies to any third
party with respect to Intellectual Property Rights and all licenses and
other rights granted by any third party to the Company and the Group
Companies, in each case together with a description of the subject
matter licensed. (i) The Group owns and possesses all right, title and
interest in and to, or has a written, enforceable license to use, all
of the Intellectual Property Rights necessary for the operation of the
Business free and clear of all encumbrances; (ii) no claim by any third
party contesting the validity, enforceability, use or ownership of any
Intellectual Property Rights owned or used by the Group has been made,
is currently outstanding or, to the Best Knowledge of the Shareholders,
the Company and the Group Companies, is threatened, and there are no
grounds for such claim; (iii) the Group has not received any written
notices of, nor is it aware of any facts which indicate a likelihood
of, any infringement or misappropriation of, or other conflict with any
third party with respect to, any Intellectual Property Rights owned or
used by the Group, nor has the Group received any claims of
infringement or misappropriation of, or conflict with, any Intellectual
Property Rights of any third party; (iv) the Group has not infringed,
misappropriated or otherwise acted in conflict with any Intellectual
Property Rights of any third party, nor is the Group aware of any
infringement, misappropriation or conflict which will occur as a result
of the continued operation of the Business as conducted; (v) all
Intellectual Property Rights owned or used in connection with the
Business will be owned by or available for use by the Group on
identical terms and conditions
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Share Purchase Agreement 17
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immediately subsequent to Closing. The Group has taken all actions
necessary to preserve the value of and to ensure the continuous
protection of the Intellectual Property Rights and its rights therein.
(t) CONTRACTS
ANNEX III(t) hereto sets forth a complete and correct list, of all
(written or oral) contracts (except employment contracts), agreements,
commitments, instruments or other consensual obligations to which the
Company or the Group Companies are a party or by which the Company or
the Group Companies, or any of the assets of the Company or the Group
Companies are bound (excluding customary inventory purchase orders in
the ordinary course of business) (i) which each involve a yearly
aggregate consideration of CHF 200'000.- (two hundred thousand Swiss
francs) or more, (ii) which evidence or provide for any borrowing
indebtedness of the Company or the Group Companies or any encumbrance
on any of the assets of the Group, excluding lease agreements, (iii)
which guarantee the performance, liabilities or obligations of any
other person (whether legal or natural), (iv) which restrict the
ability of the Company or the Group Companies to conduct any business
activities, (v) which involve any governmental entity, (vi) which are
not in the ordinary course of the business, (vii) which are not
concluded at arm's length terms, (viii) which are terminable by any
third party, or which would be breached, in both cases, as a result of
the transactions contemplated by this Agreement, (ix) which relate to
Intellectual Property Rights used in connection with the Business, (x)
which are concluded for a period of more than 6 months or cannot be
terminated on a six-month notice or (xi) which are otherwise material
to the Business (these agreements collectively referred to as the
"AGREEMENTS"). None of the Company or any Group Company is in default
or otherwise in breach of any of the Agreements, nor is any third party
in material default or otherwise in breach of the Agreements or has
repudiated any provision of the Agreements and no event has occurred
which with notice, lapse of time or both would constitute a breach or
default or permit termination, modification or acceleration of any such
Agreement.
(u) LITIGATION
There is no claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Swiss or foreign governmental
commission, court, tribunal or arbitral body by or against any member
of the Group or any of its assets or properties pending, or, to the
Best Knowledge of the Shareholders, the Company and the Group
Companies, threatened to be brought against the Sellers, any member of
the Group or any of their officers or staff relating to the Business,
by or before any Swiss or foreign governmental commission, court,
tribunal or arbitral body nor do any circumstances exist likely to give
rise to any such claim, action suit, arbitration, inquiry, proceedings
or investigation.
(v) COMPLIANCE WITH LAWS
The Business has been conducted in compliance with all laws and
regulations of local, federal and foreign governmental authorities
applicable to the Company and the Group Companies. The Group possesses,
and is in compliance with, all licenses, permits, approvals and other
governmental authorisations required to the conduct of the
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Share Purchase Agreement 18
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Business, which licenses, permits and approvals are set forth on
ANNEX III(v), and there is no reason or circumstance which indicates
that such licenses, permits, approvals and authorisations are likely
to be revoked or confer a right of revocation.
(w) INSURANCE
ANNEX III(w) hereto sets forth a true and correct list of all insurance
policies maintained by the Company and the Group Companies relating to
the Business and sets forth the annual or other premiums payable
thereunder with respect to the Business and the type and extent of
coverage afforded by each such policy. Neither the Company nor any
Group Company have received any notice or other communication from any
insurance company within the three years prior to the date hereof
cancelling or amending such policies or substantially increasing the
annual or other premiums payable under any of said insurance policies
and to the Best Knowledge of the Shareholders, the Company and the
Group Companies no such cancellation or amendment is threatened.
The Company and the Group Companies maintain insurance coverage of a
kind and to an extent as it is required for the prudent conduct of the
Business and as companies of similar activity and size regularly
maintain.
All premiums pertaining to the insurance policies are paid up and have
been paid as they fell due.
(x) PRODUCT LIABILITY
The Company and the Group Companies have not manufactured, sold or
provided any product or service (i) which does not in any material
respect comply in the countries where the said products or services are
provided, with all applicable laws, regulations or standards and (ii)
which does not comply with the Company's manufacturing specification.
In particular, and without limitation to the generality of the
foregoing, the Company or the Group Companies have not incurred and to
the Best Knowledge of the Shareholders, the Company and the Group
Companies will not, in relation to products manufactured in compliance
with the aforesaid rules in the past and up to the date hereof, incur
any liability nor has any liability been alleged in connection with any
applicable laws governing product liability for personal injury or
death of any user.
(y) EMPLOYEES
ANNEX III(y) contains a list of all employees of the Company and the
Group Companies. This list contains details about salary, (including
benefits in kind), notice periods for termination, right to severance
pay and to bonus.
Except for contracts of employment listed in ANNEX III(y)(ii), each
contract of employment to which the Company or the Group Companies are
a party can be terminated by the Company or the Group Companies without
damages or compensation (other than that payable by law) by giving at
any time only the minimum period of notice applicable to that contract
under the laws of Switzerland or of any jurisdiction in which the Group
Companies are located.
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Share Purchase Agreement 19
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(z) PROFESSIONAL AND SOCIAL WELFARE
Any and all returns and reports related to Social Security
Contributions that are required to be filed with respect to the Company
and the Group Companies prior to the date hereof have been timely and
correctly filed. The Company and the Group Companies have paid in full
any and all Social Security Contributions as and when due. No social
security authority is now asserting any deficiency or claim for
additional Social Security Contributions (or interest thereon or
penalties in connection therewith) and any and all Social Security
Contributions which (although not due) have accrued on the basis of the
salaries to be paid until the date hereof, have been fully provided
against.
There are no facts or circumstances existing or having arisen prior to
the date hereof which have or may lead to a material re-assessment by
any social security authority of Social Security Contributions to be
made by the Company and the Group Companies relating to any period
prior to the date hereof.
The details of the employee pension fund of the Company and the Group
Companies are described in ANNEX III(z)(i) (hereinafter the "PENSION
FUND"). The Company and the Group Companies are meeting all their
obligations under the Pension Fund and specifically have paid (or
provisioned) all contributions required prior to the date hereof as
stipulated by the regulations of the Pension Fund.
Performance of these obligations is reflected in the Pension Fund
Certificate. All payments required to be made to fund the Pension Fund
have been made. The Company and the Group Companies are not required to
contribute to any pension fund other than the Pension Fund.
(aa) NO COLLECTIVE BARGAINING
Except as set forth in ANNEX III(aa), there is no collective bargaining
or other union agreement or arrangement (whether binding or not) to
which the Company and the Group Companies are a party or by which it is
bound or which is currently being negotiated and no dispute between the
Company and the Group Companies and any trade union or other
organisation formed for a similar purpose is existing, pending or
threatened.
(bb) BANK ACCOUNTS
ANNEX III(bb) contains a complete list of all bank accounts opened in
the Company's and the Group Companies' name and of the persons holding
powers to access them or withdraw from them.
(cc) MILLENNIUM
The Company and the Group Companies have exercised due diligence, with
respect to their Business, in investigation the possibility of the
occurrence of Year 2000 Problems, in a manner and to an extent that is
required for the prudent conduct of the Business and as companies of
similar activity and size have exercised.
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Share Purchase Agreement 20
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(dd) ACCURACY OF INFORMATION
All information required to be provided by the Sellers, the Company,
the Group Companies or their respective agents pursuant to the terms of
this Agreement is true, complete and correct.
(ee) TERMINATION OF AGREEMENTS BETWEEN THE COMPANY AND THE SELLERS
As of the date hereof, except for the agreements otherwise contemplated
by this Agreement, Sellers have terminated all agreements existing
between the Company and the Group Companies, on the one hand, and the
Sellers or any persons, companies, partnerships or other legal or
business entities with which Sellers are affiliated, on the other hand,
unless the continuation of such agreement is approved by Purchaser in
writing or contemplated by this Agreement. The termination of such
agreement does not oblige the Company and the Group Companies to make
any payments in compensation of the termination such as for example
severance payments or any payment for a notification period extending
beyond the date hereof.
ARTICLE IV - COVENANTS
IV.1 AGREEMENTS
As of the date hereof, the Purchaser and the Key Persons shall enter into the
Agreements.
IV.2 COVENANT NOT TO COMPETE AND NOT TO SOLICIT
For the purpose of assuring to the Purchaser the full benefit of the businesses
and goodwill of the Group Companies, each of the Sellers undertakes by way of
further consideration for the obligations of the Purchaser under this Agreement
as separate and independent agreements that each Seller will not:
(i) at any time after Closing disclose to any person, or himself/itself use
for any purpose, and shall use his/its best endeavours to prevent the
publication or disclosure of, any information concerning the business,
accounts or finances of the Company or any Group Company or any of its
clients' or customers' transactions or affairs of which he/it has
knowledge;
(ii) for 5 years after Closing either on his/its own account or for any other
person directly or indirectly solicit, interfere with or endeavour to
entice away from the Company or any Group Company any person who to
his/its knowledge is, or has during the past 2 years been, a client,
customer or employee of, or in the habit of dealing with, the Company or
any Group Company;
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Share Purchase Agreement 21
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(iii) for 5 years after Closing, either alone or jointly with another Seller,
as a partner or a shareholder who either alone or jointly with another
Seller controls a Company, or as manager, agent for or employee of any
person, directly or indirectly carry on or be engaged, concerned or
interested in (a) the Business, or (b) any other competitive business to
the Business now carried on by the Company or any Group Company.
IV.3 FIDUCIARY AGREEMENT
As of the date hereof, the Purchaser and Mr. Alain Nicod shall enter into the
Fiduciary Agreement.
ARTICLE V - INDEMNIFICATION
V.1 PRINCIPLE OF THE WARRANTY INDEMNIFICATION
The Sellers hereby jointly and severally agree to indemnify and hold harmless
the Purchaser from and against any losses, damages, liabilities, obligations,
claims, judgements, costs and expenses including reasonable attorney's fees
incurred by the Purchaser by reason of or resulting from (i) a breach of or
inaccuracy in the representations and warranties contained in Article III or
(ii) a breach of or inaccuracy in any of the other covenants contained in
this Agreement.
The Parties mutually agree, acknowledge and expressly exclude the application
of Articles 201 and 210 SCO to any claim arising out of or in connection with
this Agreement. However, the Purchaser shall assert any claim for breach of
or inaccuracy in the representations, warranties and covenants contained in
this Agreement within six months from the discovery of such breach or
inaccuracy and the amount of the damage suffered.
V.2 LIMITATION IN TIME
The Purchaser may request indemnification as provided in Article V.1 or claim
for breach of a warranty contained in Article III: (i) during a period
starting from the date hereof until October 31, 2001 or (ii) in case of a
breach of the Sellers' representations and warranties in Articles III(o) and
III(z), the Purchaser may give notice of a claim until the expiration of the
applicable statutory limitation period in the relevant statute of limitations
(or comparable statute) in each relevant jurisdiction plus sixty days
(hereinafter in both cases of (i) and (ii) the "INDEMNIFICATION PERIOD").
Upon expiry of the Indemnification Period, the right to request
indemnification shall lapse.
Where reasonable details of any claim are given by the Purchaser to the
Sellers within this deadline, and in conformity with Article V.5 where
applicable, the giving of those details shall be considered to be a call for
indemnification, subject to the condition that such details have been sent to
the Sellers in accordance with Article V.1.
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Share Purchase Agreement 22
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V.3 CAP; THRESHOLD
(i) The Parties have agreed that the Sellers' aggregate liability pursuant
to Article V.1 is limited to an aggregate amount equivalent to 30% of
the Purchase Price.
(ii) No amount shall be payable by the Sellers in respect of any claim for
damages, for breach of any of the warranties, covenants or other
undertakings under this Agreement unless and until the aggregate
cumulative liability of the Sellers in respect of all such claims,
reaches a threshold amount of CHF 200'000.- (two hundred thousand Swiss
francs). Once the threshold amount has been exceeded, the Sellers shall
be liable for the full amount of any and all claims, and not merely for
the excess, provided, however, that any single claim for an amount of
less than CHF 10'000.- (ten thousand Swiss francs) shall be disregarded
entirely.
The limitations contained in sub-clauses V.2 and V.3 shall not apply in case of
intentional misrepresentations or fraud by the Sellers which may give rise to a
claim for damages.
V.4 INDEMNIFICATION BY PURCHASER
The Purchaser hereby agrees to indemnify and hold harmless the Sellers from
and against any losses, damages, liabilities, obligations, claims,
judgements, costs and expenses including reasonable attorneys' fees incurred
by the Sellers by reason of or resulting from a breach or inaccuracy of any
of the other covenants given by the Purchaser contained in this Agreement.
V.5 THIRD PARTY CLAIMS
Promptly after a party entitled to indemnification under this Article V (an
"INDEMNIFIED PARTY") shall have received notice (an "INDEMNIFICATION NOTICE")
of the commencement of any action by a third party in respect of which the
Indemnified Party will or may seek indemnification under this Article V or
shall have discovered other facts that the Indemnified Party believes give
rise to a right to indemnity in respect of third party rights, the
Indemnified Party shall notify the party providing the indemnification
hereunder (the "INDEMNIFYING PARTY") thereof in writing but no failure to so
notify the Indemnifying Party shall relieve the Indemnifying Party from any
liability that it has to the Indemnified Party except if and to the extent
that the Indemnifying Party shall have been materially prejudiced thereby. In
making any claim under this Article V.6, the Indemnified Party will specify
with reasonable particularity the item or items giving rise to the claim and
the basis of the claim.
The Indemnified Party shall be entitled to defend such lawsuit or action
(including, without limitation, all administrative appeals, proceedings,
hearing and conferences with any tax authority and all aspects of any
litigation relating to taxes) and to employ and engage attorneys of its own
choice to adequately handle and defend the same. The reasonable fees of such
attorneys shall be borne by the Indemnifying Party.
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Share Purchase Agreement 23
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The Indemnifying Party shall have the right to employ its own, separate
counsel who may give non-binding advice to the Indemnified Party and shall
have the right to be consulted by the Indemnified Party in the defence of
such lawsuit or action, but the fees and expenses of such counsel shall be at
the expense of the Indemnifying Party.
The Indemnifying Party shall co-operate in all reasonable respects with the
Indemnified Party and its attorneys in the investigation, trial and defence
of such lawsuit or action and any appeal arising therefrom.
The Indemnified Party shall, in conducting the lawsuit or action, take into
account the reasonable interests of the Indemnifying Party.
The Indemnified Party shall not make any admission of liability, agreement or
compromise with any person, body or authority in relation thereto without the
prior written consent of the Indemnifying Party which shall not be
unreasonably withheld or delayed.
V.6 ADJUSTMENT OF INDEMNITY PAYMENT
If any amount is paid by an Indemnifying Party pursuant to this Article V in
respect of any item, then to the extent that the Indemnified Party later
recovers in respect of such item an amount which, when added to the
indemnification payment previously received in respect thereof pursuant to
this Article V, exceeds the amount which the Indemnified Party was entitled
to receive in respect of such item in accordance with the terms thereof, the
Indemnified Party will pay to the Indemnifying Party promptly the amount of
such excess.
V.7 EXCLUSIVE REMEDY
The sole and exclusive remedy of any party for any misrepresentation or any
breach of a warranty or covenant set forth in or made pursuant to this
Agreement shall be a claim for indemnification under and pursuant to this
Article V, provided, however, that the Purchaser shall be entitled to
specific performance and injunctive relief where available by law.
V.8 EFFECTS OF INSURANCE ON INDEMNITY PAYMENT
It is understood by the parties hereto that any decrease of the currently
existing insurance coverage of the Company and the Group Companies, as set
forth in Art. III(v) shall be duly taken into account in determining the
indemnity payments under this Article V if such decrease would lead to an
increased indemnity payment by the Sellers.
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Share Purchase Agreement 24
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ARTICLE VI - MISCELLANEOUS
VI.1 NOTICES
All notices, requests, demands, waivers and other communications (together
"NOTICES"), required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if sent by registered
mail or by telefax with a confirmation by registered mail, as follows:
a. if to the Sellers, to:
Mr. Alain Nicod
Route de Morges 35
CH -1162 Saint Prex
Fax: 0041 22 960 94 61
with a copy to:
Mr. Lucien Masmejan
Bourgeois, Muller, Pidoux & Associes
Montbenon 2
CH-1003 Lausanne
Fax: 0041 21 321 45 46
Alain Nicod shall transmit any notices made by the Purchaser to all of the
Sellers.
b. if to the Purchaser, to:
Rehabilicare
Attn. Mr. David B. Kaysen
1811 Old Highway 8
New Brighton, MN 55112
Fax: 001 651 638 04 77
with a copy to:
Lenz & Staehelin
25 Grand'Rue
CH - 1211 Geneva
Fax: 0041 22 318 71 26
or to such other substitute person or address as any party shall from time to
time specify by notice in writing to the other parties.
<PAGE>
Share Purchase Agreement 25
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Notices and communications made by fax shall be deemed to be received on the
date of dispatch provided that an answer-back confirmation is available,
irrespective of the date of receipt of the confirmation by registered mail.
Notices given by registered mail only are deemed to be received upon delivery
to the addressee.
VI.2 ENTIRE AGREEMENT
This Agreement (including the Schedules and Annexes) constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
undertakings, oral or written, between the parties hereto with respect to the
subject matter hereof.
VI.3 SEVERABILITY OF PROVISIONS
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement and the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforceable to the fullest extent
permitted by law.
VI.4 BINDING EFFECT, BENEFIT
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
VI.5 ASSIGNABILITY
This Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties hereto. The Purchaser may however assign
all its rights under the Agreement to any corporate entity of the group to
which it belongs.
VI.6 AMENDMENT AND MODIFICATION; WAIVER
This Agreement may be amended or modified by a written instrument duly
executed by the Purchaser and the Sellers at any time with respect to any of
the terms contained herein. No waiver by any party of any provision hereof
shall be effective unless explicitly set forth in writing and executed by the
party so waiving. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants, or agreements contained herein, and
in any documents delivered or to be delivered pursuant to this Agreement and
in connection with the Closing hereunder. The waiver by any party hereto of a
<PAGE>
Share Purchase Agreement 26
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breach of any provision of this Agreement shall not operate or be construed
as a waiver of any other or subsequent breach or a waiver of any other
provision of this Agreement.
VI.7 ANNOUNCEMENTS
(a) EMPLOYEES
The transactions contemplated by this Agreement shall be announced to
the employees prior to or simultaneous with any press release or public
announcement in a form to be agreed upon by the parties and in
accordance with applicable laws.
(b) PRESS RELEASE
No announcement concerning this sale and purchase will be made before,
on or after Closing by any party to this Agreement except as required
by law or SEC regulations (provided that in any such case a party
required to make such an announcement has, where reasonably
practicable, first consulted the other party and taken into account the
reasonable comments, objections and requirements of the other party) or
with the written approval of the other party hereto (such approval not
to be unreasonably withheld or delayed).
VI.8 CONFIDENTIALITY
The parties agree to keep the terms of this Agreement and any information
acquired during the course of the negotiations having led to this Agreement
strictly confidential.
VI.9 ADVISER'S FEES; EXPENSES
Except as otherwise specifically provided in this Agreement, each of the parties
shall bear its own fees and costs incident to this Agreement and the
transactions contemplated hereby, including those of its financial, technical,
legal and other advisers.
VI.10 APPLICABLE LAW
This Agreement and the legal relations between the parties hereto shall be
governed by and construed in accordance with the laws of Switzerland.
VI.11 ARBITRATION
(a) All disputes arising out of or in connection with the present Agreement
that cannot be settled by mutual agreement shall be finally settled by
arbitration to the exclusion of the ordinary courts, by a three-person
arbitral tribunal (the "ARBITRAL TRIBUNAL").
<PAGE>
Share Purchase Agreement 27
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(b) In the event of such dispute, the Sellers shall jointly appoint one
arbitrator and the Purchaser shall appoint an arbitrator, and the
so-appointed arbitrators shall jointly appoint a third arbitrator who
shall act as the president of the Arbitral Tribunal (the "PRESIDENT").
Should either the Sellers or the Purchaser fail to appoint its
arbitrator within thirty days from the date of appointment of the other
party's arbitrator, or, if the two appointed arbitrators cannot agree
on the President within fifteen days from the date of appointment of
the second arbitrator, the necessary appointment shall be made by the
President of the Geneva Chamber of Commerce, at the request of one or
both parties. Such appointment shall be final and binding on the
parties hereto. The Arbitral Tribunal shall have its seat in Geneva and
the arbitration proceedings, including arguments and briefs, shall be
conducted in English. The rules of arbitration of the Geneva Chamber of
Commerce shall be applicable.
(c) The parties hereby waive the filing of the award with the competent
judicial authority. The award shall be delivered to the parties by the
Arbitral Tribunal.
<PAGE>
Share Purchase Agreement 28
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written below.
HERITAGE FINANCE AND TRUST CO. REHABILICARE INC.
- ------------------------------- -------------------------------
Date : Date :
Name : Name :
Title: Title:
ESPIRITO SANTO RESOURCES LTD
- -------------------------------
Date :
Name :
Title:
ALAIN NICOD
- -------------------------------
Date :
JEAN-FRANCOIS NICOD
- -------------------------------
Date :
PASCAL NICOD
- -------------------------------
Date :
BERNARD ESTIER
- -------------------------------
Date :
<PAGE>
Share Purchase Agreement 29
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<TABLE>
<CAPTION>
LIST OF ANNEXES
- ---------------
<S> <C>
ANNEX N DEG. DESCRIPTION
III(b) Organisation of the Company
III(e) Organisation of the Group
III(f) Ownership of Group Companies
III(g) Organisation of Group Companies
III(i) Financial Statements
III(k) Accounts Receivable
III(l) Capital Improvements
III(m) Absence of Change
III(q) Lease; Real Property
III(r) Inventory
III(t) Contracts
III(v) Compliance with Laws
III(w) Insurance
III(y) Employees
III(z) Professional and Social Welfare
III(aa) No Collective Bargaining
III(bb) Bank Accounts
IV(ii) Pension Fund Certificate
<PAGE>
Share Purchase Agreement 30
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<CAPTION>
LIST OF SCHEDULES
- -----------------
SCHEDULE NUMBER DESCRIPTION
<S> <C>
Schedule 1 Shareholders of the Company
Schedule 1.2 Earn Out Calculation
Schedule 2 Agreements (forms)
Schedule 3
Schedule 4 Due Diligence Report Lenz & Staehelin
Schedule 5 Due Diligence Report PricewaterhouseCoopers
Schedule 6 Fiduciary Agreement
</TABLE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 14, 1999, is by and between
Rehabilicare Inc., a Minnesota corporation (the "Borrower"), and U.S. Bank
National Association, a national banking association (the "Bank").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. In addition to terms defined elsewhere
in this Agreement, the following terms shall have the following respective
meanings (and such meanings shall be equally applicable to both the singular
and plural form of the terms defined, as the context may require):
"ACQUISITION INDEBTEDNESS": The balance sheet amount of any
Indebtedness incurred by the Borrower or any of its Subsidiary in connection
with the Transaction or any other Permitted Acquisition transaction including
obligations or Indebtedness that do not constitute interest-bearing
Indebtedness such as, but not limited to, any obligation or Indebtedness
arising from a covenant- not-to -compete, consulting agreement, employment
agreement or other consideration payable to the seller of any business or any
of its officers, shareholders, directors or affiliates.
"ADJUSTED EBITDA": For any period, the sum of: (a) the Adjusted Net
Income for such period; PLUS (b) the sum of the following amounts deducted in
arriving at the Net Income included in such Adjusted Net Income (but without
duplication for any item): (i) Interest Expense; (ii) depreciation and
amortization; and (iii) income taxes.
"ADJUSTED EURODOLLAR RATE": Applicable to a Eurodollar Rate Loan
Unit during its Interest Period, the rate (rounded upward, if necessary, to
the next higher one-hundredth of one percent) determined by dividing the
Eurodollar Rate for the relevant Interest Period by 1.00 MINUS the Eurodollar
Reserve Percentage.
"ADJUSTED NET INCOME": For any period, the Borrower's Net Income for
such period but excluding therefrom non-operating gains and losses (including
extraordinary gains and losses, gains and losses from discontinuance of
operations and gains and losses arising from the sale of assets other than
Inventory) during such period.
"ADVERSE EVENT": The occurrence of any event that would have a
material adverse effect on the business, operations, property, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries
(taken as a whole on a consolidated basis) or on the ability of any Loan
Party to perform its obligations under the Loan Documents to which such Loan
Party is a party.
"AGREEMENT": This Credit Agreement, as it may be amended, modified,
supplemented, restated or replaced from time to time.
<PAGE>
"APPLICABLE MARGIN": At any date of determination, the percentage
indicated below in accordance with the Cash Flow Leverage Ratio at such date:
<TABLE>
<CAPTION>
WHEN THE CASH FLOW THE FOR THE TERM FOR REVOLVING CREDIT
LEVERAGE RATIO APPLICABLE LOAN LOANS
IS MARGIN IS IS
------------------ ---------- ------------ --------------------
<S> <C> <C> <C>
Greater than 2.5 to 1.0 Reference Rate Loan Units 0.50% per annum 0.25% per annum
Eurodollar Rate Loan Units 2.75% per annum 2.50% per annum
Greater than 2.0 to 1.0 Reference Rate Loan Units 0.25% per annum 0.00% per annum
but less than or equal to
2.5 to 1.0
Eurodollar Rate Loan Units 2.50% per annum 2.25% per annum
Greater than 1.5 to 1.0 Reference Rate Loan Units 0.00% per annum 0.00% per annum
but less than or equal to
2.0 to 1.0
Eurodollar Rate Loan Units 2.25% per annum 2.00% per annum
Less than or equal to Reference Rate Loan Units 0.00% per annum 0.00% per annum
1.5 to 1.0
Eurodollar Rate Loan Units 2.00% per annum 1.75% per annum
</TABLE>
The Applicable Margin on the Closing Date for: (a) the Term Loan is 0.50% per
annum with respect to Reference Rate Loan Units and 2.75 % per annum with
respect to Eurodollar Rate Loan Units; and (b) the Revolving Loans is 0.25%
per annum with respect to Reference Rate Loan Units and 2.50 % per annum with
respect to Eurodollar Rate Loan Units and the Applicable Margin shall
continue at those percentages until changed in accordance with the terms of
this definition. The Cash Flow Leverage Ratio and the Applicable Margin will
be determined at each Quarterly Measurement Date, commencing with Quarterly
Measurement Date occurring on September 30, 1999, as calculated from the
financial statements and Compliance Certificate delivered by the Borrower
pursuant to Sections 8.1(b) and 8.1(c). Any increase or decrease in the
Applicable Margin shall apply to all then existing or thereafter arising Loan
Units and shall become effective as of the first day of the third month of
each fiscal quarter of the Borrower, commencing December 1, 1999, and shall
continue to be effective until subsequently changed in accordance with this
definition; PROVIDED, HOWEVER, if the financial statements required by
SECTION 8.1(b) and Compliance Certificate required by SECTION 8.1(c), are not
delivered in the time periods provided therein, the Cash Flow Leverage Ratio
for any Quarterly Measurement Date will be deemed to be greater than 2.5 to
1.0.
2
<PAGE>
"BANK": As defined in the preamble hereto.
"BORROWER": As defined in the preamble hereto.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to
be open in Minneapolis, Minnesota.
"CAPITAL EXPENDITURE": Any amount debited to the fixed asset account
on the Borrower's consolidated balance sheet in accordance with GAAP in
respect of the acquisition (including, without limitation, acquisition by
entry into a Capitalized Lease), construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other fixed
assets or capitalized leaseholds.
"CAPITALIZED LEASE": Any lease which, in accordance with GAAP, is
capitalized on the books of the lessee.
"CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement Date, the
ratio of: (a) the Total Debt at such date; to (b) Pro Forma Adjusted EBITDA
for the Measurement Period ending at such date.
"CHANGE OF CONTROL": The occurrence after the date of this Agreement
of any single event (or related series of events) where a majority of the
members of the Borrower's board of directors as of the date of such single
event (or the date of the first of a related series of events) cease to be
members of the Borrower's board of directors.
"CLOSING DATE": The date on which the initial Revolving Loans and
the Term Loan are made after the satisfaction of all conditions precedent
specified in ARTICLE VI.
"CODE": The Internal Revenue Code of 1986, as amended, or any
successor statute, together with regulations thereunder.
"COLLATERAL": Any property in which the Bank has been granted a Lien
pursuant to any Loan Document.
"COMMITMENT": The agreement of the Bank to make the Loans.
"COMPEX": Compex SA, a Swiss corporation.
"COMPLIANCE CERTIFICATE": As defined in SECTION 8.1(c).
"CONTINGENT OBLIGATIONS:" With respect to any Person at the time of
any determination, without duplication, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary
3
<PAGE>
obligor") in any manner, whether directly or otherwise; (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any direct or indirect security therefor, (b) to purchase property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (c) to maintain working
capital, equity capital or other financial statement condition of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or
(d) entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner
against loss in respect thereof; provided, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit, in each
case in the ordinary course of business.
"DEFAULT": Any event which, with the giving of notice to the
Borrower or lapse of time, or both, would constitute an Event of Default.
"DEFAULT RATE": The rate applicable to Reference Rate Loan Units
determined in accordance with SECTION 3.1(a)(ii).
"DOMESTIC ADJUSTED EBITDA": For any Measurement Period, the Adjusted
EBITDA for such Measurement Period adjusted to exclude therefrom any income
or expense item attributable to any Foreign Subsidiary.
"DOMESTIC CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement
Date occurring on or after June 30, 2000, the ratio of: (a) the difference
between: (i) Total Debt; MINUS (ii) the Capitalized Leases included therein
that constitute only the Indebtedness of the Foreign Subsidiaries; to (b) the
Domestic Pro Forma Adjusted EBITDA for the Measurement Period ending at such
Quarterly Measurement Date.
"DOMESTIC FIXED CHARGE COVERAGE RATIO": At any Quarterly Measurement
Date occurring on or after June 30, 2000, the ratio of: (a) the sum of: (i)
the Borrower's Domestic Adjusted EBITDA for the Measurement Period ending at
such date; PLUS (ii) the Operating Lease Payments made by the Borrower and
its Domestic Subsidiaries, but not by any Foreign Subsidiary, during such
Measurement Period and deducted from the Net Income used in calculating such
Domestic Adjusted EBITDA; MINUS (iii) the Capital Expenditures made by the
Borrower or its Domestic Subsidiaries, but not by any Foreign Subsidiary,
during such Measurement Period; MINUS (v) the Permitted Distributions made by
the Borrower, but not by any Foreign Subsidiary, pursuant to SECTION 9.15
during such Measurement Period; to (b) the sum of: (i) the Interest Expense
for such Measurement Period; PLUS (ii) the Mandatory Principal Payments for
such Measurement Period; PLUS (iii) the Operating Lease Payments scheduled to
have been paid by the Borrower or its Domestic Subsidiaries, but not by any
Foreign Subsidiary, during such Measurement Period.
4
<PAGE>
"DOMESTIC PRO FORMA ADJUSTED EBITDA": For any Measurement Period,
the Pro Forma Adjusted EBITDA for such Measurement Period adjusted to exclude
therefrom any income, pro forma income, expense or pro forma expense item
attributable to any Foreign Subsidiary.
"DOMESTIC SUBSIDIARY": Any Subsidiary of the Borrower which is not a
"controlled foreign corporation" as defined in Code Section 957(a).
"EBITDA": For any period, the sum of: (a) the Net Income for such
period; PLUS (b) the sum of the following amounts deducted from such Net
Income: (i) Interest Expense; (ii) depreciation and amortization; and (iii)
income taxes.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, or any successor statute, together with regulations thereunder.
"ERISA AFFILIATE": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower or any of its
Subsidiaries is a member and which is treated as a single employer under
Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"EURODOLLAR RATE": Applicable to determining the Adjusted Eurodollar
Rate for a Eurodollar Rate Loan Unit during its Interest Period, the average
offered rate for deposits in United States dollars (rounded upward, if
necessary, to the nearest 1/16 of 1%) for delivery of such deposits on the
first day of such Interest Period, for the number of days in such Interest
Period, which appears on the Reuters Screen LIBO Page as of 11:00 a.m.,
London time (or such other time as of which such rate appears) two Eurodollar
Business Days prior to the first day of such Interest Period, or, if lower,
the Bank may substitute the per annum Eurodollar interest rate (LIBOR) for
United States Dollars displayed on the Telerate Page at such time, or, if
neither the Reuters Screen LIBO Page or the Telerate Page are published at
the time, the rate for such deposits determined by the Bank at such time
based on such other published service of general application as shall be
selected by the Bank for such purpose or, if no such published service is
available, based on rates at which United States dollar deposits are offered
to the Bank in the interbank Eurodollar market at such time for delivery in
immediately available funds on the first day of such Interest Period in an
amount approximately equal to the principal balance to be outstanding on such
Eurodollar Rate Loan Unit (rounded upward, if necessary, to the nearest 1/16
of 1 %). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO Page on that service) for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits.
"Telerate Page" means the display designated as Telerate page 3750 on the
Telerate, Inc. Telerate Service (or such other page as may replace such
Telerate Page 3750 on that service) for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits.
5
<PAGE>
"EURODOLLAR RATE LOAN UNIT": Each portion of any Loan designated as
such in a notice of borrowing under SECTION 2.3 or a notice of continuation
or conversion under SECTION 2.4.
"EURODOLLAR RESERVE PERCENTAGE": Applicable in determining the
Adjusted Eurodollar Rate for a Eurodollar Rate Loan Unit during its Interest
Period, as of any day, that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement for the Bank with deposits
comparable in amount to those held by the Bank, in respect of "Eurocurrency
Liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate of Eurodollar Rate
Loan Units is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of the Bank to
United States residents). Any rate of interest based on the Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any change
in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in SECTION 10.1 which has
not been cured to the satisfaction of, or waived by, the Bank in accordance
with SECTION 11.1.
"EXCESS CASH FLOW": For any of the Borrower's fiscal years, an
amount equal to the sum of: (a) the Borrower's EBITDA for such fiscal year;
MINUS (b) the sum of the following amounts included in such EBITDA: (i) the
Interest Expense that was actually paid in cash by the Borrower during such
fiscal year; and (ii) income taxes that were actually paid in cash by the
Borrower during such fiscal year; MINUS (c) the Mandatory Principal Payments
scheduled to have been paid during such fiscal year; MINUS (d) the lesser of:
(i) Capital Expenditures made by the Borrower or its Subsidiaries during such
fiscal year; or (ii) $750,000.00; MINUS (e) the sum of the following
Permitted Distributions made pursuant to SECTION 9.15 during such fiscal
year: (i) the Permitted Distributions made by the Borrower; PLUS (ii) the
portion of any Permitted Distribution made by any of the Borrower's
Subsidiaries to the holders of minority-interests in such Subsidiary.
"FEDERAL RESERVE BOARD": The Board of Governors of the Federal
Reserve System or any successor thereto.
"FIXED CHARGE COVERAGE RATIO": At any Quarterly Measurement Date,
the ratio of: (a) the sum of: (i) the Borrower's Adjusted EBITDA for the
Measurement Period ending at such date; PLUS (ii) the Operating Lease
Payments made by the Borrower during such Measurement Period and deducted
from the Net Income used in calculating such Adjusted EBITDA; MINUS (iii) the
Capital Expenditures made by the Borrower or its Subsidiaries during such
Measurement Period; MINUS (v) the sum of the following Permitted
Distributions made pursuant to SECTION 9.15 during such fiscal year: (A) the
Permitted Distributions made by the Borrower; PLUS (B) the portion of any
Permitted Distribution made by any of the Borrower's Subsidiaries to the
holders of minority-interests in such Subsidiary; to (b) the sum of: (i) the
Interest Expense for such Measurement Period; PLUS (ii) the Mandatory
Principal Payments for such Measurement Period;
6
<PAGE>
PLUS (iii) the Operating Lease Payments scheduled to have been paid during
such Measurement Period.
"FOREIGN SUBSIDIARY": Any Subsidiary of the Borrower which is a
"controlled foreign corporation" as defined in Code Section 957(a).
"GAAP": Generally accepted accounting principles as in effect from
time to time including, without limitation, applicable statements, bulletins
and interpretations of the Financial Accounting Standards Board and
applicable bulletins, opinions and interpretations issued by the American
Institute of Certified Public Accountants or its committees.
"INDEBTEDNESS": Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the
obligor's balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet): (a) obligations secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the obligation secured thereby shall
have been assumed and whether or not the obligation secured is the obligation
of the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase price of any property
or services, except for any Trade Account Payable provided that any Trade
Account Payable which accrues interest or any portion of which is allocable
to interest in accordance with GAAP shall be deemed to constitute
Indebtedness; (d) any obligation as lessee under any Capitalized Lease; (e)
all guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others; (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit; and (g) all Rate Protection
Obligations. For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer unless such
Indebtedness is non-recourse to such Person.
"INTEREST EXPENSE": For any period, the aggregate interest expense
(including capitalized interest) of the Borrower for such period including,
without limitation, the interest portion of any Capitalized Lease; PROVIDED,
HOWEVER, that the foregoing shall be adjusted to reflect only the net effect
of any interest rate swap, interest hedging transaction, or other similar
arrangement entered into by the Borrower in order to reduce or eliminate
variations in its interest expenses.
"INTEREST PERIOD": For any Eurodollar Rate Loan Unit, the period
which shall begin on (and include) the date of the initial borrowing date of
such Eurodollar Rate Loan Unit or the date of the conversion of any Reference
Rate Loan Unit into a Eurodollar Rate Loan Unit or the date of the
continuation of a Eurodollar Rate Loan Unit as a Eurodollar Rate Loan Unit
upon the termination of the Interest Period then applicable thereto and,
unless the final maturity of such Eurodollar Rate Loan Unit is accelerated,
shall end on (but exclude) the date which is one, two, or three or six months
thereafter selected by the Borrower; PROVIDED, HOWEVER, that:
(a) any such Interest Period which would otherwise end on a
day not a Eurodollar Business Day shall end on the next succeeding
Eurodollar Business Day unless such extension would cause the last
day of such Interest Period to fall in the next
7
<PAGE>
following calendar month, in which event the last day of such Interest
Period for such Eurodollar Rate Loan Unit shall occur on the next
preceding Eurodollar Business Day;
(b) no Interest Period relating to any Loan shall extend
beyond the stated Maturity of such Loan;
(c) Interest Periods shall not be chosen for any Eurodollar
Rate Loan Units which would require payment of any amount of such
Eurodollar Rate Loan Unit prior to the last day of the Interest
Period in order to pay a scheduled installment of the Term Loan when
due; and
(d) any Interest Period which begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day in such
Interest Period.
"INVENTORY": Any goods held for sale or lease by the Borrower or any
of its Subsidiaries.
"INVESTMENT": The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
Inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real
or personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of, or any interest in,
another Person or any integral part of any business or the assets comprising
such business or part thereof.
"LIABILITIES": At any date of determination, the aggregate amount of
liabilities appearing on the Borrower's balance sheet at such date prepared
in accordance with GAAP.
"LIEN": Any security interest, mortgage, pledge, lien,
hypothecation, judgment lien or similar legal process, charge, encumbrance,
title retention agreement or analogous instrument or device (including,
without limitation, the interest of the lessors under Capitalized Leases and
the interest of a vendor under any conditional sale or other title retention
agreement).
"LOAN DOCUMENTS": This Agreement, the Notes, the Security Agreement,
the Pledge Agreement, the Subsidiary Guaranties, the Subsidiary Security
Agreements, the Subsidiary Pledge Agreements and each other instrument,
document, guaranty, security agreement, mortgage, or other agreement executed
and delivered by any Loan Party pursuant to which such Party incurs any
liability to the Bank with respect to the Obligations, agrees to perform any
covenant or agreement with respect to the Obligations or grants any security
interest to secure the Obligations.
"LOAN PARTY": The Borrower and the Subsidiary Guarantors.
8
<PAGE>
"LOANS": The Revolving Loans and the Term Loan.
"LOAN UNITS": A Reference Rate Loan Unit and a Eurodollar Rate Loan
Unit (each a "Type" of Loan Unit).
"MANDATORY PRINCIPAL PAYMENTS": For any period, the regularly
scheduled principal payments (including the portion of any payment on any
Indebtedness comprising part of Total Debt.
"MATURITY": The earlier of: (a) the date on which the Loans become
due and payable under SECTION 10.2 upon the occurrence of an Event of
Default; or (b) (i) the Revolving Credit Termination Date for the Revolving
Loans; or (ii) July 1, 2004 for the Term Loan.
"MEASUREMENT PERIOD": At any Quarterly Measurement Date, the four
fiscal quarters ending on such date.
"NET INCOME": For any period, the Borrower's after-tax net income
for such period determined in accordance with GAAP.
"NET PROCEEDS": With respect to any sale, transfer or other
disposition of any of the Borrower's or any of its Subsidiaries' assets
(other than sales of Inventory in the ordinary course of business) or from
the issuance of any equity interest in the Borrower or any of its
Subsidiaries or of any option, warrant or other right to acquire the same,
the cash proceeds received by the Borrower or any of its Subsidiaries from
such transaction less the sum of: (a) the reasonable costs associated with
such transaction; (b) the amount of any Indebtedness (other than the
Obligations) which is required to be paid in connection with such
transaction; and (c) any cash proceeds used to acquire replacement assets of
substantially similar type, nature or function within 90 days of the receipt
of such cash proceeds.
"NET WORTH": At any date, the total of all assets appearing on the
Borrower's balance sheet at such date prepared in accordance with GAAP minus
all Liabilities.
"NOTES": The Revolving Note and the Term Note.
"OBLIGATIONS": All Loans, advances, debts, liabilities, obligations,
covenants and duties owing by any Loan Party to the Bank of any kind or
nature, present or future, which arise under this Agreement or any other Loan
Document or by operation of law, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guarantying or
confirming of a letter of credit, guaranty, indemnification or in any other
manner, whether joint, several, or joint and several, direct or indirect
(including those acquired by assignment or purchases), absolute or
contingent, due or to become due, and however acquired. The term includes,
without limitation, all
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principal, interest, fees, charges, expenses, attorneys' fees, and any other
sum chargeable to any Loan Party under this Agreement or any other Loan
Document.
"OPERATING LEASE PAYMENTS": Rent and other payments made pursuant to
any lease of (or other agreement conveying the right to use) real and/or
personal property other than a Capitalized Lease (an "Operating Lease")
"ORIGINATION FEE": As provided in SECTION 3.3.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to
the functions thereof.
"PERMITTED ACQUISITIONS": Acquisitions permitted by SECTION 9.9(k)
or otherwise approved in writing by the Bank.
"PERMITTED LIENS": Liens permitted by the provisions of SECTION 9.11.
"PERMITTED DISTRIBUTIONS": The distributions and payments described
in SECTION 9.15(a) or (b).
"PERSON": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision, or any other entity, whether
acting in an individual, fiduciary or other capacity.
"PLAN": An employee benefit plan or other plan, maintained for
employees of the Borrower or of any ERISA Affiliate, and subject to Title IV
of ERISA or Section 412 of the Code.
"PLEDGE AGREEMENT: The Pledge Agreement dated as of a date
substantially contemporaneously herewith made by the Borrower in favor of the
Bank (the "UK Pledge Agreement") and the Pledge Agreement dated as of the
date of the consummation of the Transaction (the "Swiss Pledge Agreement");
in each case, as originally executed and as it may be amended, modified,
supplemented, restated or replaced from time to time.
"PRO FORMA CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement
Date for purposes of calculating whether an acquisition is permitted by
SECTION 9.9(k), the ratio of: (a) the Total Debt at such date adjusted to
include any Indebtedness to be incurred in connection with acquisition; to
(b) the sum of: (i) the Pro Forma Adjusted EBITDA for the Measurement Period
ending at such Quarterly Measurement Date; PLUS (ii) an additional pro forma
amount attributable to the proposed acquisition equal to the Adjusted EBITDA
generated by the business to be acquired in such acquisition during such
Measurement Period as if such proposed acquisition had been consummated on
the first day of such Measurement Period.
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"PRO FORMA ADJUSTED EBITDA": For any Measurement Period, the sum of:
(a) the Adjusted EBITDA for such Measurement Period; PLUS (b) a pro forma
amount attributable to all Permitted Acquisitions closed by the Borrower or
any of its Subsidiaries during such Measurement Period where such pro forma
amount is equal to the Adjusted EBITDA generated by the businesses acquired
in such Permitted Acquisitions during such Measurement Period prior to the
date on which such Permitted Acquisition was consummated; PROVIDED, HOWEVER,
that: (x) such additional pro forma amount for any Permitted Acquisition,
other than the Transaction, shall not exceed the amount approved by the Bank,
in its reasonable business judgment; and (y) the amount of Pro Forma Adjusted
EBITDA contributed by Compex and its Subsidiaries shall be limited to 33.33%
of the total Pro Forma Adjusted EBITDA.
"PURCHASE MONEY INDEBTEDNESS": Any Indebtedness incurred for the
purchase of personal property where the repayment thereof is secured solely
by an interest in the personal property so purchased.
"QUARTERLY MEASUREMENT DATE": The last day of each quarter of the
Borrower's fiscal year, commencing with the fiscal quarter ending September
30, 1999.
"QUARTERLY PAYMENT DATE": The last day of March, June, September,
and December of each year.
"RATE PROTECTION AGREEMENT": Any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate options contract or similar agreement or
arrangement between the Borrower and the counterparty thereto (the "Rate
Protection Provider") designed to protect the Borrower against fluctuations
in interest.
"RATE PROTECTION OBLIGATIONS": The liabilities, indebtedness, and
obligations of the Borrower, if any, to the Rate Protection Provider under
the Rate Protection Agreement.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate which is based on the Reference
Rate, such interest rate shall change on the effective date of any change in
the Reference Rate.
"REFERENCE RATE LOAN UNIT": Each portion of any Revolving Loan
designated as such in a notice of borrowing under SECTION 2.3 or a notice of
continuation or conversion under SECTION 2.4.
"REGULATORY CHANGE": As to the Bank, any change (including any
scheduled change) applicable to a class of banks which includes the Bank in
any:
(a) federal or state law or foreign law; or
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(b) regulation, interpretation, directive or request
(whether or not having the force of law) of any court or governmental
authority charged with the interpretation or administration of any
law referred to in clause (a) of this definition or of any fiscal,
monetary or other authority having jurisdiction over such class of
banks;
or the adoption after the date hereof of any new or final law, regulation,
interpretation, directive or request applicable to a class of banks which
includes the Bank.
"RELATED PARTY": Any Person (other than a Subsidiary, the Bank or
any other subsidiary or affiliate of U.S. Bancorp): (a) which directly or
indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Borrower; (b) which beneficially
owns or holds 5% or more of the equity interest of the Borrower; or (c) 5% or
more of the equity interest of which is beneficially owned or held by the
Borrower or a Subsidiary. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or by contract.
"REPORTABLE EVENT": A reportable event, as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC, by regulation,
has waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event, provided that a failure to
meet the minimum funding standard of Section 412 of the Code and Section 302
of ERISA shall be a reportable event regardless of the issuance of any such
waivers in accordance with Section 412(d) of the Code.
"REVOLVING CREDIT COMMITMENT": $5,000,000.00, as the same may be
reduced from time to time pursuant to SECTION 4.3 and, as the context may
require, the agreement of the Bank to make Revolving Loans to the Borrower up
to the Revolving Credit Commitment subject to the terms and conditions of
this Agreement.
"REVOLVING CREDIT COMMITMENT FEE": As provided in SECTION 3.2.
"REVOLVING CREDIT TERMINATION DATE": The date which is the earlier
of: (a) July 1, 2001; or (b) the date upon which the obligation of the Bank
to make Revolving Loans is terminated pursuant to SECTION 4.3 or SECTION 10.2.
"REVOLVING LOAN(S)": The Loans described in SECTION 2.1(a).
"REVOLVING NOTE": The promissory note of the Borrower described in
SECTION 2.5(a), substantially in the form of EXHIBIT A, as such promissory
note may be amended, modified or supplemented from time to time, and such
term shall include any substitutions for, or renewals of, such promissory
note.
"SEC": The Securities and Exchange Commission or any successor
thereto.
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"SECURITY AGREEMENT": The Security Agreement dated as of even date
herewith made by the Borrower in favor of the Bank, as originally executed
and as it may be amended, modified, supplemented, restated or replaced from
time to time.
"SOLVENT": With respect to any Person on any date of determination,
that on such date:
(a) the fair value of such Person's tangible and
intangible assets is in excess of the total amount of such Person's
liabilities including, without limitation, Contingent Obligations;
and
(b) such Person is then able to pay its debts as they
mature; and
(c) such Person has capital sufficient to carry on its
business.
"SUBSIDIARY": Any Person of which or in which the Borrower and its
other Subsidiaries own directly or indirectly 50% or more of: (a) the
combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such Person, if it is a corporation, (b) the capital interest or profit
interest of such Person, if it is a partnership, joint venture or similar
entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"SUBSIDIARY DOCUMENTS": Each Subsidiary Guaranty, Subsidiary
Security Agreement, Subsidiary Pledge Agreement, Subsidiary UCC Financing
Statements, Subsidiary Secretary's Certificate and such other approvals,
opinions or documents as the Bank may request.
"SUBSIDIARY GUARANTOR": Compex and each now existing or hereafter
acquired Subsidiary of the Borrower which may execute a Subsidiary Guaranty,
Subsidiary Security Agreement and/or Subsidiary Pledge Agreement after the
date of this Agreement.
"SUBSIDIARY GUARANTY": The Guaranty dated as of the date of the
consummation of the Transaction made by Compex in favor of the Bank and each
Guaranty hereafter made by a Subsidiary Guarantor in favor of the Bank; in
each case, as originally executed and as it may be amended, modified,
supplemented, restated or replaced from time to time.
"SUBSIDIARY GUARANTY RELEASE CONDITIONS": The Subsidiary Guaranty
Release Conditions defined in SECTION 11.13.
"SUBSIDIARY GUARANTY RELEASE DATE": The Subsidiary Guaranty Release
Date defined in SECTION 11.13.
"SUBSIDIARY PLEDGE AGREEMENT": Each pledge agreement hereafter made
by a Subsidiary Guarantor in favor of the Bank; in each case, as originally
executed and as it may be amended, modified, supplemented, restated or
replaced from time to time.
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"SUBSIDIARY SECURITY AGREEMENT": Each Security Agreement hereafter
made by a Subsidiary Guarantor in favor of the Bank; in each case, as
originally executed and as it may be amended, modified, supplemented,
restated or replaced from time to time.
"TERM LOAN COMMITMENT": $15,000,000.00, and as the context may
require, the agreement of the Bank to make the Term Loan to the Borrower up
to the amount of the Term Loan Commitment subject to the terms and conditions
of this Agreement.
"TERM LOAN": The Loan described in SECTION 2.1(b).
"TERM NOTE": The promissory note of the Borrower described in
SECTION 2.5(b), substantially in the form of EXHIBIT B, as such promissory
note may be amended, modified or supplemented from time to time, and such
term shall include any substitutions for, or renewals of, such promissory
note.
"TOTAL DEBT": At any date, the outstanding principal balance of the
Loans, the Borrower's and its Subsidiaries' Capitalized Leases, other
interest-bearing Indebtedness (other than Trade Accounts Payable not
constituting Indebtedness) and the Acquisition Indebtedness.
"TRADE ACCOUNTS PAYABLE": The trade accounts payable of the
described Person with a maturity of not greater than 90 days after their
respective original due dates and that are incurred in the ordinary course of
such Person's business and which do not remain unpaid for more than such
period of time.
"TRANSACTIONS": The following series of transactions as more fully
set forth in the Transaction Documents: (a) the Borrower's purchase of all
600 shares of Compex pursuant to the Share Purchase Agreement from the
"Sellers" as that term is defined therein; (b) the Borrower's incurrence of
the Obligations pursuant to this Agreement; and (c) the consummation of the
other transactions contemplated by the Transaction Documents.
"TRANSACTION DOCUMENTS": The documents listed on SCHEDULE A attached
hereto.
"TRANSACTION FEES": The fees, costs and expenses described on
SCHEDULE B attached hereto and incorporated herein by reference.
SECTION 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder (including,
without limitation, determination of compliance with financial ratios and
restrictions in ARTICLES VIII and IX hereof) shall be made in accordance with
GAAP consistently applied on a consolidated basis for the Borrower and its
consolidated Subsidiaries as used in the preparations of the Borrower's
audited financial statements described in SECTION 7.5(a).
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SECTION 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, unless otherwise stated, the word "from" means "from and including" and
the words "to" or "until" each means "to but excluding."
SECTION 1.4 OTHER DEFINITIONAL PROVISIONS. The words "hereof,"
"herein," and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and
like references are to this Agreement unless otherwise expressly provided.
ARTICLE II
TERMS OF LENDING
SECTION 2.1 THE LOANS. Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, the Bank agrees:
(a) REVOLVING LOANS. To make loans (each a "Revolving Loan"
and collectively the "Revolving Loans") to the Borrower from time to
time from the date hereof until the Revolving Credit Termination
Date up to an aggregate undrawn amount of the Revolving Credit
Commitment, during which period the Borrower may repay and reborrow
in accordance with the provisions hereof, PROVIDED that: (i) the
Bank shall not be obligated to make any Revolving Loan if, after
giving effect to such Revolving Loan, the aggregate outstanding
principal amount of all Revolving Loans would exceed the Revolving
Credit Commitment; and (ii) the aggregate amount of Revolving Loans
available on the Closing Date shall not exceed $2,000,000.00.
(b) TERM LOAN. To make a loan (the "Term Loan") in the
amount of $15,000,000.00 to the Borrower at the Bank's principal
office in Minneapolis, Minnesota in immediately available funds on
the Closing Date.
SECTION 2.2 LOAN UNITS FOR LOANS. Except as otherwise provided
herein, the Revolving Loans and the Term Loan shall be comprised of
Eurodollar Rate Loan Units and Reference Rate Loan Units as shall be selected
by the Borrower in accordance with SECTION 2.3 and SECTION 2.4. Any
combination of Types of Loan Units for the Loans may be outstanding at the
same time; PROVIDED, HOWEVER, that the Loans may not consist of more than
four (4) different Eurodollar Rate Loan Units. Each Eurodollar Rate Loan Unit
shall be in a minimum amount of $100,000.00 or in an integral multiple of
$100,000.00 above such amount. Each Reference Rate Loan Unit shall be in an
amount of not less than $50,000.00.
SECTION 2.3 BORROWING PROCEDURES.
(a) REVOLVING LOANS. Any request by the Borrower for
Revolving Loans shall be in writing, or by telephone promptly confirmed
in writing if so requested by the Bank, and must be given so as to be
received by the Bank not later than 11:00 a.m.,
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Minneapolis time, on: (i) the date of the requested Revolving Loans,
if such Revolving Loans will not include Eurodollar Rate Loan Units;
or (ii) on the second Eurodollar Business Day prior to the date of
the requested Revolving Loans, if such Revolving Loans will include
Eurodollar Rate Loan Units. Each request for Revolving Loans shall
specify the borrowing date (which shall be a Business Day and, in the
case of any request for Eurodollar Rate Loan Units, a Eurodollar
Business Day) and the amount of such Revolving Loans. Each request
for Revolving Loans shall be in a minimum amount of $50,000.00. Each
request for Revolving Loans shall be deemed a representation and
warranty by the Borrower that all conditions precedent specified in
SECTION 6.2 to such Revolving Loans are satisfied on the date of such
request and on the date the requested Revolving Loans are made.
Unless the Bank determines that any applicable condition specified in
ARTICLE VI has not been satisfied (in which case the Bank will
promptly notify the Borrower in writing of such determination), the
Bank will make the amount of the requested Revolving Loan available
to the Borrower at the Bank's principal office in Minneapolis,
Minnesota in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the date requested. Each written request or
confirmation shall be in the form of EXHIBIT C attached hereto.
(b) TERM LOAN. On the Closing Date, the Term Loan shall be
made as a single Reference Rate Loan Unit. Unless the Bank
determines that any applicable condition specified in ARTICLE VI has
not been satisfied (in which case the Bank will promptly notify the
Borrower in writing of such determination), the Bank will make the
amount of the Term Loan available to the Borrower at the Bank's
principal office in Minneapolis, Minnesota in immediately available
funds on the Closing Date.
SECTION 2.4 CONTINUATION OR CONVERSION OF LOAN UNITS FOR LOANS. The
Borrower may elect to: (i) continue any outstanding Eurodollar Rate Loan Unit
from one Interest Period into a subsequent Interest Period to begin on the
last day of the earlier Interest Period; or (ii) convert any outstanding Loan
Unit into another Type or Types of Loan Unit (on the last day of an Interest
Period only, in the instance of a Eurodollar Rate Loan Unit), by giving the
Bank notice in writing, or by telephone promptly confirmed in writing if so
requested by the Bank, given so as to be received by the Bank not later than:
(a) 11:00 a.m., Minneapolis time, on the date of the
requested continuation or conversion, if all or part of the
continuing or converted Loan Unit shall be a Reference Rate Loan
Unit; or
(b) 11:00 a.m., Minneapolis time, two (2) Eurodollar
Business Days prior to the date of the requested continuation or
conversion, if all or part of the continuing or converted Loan Unit
shall be a Eurodollar Rate Loan Unit.
Each notice of continuation or conversion of a Loan Unit shall specify: (i)
the effective date of the continuation or conversion (which shall be a
Business Day and, if the resulting Loan Unit is a Eurodollar Rate Loan Unit,
a Eurodollar Business Day); (ii) the amount and the Type or Types
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of Loan Units following such continuation or conversion; and (iii) for
continuation as, or conversion into, Eurodollar Rate Loan Units, the Interest
Periods for such Loan Units. Absent timely notice of continuation or
conversion, each Eurodollar Rate Loan Unit shall automatically convert into a
Reference Rate Loan Unit on the last day of an applicable Interest Period,
unless paid in full on such last day. No Loan Unit shall be continued as, or
converted into, a Eurodollar Rate Loan Unit if the shortest Interest Period
for such Loan Unit may not transpire prior to the Maturity of the relevant
Loan or if a Default or Event of Default shall exist. Each written notice of
continuation or conversion shall be in the form of EXHIBIT D attached hereto.
SECTION 2.5 THE NOTES AND MATURITIES. The Loans shall be evidenced
by the following Notes:
(a) REVOLVING NOTE. The Revolving Loans made by the Bank
shall be evidenced by a Revolving Note in the initial amount of the
Revolving Credit Commitment. The Revolving Loans and the Revolving
Note shall mature and be payable at Maturity of the Revolving Loans.
The Bank shall enter in its records the amount of each of its
Revolving Loans, the rate of interest borne on such Revolving Loans
by each Loan Unit, and the payments of the Revolving Loans received
by the Bank, and such records shall be conclusive evidence of the
subject matter thereof, absent manifest error.
(b) TERM NOTE. The Term Loan made by the Bank shall be
evidenced by the Term Note in the amount of the Term Loan when made.
The Term Loan shall mature and be payable in accordance with the
provisions of SECTION 4.2. The Bank shall enter in its records the
amount of the Term Loan, the rate of interest borne on the Term Loan
by each Loan Unit and the payments of the Term Loan received by the
Bank, and such records shall be conclusive evidence of the subject
matter thereof, absent manifest error.
SECTION 2.6 FUNDING LOSSES. Upon demand, the Borrower will
indemnify and hold the Bank free and harmless from all reasonable losses,
costs and expenses which such Bank may sustain or incur (including, without
limitation, any loss or expense sustained or incurred in obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan Unit) as a result of: (a) a default by the Borrower in
payment when due of the principal of or interest on any Eurodollar Rate Loan
Unit; (b) the Borrower's failure (other than a failure attributable to a
default by the Bank) to make a borrowing, conversion or refunding with
respect to a Eurodollar Rate Loan Unit after making a request therefor in
accordance with the terms of this Agreement; (c) a prepayment (whether
mandatory or otherwise) of a Eurodollar Rate Loan Unit before the expiration
of the related Interest Period; and (d) any Event of Default by the Borrower
under the Loan Documents and a demand for payment of a Eurodollar Rate Loan
Unit by the Bank before the expiration of the related Interest Period. A
certificate as to any such loss, cost or expense shall be submitted by the
Bank to the Borrower together with such Bank's request for indemnification
(which requests shall set forth the basis for requesting such amounts in
reasonable detail) and shall, in the absence of manifest error or error
proven by the Borrower, be conclusive and binding as to the amount thereof.
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ARTICLE III
INTEREST AND FEES
SECTION 3.1 INTEREST.
(a) REVOLVING LOANS.
(i) Subject to the provisions of SECTION
3.1(a)(ii), the Borrower agrees to pay interest on the
outstanding principal amount of each Revolving Loan from the
date of such Revolving Loan until the Maturity thereof:
(A) With respect to each Reference Rate Loan
Unit comprising a portion of such Revolving Loan,
at a fluctuating rate per annum equal at all times
to the sum of the Reference Rate PLUS the
Applicable Margin; and
(B) With respect to each Eurodollar Rate
Loan Unit comprising a portion of such Revolving
Loan, at a rate per annum equal at all times
during the Interest Period relating to such
Eurodollar Rate Loan Unit to the sum of the
Adjusted Eurodollar Rate in effect for such Interest
Period PLUS the Applicable Margin.
(ii) Notwithstanding the provisions of SECTION
3.1(a)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal amount of each
Revolving Loan from the date on which the Bank notifies the
Borrower of such Event of Default at a rate per annum at
all times equal to the sum of the rate otherwise in effect
on such Revolving Loan plus two percent (2.0%) per annum.
(b) TERM LOANS.
(i) Subject to the provisions of SECTION
3.1(b)(ii), the Borrower agrees to pay interest on the
outstanding principal amount of the Term Loan from the date
of the Term Loan until the Maturity thereof:
(A) With respect to each Reference Rate Loan
Unit comprising a portion of the Term Loan, at a
fluctuating rate per annum equal at all times to
the sum of the Reference Rate PLUS the Applicable
Margin; and
(B) With respect to each Eurodollar Rate Loan
Unit comprising a portion of the Term Loan, at a
rate per annum equal at all times during the
Interest Period relating to such Eurodollar Rate
Loan Unit to the sum of the Adjusted Eurodollar
Rate in effect for such Interest Period PLUS the
Applicable Margin.
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(ii) Notwithstanding the provisions of SECTION
3.1(b)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal balance of the
Term Loan from the date on which the Bank notifies the
Borrower of such Event of Default at a rate per annum at all
times equal to the sum of the rate otherwise in effect on
the Term Loan plus two percent (2.0%) per annum.
(c) ALL LOANS.
(i) Until Maturity of a Loan, interest accrued on
each Loan Unit through the end of a month shall be payable
on the last day of such month, commencing on July 31, 1999.
Interest shall also be payable at the Maturity of a Loan
and interest accrued after Maturity shall be payable on
demand.
(ii) No provision of this Agreement or any Note
shall require the payment of interest in excess of the rate
permitted by applicable law.
SECTION 3.2 REVOLVING CREDIT COMMITMENT FEE. The Borrower shall pay
to the Bank a fee (the "Revolving Credit Commitment Fee") in an amount
determined by applying a rate of three-eighths of one percent (0.375%) per
annum to the average daily excess of the Revolving Credit Commitment over the
sum of the outstanding principal amount of the Revolving Loans. Such
Revolving Credit Commitment Fee shall be payable to the Bank in arrears on
each Quarterly Payment Date after the date of this Agreement and on the
Revolving Credit Termination Date.
SECTION 3.3 ORIGINATION FEE. The Borrower shall pay to the Bank a
non-refundable origination fee (the "Origination Fee") in an aggregate amount
equal to $275,000.00, of which $50,000.00 has been deposited with the Bank
and will be applied to the Origination Fee. No termination or reduction of
any Loan or any Commitment and no failure of the Borrower to satisfy the
conditions set forth in ARTICLE VI shall entitle the Borrower to a refund of
any portion of the Origination Fee.
SECTION 3.4 COMPUTATION. Interest, the Revolving Credit Commitment
Fee and any other fee calculated on a per annum basis shall be computed on
the basis of actual days elapsed and a year of 360 days.
ARTICLE IV
PAYMENTS, PREPAYMENTS, REDUCTION OR
TERMINATION OF THE CREDIT AND SETOFF
SECTION 4.1 REPAYMENT. Principal of the Loans shall be due and
payable in accordance with the provisions of SECTION 2.5 and this ARTICLE IV.
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SECTION 4.2 VOLUNTARY AND MANDATORY PREPAYMENTS; SCHEDULED
INSTALLMENT PAYMENTS.
(a) OPTIONAL PREPAYMENTS. The Borrower, by giving written
or telephonic notice to the Bank by no later than 2:00 p.m. on the
Business Day of a prepayment, may prepay the Loans, in whole or in
part, at any time, without premium or penalty except as provided by
SECTION 3.4; PROVIDED, HOWEVER, that: (i) any prepayment shall be
subject to the provisions of SECTION 2.6; and (ii) each partial
prepayment of any Term Loan shall be in an amount of $500,000.00 or
an integral multiple of $100,000.00 above such amount. Any such
prepayment must be accompanied by accrued and unpaid interest on the
amount prepaid and any amount payable pursuant to SECTION 2.6.
(b) MANDATORY PREPAYMENT OF REVOLVING LOANS. If, at any
time, the aggregate outstanding principal amount of all Revolving
Loans exceeds the Revolving Credit Commitment, then the Borrower
shall immediately prepay the Revolving Loans by the amount of such
excess together with interest on the amount prepaid.
(c) MANDATORY PREPAYMENT OF TERM LOAN. The Borrower shall
prepay the Term Loan as follows:
(i) By no later than later than September 30 of
each fiscal year, commencing September 30, 2000, the
Borrower agrees to make a prepayment (an "Excess Cash Flow
Prepayment") of the principal of the Term Loan in an amount
equal to 50% of the positive Excess Cash Flow for the then
most recently ended fiscal year (rounded up to the nearest
$1,000.00).
(ii) Contemporaneously with the Borrower's receipt
of any Net Proceeds, the Borrower shall prepay the Term
Loan by an amount equal to such Net Proceeds except that no
such prepayment shall be required during any fiscal year
until after the aggregate amount of Net Proceeds received
by the Borrower and/or any of its Subsidiaries during such
fiscal year is greater than $100,000.00 and the Borrower and
its Subsidiaries may retain aggregate Net Proceeds up to
such amount.
(d) SCHEDULED TERM LOAN PAYMENTS. Principal installments
of the Term Loan shall be due and payable in 20 consecutive
quarterly installments of principal, such installments shall be due
and payable on each Quarterly Payment Date, commencing September 30,
1999 and continuing through, to and including June 30, 2004 and each
such installment shall be in the amount set forth in the table below
for the relevant installment:
20
<PAGE>
<TABLE>
<CAPTION>
Number of Amount of
Consecutive Quarterly Each Such Quarterly
Installments Installment
------------ -----------
<S> <C>
FIRST THROUGH FOURTH $400,000.00
FIFTH THROUGH EIGHTH $450,000.00
NINTH THROUGH TWELFTH $500,000.00
THIRTEEN THROUGH SIXTEENTH $550,000.00
SEVENTEENTH THROUGH NINETEEN $600,000.00
TWENTIETH REMAINING PRINCIPAL.
</TABLE>
In any event, the Term Loan, together with accrued interest, shall
be due and payable in full at its Maturity.
(e) APPLICATION OF PREPAYMENTS. Each optional or
mandatory prepayment of the Term Loan shall be applied to reduce the
unpaid installments thereon in the inverse order of maturities.
Subject to the immediately preceding sentence, the Bank shall apply
prepayments first to Reference Rate Loan Units, then to Eurodollar
Rate Loan Units having an Interest Period ending on such day of
prepayment and then to other Eurodollar Rate Loan Units.
SECTION 4.3 OPTIONAL REDUCTION OR TERMINATION OF REVOLVING CREDIT
COMMITMENT. The Borrower may, at any time, upon no less than two (2) Business
Days' prior written notice received by the Bank, permanently reduce the
Revolving Credit Commitment, with any such reduction in a minimum amount of
$1,000,000.00 or an integral multiple thereof; PROVIDED, HOWEVER, the
Borrower may not reduce the Revolving Credit Commitment below the aggregate
outstanding principal amount of all Revolving Loans. The Borrower may, at any
time when no Revolving Loans are outstanding, upon not less than two (2)
Business Days' prior written notice to the Bank, terminate the Revolving
Credit Commitment in its entirety. Upon termination of the Revolving Credit
Commitment pursuant to this Section, the Borrower shall pay to the Bank all
accrued and unpaid interest on the Revolving Loans, all unpaid Revolving
Credit Commitment Fees accrued to the date of such termination and all other
unpaid Obligations of the Borrower to the Bank hereunder with respect to the
Revolving Loans and the Revolving Credit Commitment.
SECTION 4.4 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other Obligations under the
Loan Documents payable to the Bank shall be made without deduction, set-off,
or counterclaim in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the dates due at the main office of the Bank in
Minneapolis, Minnesota. Funds received on any day after such time shall be
deemed to have been received on the next Business Day. Subject to the
definition of the term "Interest Period", whenever any payment to be made
hereunder or on the Notes shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of any
interest or fees. The Borrower authorizes the Bank to charge any of the
Borrower's accounts maintained at the Bank
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<PAGE>
for the amount of any payment or prepayment on the Notes or other amount
owing pursuant to any of the other Loan Documents.
ARTICLE V
ADDITIONAL PROVISIONS RELATING TO THE LOANS
SECTION 5.1 INCREASED COSTS. If, as a result of any Regulatory Change:
(a) any tax, duty or other charge with respect to any
Loan, the Notes or the Commitment is imposed, modified or deemed
applicable, or the basis of taxation of payments to the Bank of
interest or principal of the Loans or of the Revolving Credit
Commitment Fee (other than taxes imposed on the overall net income
of the Bank by the jurisdiction in which the Bank has its principal
office) is changed;
(b) any reserve, special deposit, special assessment
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Bank is imposed, modified or
deemed applicable;
(c) any increase in the amount of capital required or
expected to be maintained by the Bank or any Person controlling the
Bank is imposed, modified or deemed applicable;
(d) any other condition affecting this Agreement or
the Commitment is imposed on the Bank or the relevant funding markets;
and the Bank determines that, by reason thereof, the cost to the Bank of
making or maintaining the Loans or the Commitment is increased, or the amount
of any sum receivable by the Bank hereunder or under the Notes is reduced,
then, the Borrower shall pay to the Bank upon demand such additional amount
or amounts as will compensate the Bank (or the controlling Person in the
instance of (c) above) on an after-tax basis for such additional costs or
reduction (provided that the Bank has not been compensated for such
additional cost or reduction in the calculation of the Eurodollar Reserve
Percentage). Determinations by the Bank for purposes of this SECTION 5.1 of
the additional amounts required to compensate the Bank shall be conclusive in
the absence of manifest error. The Bank's demand for payment of any amount
pursuant to this SECTION 5.1 shall show the calculation of the amount
demanded in reasonable detail. In determining such amounts, the Bank may use
any reasonable averaging, attribution and allocation methods.
SECTION 5.2 DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE OR
INADEQUATE; IMPRACTICABILITY. If the Bank determines (which determination
shall be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant
Interest Period for any Eurodollar Rate Loan Unit are not available
to the Bank in the relevant market or that, by
22
<PAGE>
reason of circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period;
(b) the Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Bank of making or funding the
Eurodollar Rate Loan Units for its relevant Interest Period; or
(c) the making or funding of any Eurodollar Rate Loan
Unit has become impracticable as a result of any event occurring
after the date of this Agreement which, in the opinion of the Bank,
materially and adversely affects such Loan Unit or the Bank's
Commitment to make such Loan Unit or the relevant market;
the Bank shall promptly give notice of such determination to the Borrower and
the Bank, and (A) all Loans made by the Bank shall accrue interest as a
Reference Rate Loan Unit during the period on and after the date of the
Bank's notice through the date on which the Bank determines that the
circumstances giving rise to the Bank's determination under subsection (a),
(b) or (c) no longer exist; (B) (1) any notice of a new Eurodollar Rate Loan
Unit previously given by the Borrower and not yet borrowed or converted shall
be deemed, as to the Bank, to be a notice to make a Reference Rate Loan Unit
and (2) the Borrower shall be obligated to either prepay in full any
outstanding Eurodollar Rate Loan Units without premium or penalty other than
any amount required by SECTION 2.6 on the last day of the current Interest
Period with respect thereto or convert any such Eurodollar Rate Loan Unit to
a Reference Rate Loan Unit or, in either case, on such earlier date as may be
required by applicable law. Any prepayment of any Eurodollar Rate Loan Unit
prior to the end of its Interest Period shall be accompanied by any payment
required by SECTION 2.6.
SECTION 5.3 CHANGES IN LAW RENDERING EURODOLLAR RATE LOAN UNITS
UNLAWFUL. If at any time due to the adoption of any law, rule, regulation,
treaty or directive, or any change therein, or in the interpretation or
administration thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with the
interpretation or administration thereof, or for any other reason arising
subsequent to the date of this Agreement, it shall become unlawful or
impossible for the Bank to make or fund any Eurodollar Rate Loan Unit, the
obligation of the Bank to provide such Loan Unit shall, upon the happening of
such event, forthwith be suspended for the duration of such illegality or
impossibility. If any such event shall make it unlawful or impossible for the
Bank to continue any Eurodollar Rate Loan Unit previously made by it
hereunder, the Bank shall, upon the happening of such event, notify the
Borrower and the Bank thereof in writing, and the Borrower shall, at the time
notified by the Bank, either convert each such unlawful Loan Unit to a
Reference Rate Loan Unit or repay such Loan Unit in full, together with
accrued interest thereon and any payment required pursuant to SECTION 2.6.
SECTION 5.4 DISCRETION OF THE BANK AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, the Bank
shall be entitled to fund and maintain its funding of all or any part of the
Loans in any manner it elects; it being understood, however, that
23
<PAGE>
for purposes of this Agreement, all determinations hereunder shall be made as
if the Bank had actually funded and maintained each Eurodollar Rate Loan Unit
during the Interest Period for such Loan Unit through the purchase of
deposits having a term corresponding to such Interest Period and bearing an
interest rate equal to the Eurodollar Rate (whether or not the Bank shall
have granted any participation in such Loan Units).
SECTION 5.5 FUNDING THROUGH THE SALE OF PARTICIPATION. The Borrower
acknowledges that the Bank may fund all or any part of the Loans by sales of
participation to various participants and agrees that the Bank may, in
invoking its rights under this ARTICLE V or under SECTION 2.6, demand and
receive payment for costs and other amounts incurred by, or allocable to, any
such participant, or take other action arising from circumstances applicable
to any such participant, to the same extent that such participant could
demand and receive payments, or take other action, under this ARTICLE V or
under SECTION 2.6 if such participant were the Bank under this Agreement
except that no participant's claims for payment of costs and other amounts
under this Article V or SECTION 2.6 shall exceed the amount which the Bank
would have received had the Bank not sold a participation to such participant.
SECTION 5.6 FUNDING THROUGH BRANCH OR AFFILIATE. At the Bank's sole
option, it may fulfill its commitment to make Eurodollar Rate Loan Units by
causing a foreign branch or an affiliate to make or continue such Eurodollar
Rate Loan Units; PROVIDED, that in such instance such Eurodollar Rate Loan
Unit shall be deemed for purposes of this Agreement to have been made by the
Bank and the obligation of the Borrower to repay such Eurodollar Rate Loan
Units shall be to the Bank and shall be deemed held by the Bank for the
account of such branch or affiliate.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS OF INITIAL LOANS, ETC. The obligation of the
Bank to make the initial Revolving Loans and the Term Loan hereunder shall be
subject to the satisfaction of the conditions precedent, in addition to the
applicable conditions precedent set forth in SECTION 6.2 below, that the Bank
shall have received all of the following, in form and substance satisfactory
to the Bank, each duly executed and certified or dated the date of the
initial Loans or such other date as is satisfactory to the Bank:
(a) The Notes appropriately completed and duly
executed by the Borrower;
(b) The Security Agreement, the UK Pledge Agreement
and the Swiss Pledge Agreement appropriately completed and duly
executed by the Borrower and the Subsidiary Guaranty appropriately
completed and duly executed by Compex;
(c) UCC-1 Financing Statements in a form acceptable to
the Banks appropriately completed and duly executed by the Borrower;
24
<PAGE>
(d) Recent UCC searches from the filing offices in all
states required by the Banks which reflect that no Person holds a
Lien in any Loan Party's assets other than Permitted Liens;
(e) A certificate of the Secretary of each Loan Party
having attached: (i) a copy of the corporate resolution of such Loan
Party authorizing the execution, delivery and performance of the
Loan Documents to which such Loan Party is a party, certified by the
Secretary or an Assistant Secretary of such Loan Party; (ii) an
incumbency certificate showing the names and titles, and bearing the
signatures of, the officers of such Loan Party authorized to execute
the Loan Documents to which such Loan Party is a party; and (iii) a
copy of the bylaws of such Loan Party with all amendments thereto;
(f) A copy of the articles or certificate of
incorporation of each Loan Party with all amendments thereto,
certified by the appropriate governmental official of the
jurisdiction of its incorporation as of a date acceptable to the
Banks;
(g) Certificates of good standing for each Loan Party
in the jurisdiction of its incorporation and such other states as,
in accordance with the standards set forth in SECTION 7.1, such Loan
Party is required to qualify to do business, certified by the
appropriate governmental officials as of a date acceptable to the
Banks;
(h) An opinion of counsel to the Loan Parties,
addressed to the Bank, in form and substance satisfactory to the
Bank;
(i) A No Default Certificate in a form provided by the
Bank executed by the chief financial officer or treasurer of the
Borrower;
(j) Evidence of insurance for all insurance required
by the Loan Documents;
(k) A copy of the Transaction Documents, each in form
and substance satisfactory to the Bank and certified as a true and
correct copy by the Secretary of the Borrower;
(l) Evidence satisfactory to the Bank that: (i) all
conditions precedent to the consummation of the Transactions have
been satisfied or waived; (ii) all necessary regulatory approvals to
the consummation of the Transactions have been obtained; (iii) no
litigation exists relating to the Transactions; and (iv)
contemporaneously with the Borrower's receipt of the proceeds of the
initial Revolving Loans and the Term Loan, the Transactions will be
consummated in full in accordance with the terms of the Transaction
Documents;
(m) A pro forma balance sheet for the Borrower
prepared by the Borrower based on the Borrower's internally prepared
balance sheet satisfactory to the Bank, taking
25
<PAGE>
into account the consummation of the Transactions and the receipt of
the proceeds of the Loans, which pro forma balance sheet has been
delivered to the Bank;
(n) A letter signed by the Borrower instructing the
Bank as to payment of the proceeds of the Loans;
(o) Receipt in immediately available funds of the
Origination Fee;
(p) Projections of the Borrower's financial
performance on an annual basis for each fiscal year through the
Borrower's 2004 fiscal year prepared by management of the Borrower in
form and substance satisfactory to the Bank, which projects have been
previously delivered to the Bank;
(q) Evidence that all consideration payable by the
Borrower in connection with the Transactions to the "Sellers" or any
other Person pursuant to the Share Purchase Agreement and that the
Transaction Fees and other costs of consummating the Transactions
does not exceed the amount set forth on SCHEDULE B attached hereto
and incorporated herein by reference;
(r) A pay-off letter from Norwest Bank Minnesota, N.A.
("Norwest") in a form acceptable to the Bank appropriately completed
and duly executed by Norwest;
(s) A Mortgagee Consent in a form acceptable to the
Bank appropriately completed and duly executed by Norwest;
(t) Evidence satisfactory to the Bank that all credit
facilities to Compex or any of its Subsidiaries shall be terminated
upon the consummation of the Borrower's purchase of the shares of
Compex pursuant to the Share Purchase Agreement and that all
Indebtedness thereunder will be paid in full and all Liens on
Compex's or any of its Subsidiaries' property securing such credit
facilities shall be released upon such termination and payment; and
(u) Such other approvals, opinions or documents as the
Bank may reasonably request.
SECTION 6.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
the Bank to make any Loan hereunder (including the initial Revolving Loans
and the Term Loan) shall be subject to the satisfaction of the following
conditions precedent:
(a) Before and after giving effect to such Loan, the
representations and warranties contained in ARTICLE VII shall be
true and correct, as though made on the date of such Loan except
that, after the delivery of any financial statements to the Bank in
accordance with SECTION 8.1(A) or (B), the representations and
warranties set forth in
26
<PAGE>
SECTION 7.5 shall be deemed a reference to the audited or unaudited
financial statements then most recently delivered to the Bank;
(b) Before and after giving effect to such Loan, no
Default or Event of Default shall have occurred and be continuing;
and
(c) The Bank shall have received the Borrower's
request for such Loan as required by SECTION 2.3.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the
Commitment and to make Loans, the Borrower represents and warrants to the
Bank:
SECTION 7.1 ORGANIZATION, STANDING, ETC. The Borrower and each of
its Subsidiaries are corporations duly incorporated and validly existing and
in good standing under the laws of the State of their respective
incorporation and have all requisite corporate power and authority to carry
on their respective businesses as now conducted, to enter into the Loan
Documents and the Transaction Documents to which they are a party and to
perform their obligations under such Loan Documents and Transaction
Documents. The Borrower and each of its Subsidiaries are duly qualified and
in good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary and where the failure to
qualify could constitute an Adverse Event.
SECTION 7.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by each Loan Party of the Loan Documents and the Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate action by such Loan Party. The Loan Documents and the Transaction
Documents constitute the legal, valid and binding obligations of each Loan
Party which is a party thereto and are enforceable against such Loan Party in
accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
SECTION 7.3 NO CONFLICT, NO DEFAULT. The execution, delivery and
performance by each Loan Party of the Loan Documents and the Transaction
Documents to which it is a party will not: (a) violate any provision of any
law, statute, rule or regulation or any order, writ, judgment, injunction,
decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to such Loan Party; (b)
violate or contravene any provisions of the articles (or certificate) of
incorporation or bylaws of such Loan Party; or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any
other agreement, lease or instrument to which such Loan Party is a party or
by which it or any of its properties may be bound or result in the creation
of any Lien on any asset of such Loan Party except for Liens created by the
Loan Documents. No Loan Party is in default under or in
27
<PAGE>
violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
loan or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation constitute an Adverse
Event. No Default or Event of Default has occurred and is continuing.
SECTION 7.4 GOVERNMENT CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is
required on the part of any Loan Party to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents or the
Transaction Documents to which such Loan Party is a party.
SECTION 7.5 FINANCIAL STATEMENTS AND CONDITION.
(a) The Borrower's audited consolidated financial
statements as at June 30, 1998 and unaudited consolidated financial
statements as at March 31, 1999, as heretofore furnished to the
Bank, have been prepared in accordance with GAAP on a consistent
basis (except for the omission of footnotes and prior period
comparative data required by GAAP and for variations from GAAP which
in the aggregate are not material) and fairly present the consolidated
financial condition of the Borrower and its Subsidiaries as at such
dates and the results of their consolidated operations and changes in
financial position for the respective periods then ended. Since June
30, 1998, no event has occurred which materially, adversely affects
the Borrower's consolidated condition (financial or otherwise),
business operations, properties or assets.
(b) The pro forma unaudited balance sheet of the
Borrower delivered to the Bank pursuant to SECTION 6.1(m) has been
prepared on a basis in conformity with GAAP (except for the omission
of footnotes and prior period comparative data required by GAAP and
for variations from GAAP which in the aggregate are not material and
for reallocations of values with respect to categories of assets
acquired in connection with, and adjustment for actual fees, expenses
and transaction costs incurred in connection with, the Transactions)
and presents fairly the financial condition of the Borrower, assuming
consummation of the Transactions.
(c) The projections provided to the Bank pursuant to
SECTION 6.1(p) have been prepared on the basis of the assumptions
which are set forth therein. Such projections have been prepared in
good faith and represent, on the date of this Agreement, the good
faith opinion of the Borrower's management as to the most probable
course of business of the Borrower on the basis of the assumptions
which are set forth therein.
SECTION 7.6 LITIGATION. Except as described in SCHEDULE 7.6 attached
hereto and incorporated herein by reference, there are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against
or affecting the Borrower or any of its Subsidiaries, or any of its
properties, before any court or arbitrator, or any governmental
28
<PAGE>
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, could constitute an Adverse
Event.
SECTION 7.7 CONTINGENT OBLIGATIONS. Except as described in SCHEDULE
7.7 attached hereto and incorporated herein by reference, neither the
Borrower nor any of its Subsidiaries has any Contingent Obligations which are
material.
SECTION 7.8 COMPLIANCE. The Borrower and each of its Subsidiaries
are in material compliance with all statutes and governmental rules and
regulations applicable to them.
SECTION 7.9 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Borrower or any of its Subsidiaries of any
applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
threatens to impose a material liability on such Person or which would
require a material expenditure by such Person to cure except as described in
SCHEDULE 7.9. Neither the Borrower nor any of its Subsidiaries has received
any notice to the effect that any part of its operations or properties is not
in material compliance with any such law, rule, regulation or order or notice
that it or its property is the subject of any governmental investigation
evaluating whether any remedial action is needed to respond to any release of
any toxic or hazardous waste or substance into the environment, the
consequences of which non-compliance or remedial action could constitute an
Adverse Event except as described in SCHEDULE 7.9.
SECTION 7.10 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings
and regulations issued under the provisions of ERISA and the Code setting
forth those requirements. No Reportable Event has occurred and is continuing
with respect to any Plan. All of the minimum funding standards applicable to
such Plans have been satisfied and there exists no event or condition which
would permit the institution of proceedings to terminate any Plan under
Section 4042 of ERISA. The current value of the Plans' benefits guaranteed
under Title IV of ERISA does not exceed the current value of the Plans'
assets allocable to such benefits.
SECTION 7.11 REGULATION U. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve Board), and no part of the proceeds
of any Loan will be used to purchase or carry margin stock or for any other
purpose which would violate any of the margin requirements of the Board of
the Governors of the Federal Reserve System.
SECTION 7.12 OWNERSHIP OF PROPERTY; LIENS. The Borrower and each of
its Subsidiaries have good and marketable title to their respective
properties, including all properties and assets referred to in the pro forma
financial statements of the Borrower referred to in SECTION 7.5(B) (other
than property disposed of since the date of such financial statements in the
ordinary course of business). None of the properties, revenues or assets of
the Borrower or
29
<PAGE>
any of its Subsidiaries is subject to a Lien, except for: (a) Liens listed on
SCHEDULE 7.12 attached hereto and incorporated herein by reference; or (b)
Liens allowed under SECTION 9.11.
SECTION 7.13 INDEBTEDNESS. Except for Indebtedness permitted by
SECTION 9.10, neither the Borrower nor any of its Subsidiaries has any
Indebtedness.
SECTION 7.14 GUARANTY OF SURETYSHIP. Except for Contingent
Obligations permitted by SECTION 9.12, neither the Borrower nor any of its
Subsidiaries is a party to any contract of guaranty or suretyship and none of
its assets is subject to such a contract.
SECTION 7.15 TAXES. Except as described on SCHEDULE 7.15 attached
hereto and incorporated herein by reference, each of the Borrower and each of
its Subsidiaries has filed all federal, state and local tax returns required
to be filed and has paid or made provision for the payment of all taxes due
and payable pursuant to such returns and pursuant to any assessments made
against it or any of its property and all other taxes, fees and other charges
imposed on it or any of its property by any governmental authority (other
than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges. The sum of the
charges, accruals and reserves on the books of the Borrower and each of its
Subsidiaries in respect of taxes and other governmental charges are adequate
to pay and discharge all such taxes.
SECTION 7.16 TRADEMARKS, PATENTS. The Borrower and each of its
Subsidiaries possess or have the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of their respective businesses, without known conflict with the
rights of others. SCHEDULE 7.16 attached hereto and incorporated herein by
reference is a complete list of all such patents and trademarks.
SECTION 7.17 INVESTMENT COMPANY ACT. Neither the Borrower nor any of
its Subsidiaries is an "investment company" and is not "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 7.18 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any of its Subsidiaries is a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" of a holding company or of a
subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 7.19 SUBSIDIARIES. The Borrower does not have any
Subsidiaries except for: (a) Subsidiaries in existence on the date of this
Agreement and described on SCHEDULE 7.19; and (b) additional subsidiaries
permitted by SECTION 9.6.
30
<PAGE>
SECTION 7.20 PARTNERSHIPS AND JOINT VENTURES. Neither the Borrower
nor any of its Subsidiaries is a partner (limited or general) or joint
venturer in any partnerships or joint ventures except: (a) those in existence
on the date of this Agreement and described on SCHEDULE 7.20 ; and (b)
additional partnerships and joint ventures permitted by SECTION 9.7.
SECTION 7.21 USE OF PROCEEDS. The Term Loan will be used to
consummate the Transactions including costs related to the Transactions set
forth in SCHEDULE B. The Revolving Loans will be used to consummate the
Transactions, to provide working capital to the Borrower and for other
general corporate purposes. SECTION 7.22 SOLVENCY. Each Loan Party
is Solvent after giving effect to the making of the Loans in the full amount
available hereunder, the incurrence of the Indebtedness pursuant to the Loan
Documents, the granting of Liens pursuant to the Loan Documents and the
consummation of the Transactions.
SECTION 7.23 INSURANCE. SCHEDULE 7.23 attached hereto and
incorporated herein by reference sets forth a summary of the property and
casualty insurance program carried by the Borrower or any of its Subsidiaries
on the date hereof, including any self-insurance or risk assumption agreed to
by such Person or imposed upon such Person by any such insurer.
SECTION 7.24 CONTRACTS; LABOR MATTERS. Except as disclosed on
SCHEDULE 7.24 attached hereto and incorporated herein by reference: (a)
neither the Borrower nor any of its Subsidiaries is a party to any contract
or agreement, or subject to any charge, corporate restriction, judgment,
decree or order, the performance of which could constitute an Adverse Event;
(b) on the Closing Date: (i) neither the Borrower nor any of its Subsidiaries
is a party to any labor dispute; and (ii) there are no strikes or walkouts
relating to any labor contracts to which the Borrower or any of its
Subsidiaries is subject.
SECTION 7.25 ACCURACY OF INFORMATION. All factual information
heretofore or herewith furnished by the Borrower to the Bank for purposes of
or in connection with this Agreement or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by the
Borrower to the Bank will be, true and accurate in every material respect on
the date as of which such information is dated or certified and no such
information contains any material misstatement of fact or omits to state any
fact necessary to make the statements contained therein not misleading.
SECTION 7.26 REPRESENTATIONS AND WARRANTIES UNDER TRANSACTION
DOCUMENTS. All representations and warranties made by the Borrower or any of
its Subsidiaries in any of the Transaction Documents or in the certificates
delivered in connection therewith are true and correct in all material
respects as of the date hereof with the same force and effect as though made
on and as of the date hereof, and such representations and warranties of the
Borrower or any of its Subsidiaries are hereby confirmed to the Bank and made
representations and warranties of the Borrower hereunder as fully as if set
forth herein. The Borrower has no knowledge that any of the representations
and warranties made in the Transaction Documents by
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or on behalf of any party thereto other than the Borrower or any of its
Subsidiaries are untrue or incorrect.
SECTION 7.27 YEAR 2000. The Borrower has reviewed and assessed its
and each of its Subsidiaries' respective business operations and computer
systems and applications to address the "year 2000 problem" (that is, that
computer applications and equipment used by the Borrower or any of its
Subsidiaries, directly or indirectly through third parties, may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000). The Borrower reasonably believes that the year 2000 problem will not
result in a material adverse change in the Borrower's consolidated business
condition (financial or otherwise), operations, properties or prospects or
ability to repay the Bank. The Borrower agrees that this representation will
be true and correct on and shall be deemed made by the Borrower on each date
the Borrower requests any Loan under this Agreement or any Note or delivers
any information to the Bank. The Borrower will promptly deliver to the Bank
such information relating to this representation as the Bank requests from
time to time.
SECTION 7.28 SURVIVAL OF REPRESENTATIONS. All representations and
warranties contained in this ARTICLE VII shall survive the delivery of the
Notes, the making of the Loans evidenced thereby and any investigation at any
time made by or on behalf of the Bank shall not diminish the Bank's rights to
rely thereon.
ARTICLE VIII
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment
is terminated or expires and the Loans and all other Obligations of the
Borrower to the Bank hereunder and under the Notes and the other Loan
Documents have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will do, and cause each of its Subsidiaries
to do, all of the following:
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SECTION 8.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank:
(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, the annual audit
report (which may be included in the 10K Reports described below) of
the Borrower prepared in conformity with GAAP, consisting of at least
consolidated statements of operations and retained earnings and cash
flows, and a consolidated balance sheet as at the end of such year,
setting forth in each case in comparative form corresponding figures
from the previous annual audit, certified without qualification by
independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Bank together with: (i)
the related consolidating statements; (ii) any management letters,
management reports or other supplementary comments or reports to the
Borrower or its board of directors furnished by such accountants; and
(iii) a statement by the accounting firm performing such audit stating
that it has reviewed this Agreement and that in performing its
examination nothing came to its attention that caused it to believe
that any Default or Event of Default exists, or, if such Default or
Event of Default exists, describing its nature.
(b) As soon as available and in any event within 45 days
after the end of each fiscal quarter of each fiscal year, a copy (which
may be included in the 10Q Reports described below) of the unaudited
consolidated financial statements of the Borrower prepared in
conformity with GAAP (except for the omission of footnotes and prior
period comparative data required by GAAP and for variations from GAAP
which in the aggregate are not material) consisting of a consolidated
balance sheet as of the close of such fiscal quarter and related
consolidated statements of operations and retained earnings and cash
flow for such fiscal quarter and from the beginning of such fiscal year
to the end of such fiscal quarter and comparative figures for the
corresponding portion of the preceding fiscal year.
(c) As soon as available, and in any event within 45 days
after the end of each quarter of each fiscal year, a compliance
certificate (the "Compliance Certificate") in the form of EXHIBIT E
attached hereto signed by the Borrower's chief financial officer.
(d) As soon as available and in any event within 10 days
after the filing thereof, a copy of the Borrower's 10K Report (or any
successor report) filed with the SEC.
(e) As soon as available and in any event within 10 days
after the filing thereof (but in no event later than 55 days after the
end of each of the first three (3) fiscal quarters of each fiscal year
of the Borrower), a copy of the Borrower's 10Q Report (or any successor
report) filed with the SEC.
(f) As soon as available and in any event within 30 days
after the filing thereof, a copy of any other report not described
above which is filed by the Borrower or any of its Subsidiaries with
the SEC.
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(g) By no later than five (5) Business Days after
becoming aware of any Default or Event of Default, a notice describing
the nature thereof and what action the Borrower proposes to take with
respect thereto.
(h) By no later than five (5) Business Days after
becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event or any "prohibited transaction" (as defined in Section
4975 of the Code), a notice specifying the nature thereof and what
action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or
have a trustee appointed for any Plan.
(i) By no later than five (5) Business Days after
becoming aware of the occurrence thereof, notice of the institution of
any litigation, arbitration or governmental proceeding against the
Borrower, any of its Subsidiaries or any of their respective property
which, if determined adversely to such Person, would constitute an
Adverse Event, or the rendering of a judgment or decision in such
litigation or proceeding which constitutes an Adverse Event, and the
steps being taken by the Borrower or its Subsidiary with respect
thereto.
(j) By no later than five (5) Business Days after
becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower or any of its Subsidiaries and
of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters: (i) in which an
adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other
permits held by the Borrower or any of its Subsidiaries which are
material to such Person's operations; or (ii) which will or threatens
to impose a material liability on the Borrower or any of its
Subsidiaries to any other Person or which will require a material
expenditure by the Borrower or any of its Subsidiaries to cure any
alleged problem or violation.
(k) By not later than 30 days after the commencement of
any of the Borrower's fiscal years, the annual plan for the Borrower's
then current fiscal year consisting of projected consolidated and
consolidating balance sheets and projected consolidated and
consolidating statements of operations and cash flows approved by the
Borrower's board of directors together with the assumptions underlying
such projections certified by the Borrower's chief financial officer or
treasurer as being such annual plan.
(l) By not later than 30 days after the Closing Date, a
copy of the Borrower's consolidated balance sheet immediately following
the making of the initial Revolving Loan and the Term Loan and the
consummation of the Transactions.
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(m) From time to time, such other information regarding
the business, operation and financial condition of the Borrower or any
of its Subsidiaries as the Bank may reasonably request.
SECTION 8.2 CORPORATE EXISTENCE. Except as permitted by SECTION 7.1
or SECTION 9.1, maintain its corporate existence and good standing under the
laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction in which the character of the properties owned,
leased or operated by it or the business conducted by it makes such
qualification necessary and where the failure to so qualify could constitute
an Adverse Event.
SECTION 8.3 INSURANCE. Maintain with financially sound and reputable
insurance companies such insurance as may be required by any Loan Document or
by law and such other insurance in such amounts and against such hazards as
is customary in the case of reputable corporations engaged in the same or
similar business and similarly situated.
SECTION 8.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and
reports which are required by law to be filed by it and pay before they
become delinquent all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind
(including, without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result
in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by
appropriate proceedings, and as long as the Borrower's or any of its
Subsidiaries' title to its property is not materially adversely affected, its
use of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set
aside on the Borrower's or its Subsidiaries books in accordance with GAAP;
provided further that, in all events, the Borrower and its Subsidiaries shall
pay or cause to be paid all such taxes, assessments, charges or levies
forthwith upon the commencement of foreclosure of any Lien which may have
attached as security therefor.
SECTION 8.5 INSPECTION. Permit any Person designated by the Bank to
visit and inspect any of its properties, corporate books and financial
records, to examine and to make copies of its books of accounts and other
financial records, and to discuss the affairs, finances and accounts of the
Borrower or any of its Subsidiaries with, and to be advised as to the same
by, its officers at such reasonable times and intervals as the Bank may
designate; PROVIDED, HOWEVER, that the expenses of the Bank for such visits,
inspections and examinations shall be at the expense of the Bank so long as
no Event of Default exists, but any such visits, inspections, and
examinations made while any Event of Default is continuing shall be at the
expense of the Borrower.
SECTION 8.6 MAINTENANCE OF PROPERTIES. Maintain its properties used
or useful in the conduct of its business in good condition, repair and
working order, and supplied with all necessary equipment, and make all
necessary repairs, renewals, replacements, betterments, and improvements
thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times.
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SECTION 8.7 BOOKS AND RECORDS. Keep adequate and proper records and
books of account in which full and correct entries will be made of its
dealings, business and affairs.
SECTION 8.8 COMPLIANCE. Comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject.
SECTION 8.9 ERISA. Maintain each Plan in compliance with all
material applicable requirements of ERISA and of the Code and with all
material applicable rulings and regulations issued under the provisions of
ERISA and of the Code.
SECTION 8.10 ENVIRONMENTAL MATTERS. Observe and comply with all
laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise constitute or result in an Adverse Event.
ARTICLE IX
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment
is terminated or expires and the Loans and all other Obligations of the
Borrower to the Bank hereunder and under the Notes and the other Loan
Documents have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will not do, and will not permit any of its
Subsidiaries to do, any of the following:
SECTION 9.1 MERGER. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person except for any such transaction
whereby any of the Borrower's Subsidiaries may merge or consolidate with the
Borrower or any other of the Borrower's Subsidiaries so long as: (a) the
Borrower is the surviving corporation in any transaction involving it; and
(b) the Borrower gives the Bank at least 30 days' prior written notice of
such transaction and takes all action required by the Bank to continue
perfection of the Bank's Lien in such Subsidiary's assets following
consummation of such transaction.
SECTION 9.2 SALE OF ASSETS. Sell, transfer, lease, or otherwise
convey all or any part of its assets except for:
(a) sales of Inventory in the ordinary course of business
and for the fair market value thereof;
(b) sales of equipment or other property for the fair
market value thereof so long as the Net Proceeds to be obtained from
any such transaction (or related series of transactions) does not
exceed $100,000.00 or the aggregate Net Proceeds determined on a
consolidated basis for the Borrower and its Subsidiaries from all such
transactions in any fiscal year does not exceed $250,000.00; PROVIDED,
HOWEVER, that contemporaneously
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<PAGE>
with the receipt of the Net Proceeds from any transaction permitted
by this subsection (b), the Borrower prepays the Term Loan in
accordance with SECTION 4.2(c); and
(c) transfers of the stock of Compex to a wholly-owned
Subsidiary to be organized under the laws of the United Kingdom ("UK
NewCo") so long as: (i) the Bank is given not less than 15 Business
Days' prior written notice of each such acquisition, (ii) no Default or
Event of Default exists immediately prior to such transfer or after
giving effect thereto; (iii) UK NewCo executes and/or delivers to the
Bank: (A) a Subsidiary Pledge Agreement in substantially the form of
the UK Pledge Agreement executed by the Borrower together with
appropriate stock powers; (B) UK NewCo's organizational documents,
which shall not contain any provision which may adversely affect the
rights of the Bank as a pledgee of Compex's stock; and (C) an opinion
of counsel in form and substance satisfactory to the Bank.
SECTION 9.3 CHANGE OF FISCAL YEAR. Change its fiscal year-end from
June 30.
SECTION 9.4 PLANS. Permit any condition to exist in connection with
any Plan which might constitute grounds for the PBGC to institute proceedings
to have such Plan terminated or a trustee appointed to administer such Plan;
permit any Plan to terminate under any circumstances which would cause the
Lien provided for in Section 4068 of ERISA to attach to any property, revenue
or asset of the Borrower or any of its Subsidiaries; or permit the
underfunded amount of Plan benefits guaranteed under Title IV of ERISA to
exceed $50,000.00.
SECTION 9.5 CHANGE IN NATURE OF BUSINESS. Make any material change
in the nature of its business as carried on at the date hereof.
SECTION 9.6 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. Except as
otherwise permitted by SECTION 9.9, either: (a) form or acquire any
corporation or company which would thereby become a Subsidiary; or (b) form
or enter into any partnership as a limited or general partner or form or
enter into any joint venture.
SECTION 9.7 OTHER AGREEMENTS. Enter into any agreement, bond, note
or other instrument with or for the benefit of any Person other than the Bank
which would: (a) prohibit the Borrower or any of its Subsidiaries from
granting, or otherwise limit the ability of the Borrower or any of its
Subsidiaries to grant to the Bank any Lien on any assets or properties of
such Person; or (b) be violated or breached by any Loan Party's performance
of its obligations under the Loan Documents.
SECTION 9.8 PAYMENT TERMS. Materially change its selling terms of
payment on accounts as in effect on the date of this Agreement or provide
dating terms.
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SECTION 9.9 INVESTMENTS. Acquire for value, make, have or hold any
Investments, except:
(a) Investments outstanding on the date hereof and listed
on SCHEDULE 9.9 attached hereto and incorporated herein by reference;
(b) Travel advances to officers and employees in the
ordinary course of business;
(c) Investments in readily marketable direct obligations
of the United States of America having maturities of one year or less
from the date of acquisition;
(d) Certificates of deposit or bankers' acceptances, each
maturing within one year from the date of acquisition, issued by the
Bank;
(e) Commercial paper maturing within 270 days from the
date of issuance and given the highest rating by a nationally
recognized rating service;
(f) Repurchase agreements relating to securities issued
or guaranteed as to principal and interest by the United States of
America;
(g) Money market accounts acceptable to the Bank;
(h) Extensions of credit in the nature of accounts or
notes receivable arising from the sale of goods and services in the
ordinary course of business;
(i) Shares of stock, obligations or other securities
received in settlement of claims arising in the ordinary course of
business;
(j) the Transactions;
(k) Acquisitions by the Borrower or any of its
Subsidiaries of assets or businesses related to the Borrower's lines of
business as in existence on the date hereof so long as: (i) the Bank is
given not less than 15 Business Days' prior written notice of each such
acquisition, (ii) no Default or Event of Default exists immediately
prior to such acquisition or after giving effect thereto, (iii) the
aggregate purchase price (with the amount of any liabilities which are
assumed as part of such acquisition to be included as part of the
purchase price) for all such acquisitions during any fiscal year of the
Borrower does not exceed: (A) $2,500,000.00, if the Cash Flow Leverage
Ratio and the Pro Forma Cash Flow Leverage Ratio at the most recent
Quarterly Measurement Date was greater than 1.50 to 1.0; (B)
$5,000,000.00, if the Cash Flow Leverage Ratio and the Pro Forma Cash
Flow Leverage Ratio at the most recent Quarterly Measurement Date was
less than or equal to 1.50 to 1.0; and (iv) the acquisition is an asset
acquisition; and
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(l) Additional Investments in any Subsidiary so long as,
in the case of any Subsidiary other than Compex, the sum of the
aggregate amount of such additional Investments or other extensions of
credit (regardless of whether such extension of credit constitutes an
Investment) by the Borrower or any other Subsidiary in such Subsidiary
does not exceed $500,000.00 during the term of this Agreement.
SECTION 9.10 INDEBTEDNESS. Incur, create, issue, assume or suffer to
exist any Indebtedness except:
(a) Indebtedness under this Agreement;
(b) Current liabilities, other than for borrowed money,
incurred in the ordinary course of business;
(c) Indebtedness existing on the date of this Agreement
and disclosed on SCHEDULE 9.10 attached hereto and incorporated herein
by reference; PROVIDED, HOWEVER, that no such Indebtedness shall be
refinanced without the express written consent of the Bank;
(d) Purchase Money Indebtedness secured by Liens
permitted under SECTION 9.11(c); and other Indebtedness so long as the
aggregate outstanding principal amount of Indebtedness permitted by
this SECTION 9.10(d) shall not exceed $2,000,000.00 at any time; and
(e) Indebtedness consisting of endorsements for
collection, deposit or negotiation and warranties of products or
services, in each case incurred in the ordinary course of business.
SECTION 9.11 LIENS. Create, incur, assume or suffer to exist any
Lien with respect to any property, revenues or assets now owned or hereafter
arising or acquired, except:
(a) Liens created by any of the Loan Documents;
(b) Liens existing on the date of this Agreement and
disclosed on SCHEDULE 7.12 hereto;
(c) Liens securing Purchase Money Indebtedness incurred
in connection with Capital Expenditures made after the date of this
Agreement by way of purchase money security interest, purchase money
mortgage, conditional sale or other title retention agreement,
Capitalized Lease or other deferred payment contract, and attaching
only to the property being acquired, provided that the Indebtedness
secured thereby is permitted as a Capital Expenditure at the time of
such incurrence and does not exceed the lesser of the purchase price or
the fair market value of such property at the time of its acquisition;
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(d) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of the
Borrower;
(e) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payments therefor shall
not at the time be required to be made in accordance with the
provisions of SECTION 8.4;
(f) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall
not at the time be required to be made in accordance with the
provisions of SECTION 8.4;
(g) Deposits to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations of a
like nature incurred in the ordinary course of business; and
(h) Zoning restrictions, easements, licenses,
restrictions on the use of real property or irregularities in title
thereto, which do not materially impair the use of such property in the
operation of the Borrower's business or the value of such property for
the purpose of such business.
SECTION 9.12 CONTINGENT LIABILITIES. Except as provided in the Loan
Documents or as described on SCHEDULE 9.12 attached hereto and incorporated
herein by reference, either: (a) endorse, guarantee, contingently agree to
purchase or to provide funds for the payment of, or otherwise become
contingently liable upon, any obligation of any other Person, except by the
endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business; or (b) agree to maintain
the net worth or working capital of, or provide funds to satisfy any other
financial test applicable to, any other Person.
SECTION 9.13 TRANSACTIONS WITH RELATED PARTIES. Either: (a) permit
the direct or indirect transfer, distribution or payment of any of its funds,
assets or property to any Related Party, except that the Borrower or any of
its Subsidiaries may pay: (i) bona fide employee compensation (including
benefits) to Related Parties for services actually rendered to such Person;
(ii) expenses incurred by an employee in the ordinary course of business;
(iii) expenses or rents for services or property or the use thereof allocated
to such Person; PROVIDED, HOWEVER, that all such payments pursuant to
subsections (a)(i), (ii) and (iii) shall not exceed the amount which would be
payable in a comparable arm's length transaction with a third party who is
not a Related Party; (iv) Permitted Distributions to the extent permitted by
SECTION 9.15; and (v) other amounts permitted by other subsections of this
Section; (b) lend or advance money, credit or property to any Related Party;
(c) invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any assets or properties, of any
Related Party except as permitted by SECTION 9.15 or otherwise permitted by
other subsections of this Section; or (d) guarantee, assume, endorse or
otherwise become responsible for, or enter into any agreement or
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instrument for the purpose of discharging or assuming (directly or
indirectly, through the purchase of goods, supplies or services or otherwise)
the indebtedness, performance, capability, obligations, dividends or
agreement for the furnishing of funds of any Related Party or any officer,
director or employee thereof except for the Guaranties permitted by SECTION
9.12.
SECTION 9.14 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a
party to any contract for the purchase or lease of materials, supplies or
other property or services if such contract requires that payment be made by
it regardless of whether or not delivery is ever made of such materials,
supplies or other property or services.
SECTION 9.15 RESTRICTED PAYMENTS. Purchase or redeem or otherwise
acquire for value any shares of the Borrower's stock, declare or pay any
dividends thereon (other than stock dividends), make any distribution on, or
payment on account of the purchase, redemption, defeasance or other
acquisition or retirement for value of, any shares of the Borrower's stock or
set aside any funds for any such purpose, or otherwise or make any
distribution of assets to its shareholders as such except that: (a) any of
the Borrower's direct or indirect wholly-owned Subsidiaries may pay dividends
to its corporate parent; and (b) so long as no Default or Event of Default
has occurred and is continuing at the time of the following described payment
or would result therefrom, the Borrower and any of its less than wholly-owned
Subsidiaries may pay dividends and/or redeem its shares of its stock so long
as the aggregate amount of all such dividends and redemptions does not exceed
$250,000.00 during any of the Borrower's fiscal years.
SECTION 9.16 USE OF PROCEEDS. Permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within
the meaning of Regulation U of the Federal Reserve Board, as amended from
time to time, and furnish to the Bank upon its request, a statement in
conformity with the requirements of Federal Reserve Form U-l referred to in
Regulation U.
SECTION 9.17 CASH FLOW LEVERAGE RATIO. Permit, as of any Quarterly
Measurement Date, the Cash Flow Leverage Ratio to be greater than the ratio
specified in the following table for any Quarterly Measurement Date occurring
in the specified period:
<TABLE>
<CAPTION>
Maximum Cash Flow
Period Leverage Ratio
------ --------------
<S> <C>
On and after June 30, 1999 to
and including March 31, 2000 3.00 to 1.0
On and after June 30, 2000 to and
including March31, 2001 2.50 to 1.0
At all times thereafter 2.00 to 1.0.
</TABLE>
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SECTION 9.18 FIXED CHARGE COVERAGE RATIO. Permit, as of any
Quarterly Measurement Date, the Fixed Charge Coverage Ratio to be less than
1.25:1.00.
SECTION 9.19 NET WORTH. Permit, as of any Quarterly Measurement
Date, the Borrower's Net Worth to be less than the greater of: (a)
$20,000,000.00; or (b) the greater of: (i) 90% of the actual Net Worth at the
immediately preceding fiscal year-end; or (ii) the minimum amount required by
this SECTION 9.19 to have been maintained as of such immediately preceding
fiscal year-end.
SECTION 9.20 SALE AND LEASE. Enter into any agreement providing for
the leasing by the Borrower or any of its Subsidiaries of property which has
been or is to be sold or transferred by the Borrower or any of its
Subsidiaries to the lessor thereof, or which is substantially similar in
purpose to property so sold.
SECTION 9.21 OTHER TRANSACTION DOCUMENTS. Amend, modify, or
supplement any provision of, or waive any other party's compliance with any
of the terms of, any Transaction Document in any manner which: (a) requires
the Borrower or any of its Subsidiaries to pay any additional consideration
under such Transaction Document or otherwise imposes any financial obligation
or burden on the Borrower or any of its Subsidiaries ; (b) could result in an
Adverse Event; or (c) is materially adverse to the rights and benefits of the
Bank under the Loan Documents.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default upon the expiration
of the cure period, if any, described in the relevant event:
(a) The Borrower shall fail to make, within three (3)
Business Days of when due, whether by acceleration or otherwise, (i)
any payment of principal of, or interest on, the Notes or (ii) any
fee or other amount required to be made to the Bank pursuant to any
Loan Document; or
(b) Any representation or warranty made or deemed to
have been made by or on behalf of any Loan Party in any of the Loan
Documents or by or on behalf of any Loan Party in any certificate,
statement, report or other writing furnished by or on behalf of any
Loan Party to the Bank pursuant to the Loan Documents shall prove to
have been false or misleading in any material respect on the date as
of which the facts set forth are stated or certified or deemed to
have been stated or certified; or
(c) The Borrower shall fail to comply with SECTION
8.1(g), SECTION 8.2, SECTION 8.3 or any Section of ARTICLE IX
hereof; or
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(d) Any Loan Party shall fail to comply with any
agreement, covenant, condition, provision or term contained in the
Loan Documents on its part to be performed (and such failure shall
not constitute an Event of Default under any of the other provisions
of this SECTION 10.1) and such failure to comply shall continue for
30 calendar days after notice thereof to the Borrower by the Bank; or
(e) Any Loan Party shall become insolvent or shall
generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of any Loan Party or for a substantial part of
its property or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed
for any Loan Party or for a substantial part of its property and
shall not be discharged within 30 days; or
(f) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be
instituted by or against any Loan Party and, if instituted against any
Loan Party, shall have been consented to or acquiesced in by such Loan
Party, or shall remain undismissed for 60 days, or an order for relief
shall have been entered against any Loan Party, or any Loan Party shall
take any corporate action to approve institution of, or acquiesced in,
such a proceeding; or
(g) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower and, if instituted against any
Loan Party, shall be consented to or acquiesced in by any Loan Party or
shall remain for 60 days undismissed, or any Loan Party shall take any
corporate action to approve institution of, or acquiescence in, such a
proceeding; or
(h) A judgment or judgments for the payment of money in
excess of the sum of $50,000.00 in the aggregate shall be rendered
against any or all of the Loan Parties and such Loan Parties shall not
discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, prior to any execution
on such judgments by such judgment creditor, within 30 days from the
date of entry thereof, and within said period of 30 days, or such
longer period during which execution of such judgment shall be stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) The Borrower or any ERISA Affiliate shall terminate
any Plan if the Borrower or any ERISA Affiliate would be required to
make a contribution to such Plan, or would incur a liability or
obligation to such Plan, in excess of $50,000.00, or the PBGC shall
terminate any Plan if such termination causes the Borrower or any of
its ERISA Affiliates to incur any liability or obligation in excess of
$50,000.00; or
(j) The maturity of any Indebtedness of any Loan Party
(other than Indebtedness under this Agreement or the other Loan
Documents) in the aggregate amount of more than $50,000.00 for one or
more of the Loan Parties shall be accelerated,
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or any one or more Loan Parties shall fail to pay any such
Indebtedness when due and any applicable grace period shall have
expired, or, in the case of such Indebtedness payable on demand,
when demanded, or any event shall occur or condition shall exist and
shall continue for more than the period of grace, if any, applicable
thereto and shall have the effect of causing, or permitting (any
required notice having been given and grace period having expired)
the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause such Indebtedness to become
due prior to its stated maturity or to realize upon any collateral
given as security therefor; or
(k) Any Change of Control shall occur; or
(l) If the validity or enforceability of any of the Loan
Documents shall be challenged by the Borrower or any other party
thereto, or shall fail to remain in full force and effect; or
(m) The Bank shall have determined in good faith (which
determination shall be conclusive) that (i) an Adverse Event has
occurred or (ii) the Bank's interest in any material Collateral has
been materially adversely affected or impaired, or the value thereof to
the Lender has been diminished to a material extent, or (iii) the
prospect of payment or performance of any obligation or agreement of
the Borrower under any of the Loan Documents is materially impaired,
and the condition giving rise to such determination does not constitute
an Event of Default under any of the other subsections of this SECTION
10.1; or
(n) (i) Any of David B. Kaysen, W. Glen Winchell or
William J. Sweeney shall cease to respectively be the Borrower's
President and Chief Executive Officer, Vice President and Chief
Financial Officer or Vice President Sales and Marketing, or shall cease
to perform the duties associated with such office as of the date of
this Agreement; (ii) the Borrower fails to appoint a successor
acceptable to the Bank, in its sole discretion, within 90 days of the
date on which such individual shall cease to hold the required office
and perform the required duties; and (iii) upon written notice from the
Bank to the Borrower that an acceptable successor has not been timely
appointed, the Borrower fails to pay the Loans and all other
Obligations and terminate the Commitment within 90 days after the
Borrower receives such written notice from the Bank; PROVIDED, HOWEVER,
that, for purposes of this Agreement, a Default shall be deemed to
exist only after the Bank delivers its written notice that an
acceptable successor has not been timely appointed.
SECTION 10.2 REMEDIES. If: (a) any Event of Default described in
SECTIONS 10.1(e), (f) or (g) shall occur, the Commitment shall automatically
terminate and the outstanding unpaid principal balance of the Notes, the
accrued interest thereon and all other Obligations under the Loan Documents
shall automatically become immediately due and payable; or (b) any other
Event of Default shall occur and be continuing, then the Bank may take any or
all of the following actions: (i) declare the Commitment terminated,
whereupon the Commitment shall terminate; (ii) declare that the outstanding
unpaid principal balance of the Notes, the accrued and
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unpaid interest thereon and all other Obligations under the Loan Documents to
be forthwith due and payable, whereupon the Notes, all accrued and unpaid
interest thereon and all such Obligations shall immediately become due and
payable, in each case without demand or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding; (iii) exercise all rights and remedies under any
other instrument, document or agreement between the Borrower and the Bank;
and (iv) enforce all rights and remedies under any applicable law.
SECTION 10.3 OFFSET. In addition to the remedies set forth in
SECTION 10.2, upon the occurrence of any Event of Default or at any time
thereafter while such Event of Default continues, the Bank or any other
holder of the Notes may offset any and all balances, credits, deposits
(general or special, time or demand, provisional or final), accounts or
monies of the Borrower then or thereafter with the Bank or such other holder,
or any obligations of the Bank or such other holder of the Notes, against the
Indebtedness then owed by the Borrower to the Bank. The Borrower hereby
grants to the Bank and each other Note holder a security interest in all such
balances, credits, deposits, accounts or monies.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 WAIVER AND AMENDMENT. No failure on the part of the
Bank or the holder of any Note to exercise and no delay in exercising any
power or right hereunder or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The remedies herein and in any other instrument,
document or agreement delivered or to be delivered to the Bank hereunder or
in connection herewith are cumulative and not exclusive of any remedies
provided by law. No notice to or demand on the Borrower not required
hereunder or under any Note or any other Loan Document shall in any event
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the right of the Bank or the
holder of any Note to any other or further action in any circumstances
without notice or demand. No amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall be effective unless the same shall be in writing and signed
by the Bank, and then such amendment, modification, waiver or consent shall
be effective only in the specific instances and for the specific purpose for
which given.
SECTION 11.2 EXPENSES AND INDEMNITIES.
(a) LOAN DOCUMENTS. Whether or not any Loan is made, the
Borrower agrees to pay and reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including filing and
recording costs and fees and expenses of legal counsel, who may be
employees of the Bank, and including the costs of any appraisals and
environmental assessments) in connection with the preparation, review,
execution, delivery, amendment, modification or interpretation of the
Loan Documents. The
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Borrower agrees to pay and reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including
reasonable fees and expenses of legal counsel, who may be employees
of the Bank in connection with the collection and enforcement of the
Loan Documents. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of the Loan Documents. The
Borrower agrees to indemnify and hold the Bank harmless from any loss
or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans or disbursing the
proceeds thereof.
(b) GENERAL INDEMNITY. In addition to the payment of
expenses pursuant to SECTION 11.2(a), whether or not the transactions
contemplated hereby shall be consummated, the Borrower hereby
indemnifies, and agrees to pay and hold the Bank, its affiliates and
any holder of any Notes, and their respective officers, directors,
employees, agents, successors and assigns (collectively called the
"INDEMNITEES") harmless from and against, any and all other
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for any of such Indemnitees in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto), that may be imposed
on, incurred by, or asserted against the Indemnitees (or any of them),
in any manner relating to or arising out of the Loan Documents, the
statements contained in any commitment letters delivered by the Bank,
the Bank's agreement to make the Loans, or the use or intended use of
the proceeds of any of the Loans (the "INDEMNIFIED LIABILITIES");
PROVIDED, HOWEVER, that the Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities arising
from the gross negligence or willful misconduct of an Indemnitee. To
the extent that the undertaking to indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute
the maximum portion that it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
(c) SURVIVAL. The obligations of the Borrower under this
SECTION 11.2 shall survive any termination of this Agreement.
SECTION 11.3 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party
in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier
or United States mail (postage prepaid) addressed to such party at the
address specified on the signature page hereof, or at such other address as
such party shall have specified to the other party hereto in writing. All
periods of notice shall be measured from the date of delivery thereof if
manually delivered, from the date of sending thereof if sent by telegram,
telex or facsimile transmission, from the first Business Day after the date
of sending if sent by overnight courier, or from four days after the date of
mailing if mailed; provided, however, that
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<PAGE>
any notice to the Bank under ARTICLE II hereof shall be deemed to have been
given only when received by the Bank. The Borrower hereby authorizes the Bank
to rely upon the telephone or written instructions of any person identifying
himself as an authorized officer of the Borrower and upon any signature which
the Bank believes to be genuine, and the Borrower shall be bound thereby in
the same manner as if the Borrower were authorized or such signature were
genuine.
SECTION 11.4 SUCCESSORS. This Agreement shall be binding upon the
Borrower, the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Bank and the successors and assigns
of the Borrower and the Bank. The Borrower shall not assign its rights or
duties hereunder without the consent of the Bank. The Bank may assign its
rights and obligations under this Agreement and the Loan Documents to any
Person, without the prior consent of the Borrower.
SECTION 11.5 PARTICIPATIONS. The Bank may sell participation
interests in any or all of the Loans and in all or any portion of the
Commitment to any Person without the prior consent of the Borrower.
SECTION 11.6 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.7 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
SECTION 11.8 ENTIRE AGREEMENT. This Agreement, the Notes and the
other Loan Documents embody the entire agreement and understanding between
the Borrower and the Bank with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and either of the parties hereto may execute this
Agreement by signing any such counterpart.
SECTION 11.10 GOVERNING LAW. EXCEPT AS OTHERWISE PROVIDED IN ANY
LOAN DOCUMENT, THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A
PARTY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,
WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING
EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
SECTION 11.11 CONSENT TO JURISDICTION. AT THE OPTION OF THE BANK,
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE
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BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE
THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
SECTION 11.12 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH, OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11.13 RELEASE OF CERTAIN GUARANTIES; ETC. The Bank agrees
that any Subsidiary Guaranty executed and delivered by a Foreign Subsidiary
shall be terminated on the date (the "Subsidiary Guaranty Release Date") on
which the Bank receives the Borrower's consolidated financial statements for
any Quarterly Measurement Date occurring on or after June 30, 2000 together
with a Guaranty/Pledge Release Compliance Certificate in the form of EXHIBIT
F attached hereto appropriately completed and duly certified by the
Borrower's chief financial officer or treasurer certifying that the following
conditions (the "Subsidiary Guaranty Release Conditions") were satisfied as
of such Quarterly Measurement Date and the Subsidiary Guaranty Release Date,
as the case may be:
(a) as of such Quarterly Measurement Date: (i) the
Domestic Cash Flow Leverage Ratio was not greater than the maximum Cash
Flow Leverage Ratio permitted for such Quarterly Measurement Date; (ii)
the Domestic Fixed Charge Coverage Ratio was not less than 1.25 to 1.0;
and (iii) no Default or Event of Default has occurred and is
continuing; and
(b) as of the Subsidiary Guaranty Release Date, no
Default or Event of Default has occurred and is continuing.
Following receipt and approval by the Bank of the Guaranty/Pledge Release
Compliance Certificate, the Bank shall execute and deliver to the Borrower
the Guaranty/Pledge Release Acknowledgment Certificate in the form of EXHIBIT
G attached hereto, thereby acknowledging
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the termination of each Subsidiary Guaranty executed by a Foreign Subsidiary
and release the portion of the "Pledged Shares" described therein, all in
accordance with the terms thereof.
SECTION 11.14 COMPEX GUARANTY. At any time after December 31, 1999,
but prior to the occurrence of the Subsidiary Guaranty Release Date, the
Bank, in its sole discretion, by written notice to the Borrower, may require
that Compex SA amend its Subsidiary Guaranty to substantially conform to
EXHIBIT H attached hereto and the Borrower agrees that, within 10 Business
Days after the date of the Bank's notice, it will cause Compex SA to execute
and deliver such amended Subsidiary Guaranty together with any shareholder or
director resolutions and opinions of counsel as may be required by the Bank,
in its sole discretion.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
REHABILICARE INC.
By
Its
1811 Old Highway Eight
New Brighton, MN 55112-3493
Attention: Mr.W. Glen Winchell
Vice President Finance/CFO
Telephone: (651) 638-0428
Telecopier: (651) 638-0477
U.S. BANK NATIONAL ASSOCIATION
By
Its
U.S. Bank Place MPFP 0602
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Mr. Michael Staloch
Vice President
Telephone: (612) 973-0527
Telecopier: (612) 973-0823
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<PAGE>
SECURITY AGREEMENT
(GRANTOR)
This SECURITY AGREEMENT is made as of July 14, 1999, by REHABILICARE
INC., a Minnesota corporation, with chief executive office at 1811 Old Highway
8, New Brighton, MN 55112 ("Grantor"), in favor of U.S. Bank National
Association, with an office at U.S. Bank Place, Minneapolis, MN 55402
("Lender").
RECITALS:
A. Grantor has requested extensions of credit from Lender
pursuant to the terms of that certain Credit Agreement dated as of even date
herewith (the Credit Agreement as it may be amended, modified, supplemented,
increased or restated from time to time being the "Credit Agreement") between
Grantor and Lender;
B. As a condition to such extensions of credit, Lender requires
that Grantor grant a security interest in its assets in accordance with this
Agreement.
C. Grantor has determined that the execution, delivery and
performance of this Agreement is in its best business and pecuniary interest.
NOW, THEREFORE, for good and valuable consideration the receipt and
adequacy of which are hereby acknowledged by each of the parties hereto, it is
agreed as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
in this Section:
"ACCOUNTS" shall mean any right to payment for Goods sold or leased or
for services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"CHATTEL PAPER" shall mean any writing or writings which evidence both
a monetary obligation and a security interest in or a lease of specific Goods.
"COLLATERAL" shall mean all property in which a security interest is
granted hereunder.
"CONTROLLED PROPERTY" shall mean property of every kind and description
in which Grantor has or may acquire any interest, now or hereafter at any time
in the possession or control of Lender for any reason and all dividends and
distributions on or other rights in connection with such property.
"CREDIT AGREEMENT" shall have the meaning set forth in the recitals
hereto.
<PAGE>
"DATA PROCESSING RECORDS AND SYSTEMS" shall mean all of Grantor's
now existing or hereafter acquired electronic data processing and computer
records, software, systems, manuals, procedures, disks, tapes and all other
storage media and memory.
"DEFAULT" shall mean any event which if it continued uncured would,
with notice or lapse of time or both, constitute an Event of Default.
"DOCUMENT" shall mean any bill of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods or any other
document which in the regular course of business or financing is treated as
adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the Goods it covers or any
receipt issued for Goods which are stored under a statute requiring a bond
against withdrawal or under a license for the issuance of receipts in the
nature of warehouse receipts.
"EQUIPMENT" shall mean any Goods, other than Inventory, used or
bought for use primarily in business.
"EVENT OF DEFAULT" shall have the meaning specified in Article VI
hereof.
"FIXTURES" shall mean any Goods which have become so affixed to
particular real estate that an interest in them arises under real estate law.
"GENERAL INTANGIBLES" shall mean any personal property (including
things in action) other than Goods, Accounts, Chattel Paper, Documents,
Instruments and money.
"GOODS" shall mean any tangible personal property, including all
things that are movable, but not including money, Documents, Instruments,
Accounts, Chattel Paper, General Intangibles or minerals or the like before
extraction.
"GRANTOR" shall have the meaning set forth in the preamble hereto.
"INSTRUMENTS" shall mean any negotiable instrument or certificated
or non-certificated security or any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease and is
of a type which is in the ordinary course of business transferred by delivery
with any necessary endorsement or assignment.
"INSURANCE PROCEEDS" shall mean all proceeds of any and all
insurance policies payable to Grantor with respect to any Collateral, or on
behalf of any Collateral, whether or not such policies are issued to or owned
by Grantor.
"INVENTORY" shall mean any Goods held for sale or lease or furnished
or to be furnished under contracts of service, or raw materials, work in
process or materials used or consumed in a business.
<PAGE>
"LENDER" shall have the meaning set forth in the preamble hereto.
"PROCEEDS" shall mean whatever is received upon the sale, exchange,
collection or other disposition of Collateral or Proceeds, including but not
limited to Insurance Proceeds.
"PRODUCTS" shall mean any goods now or hereafter manufactured,
processed or assembled with any of the Collateral.
Other terms defined herein shall have the meanings ascribed to them
herein. All capitalized terms used herein and not specifically defined herein
shall have the meaning ascribed to them in the Credit Agreement.
ARTICLE II
SECURITY INTERESTS
As security for the payment of all Obligations, Grantor hereby
grants to Lender a security interest in all of Grantor's now owned or
hereafter acquired or arising:
Accounts;
Chattel Paper;
Controlled Property;
Documents;
Equipment and Fixtures;
General Intangibles;
Instruments;
Inventory;
Proceeds (whether cash or non-cash Proceeds, including
Insurance Proceeds and non-cash Proceeds of all types); and
Products of all the foregoing.
ARTICLE III
REPRESENTATIONS AND COVENANTS OF GRANTOR
Grantor represents, warrants and covenants that:
3.1 AUTHORIZATION. The execution and performance of this
Agreement have been duly authorized by all necessary action and do not and
will not: (a) require any consent or approval of the stockholders of any
entity, or the consent of any governmental entity that has not been obtained;
or (b) violate any provision of any indenture, contract, agreement or
instrument to which it is a party or by which it is bound.
3.2 TITLE TO COLLATERAL. Grantor has good and marketable title
to all of the Collateral and none of the Collateral is subject to any
security interest
<PAGE>
except for the security interest created pursuant to this Agreement or other
security interests permitted by the Credit Agreement (such other security
interests being "Permitted Liens").
3.3 DISPOSITION OR ENCUMBRANCE OF COLLATERAL. Grantor will not
encumber, sell or otherwise transfer or dispose of the Collateral without the
prior written consent of Lender except as provided in this paragraph or for
Permitted Liens. Until a Default or Event of Default has occurred and is
continuing, Grantor may sell Collateral consisting of:
(a) Inventory in the ordinary course of business to the
extent permitted by SECTION 9.2 of the Credit Agreement;
(b) Equipment or other property to the extent permitted
by SECTION 9.2 of the Credit Agreement; and
(c) License any Patents, Trademarks, Copyrights or
applications therefor, trade secrets, know-how and other intellectual
property in the ordinary course of business, provided the Borrower
receives as consideration an amount not less than the fair value of
such license and provided further that if such license is an exclusive
license, then Borrower retains such rights as may be necessary to allow
Borrower to perform its obligations to the licensee or others under
applicable manufacturing contracts and that such license does not
restrict the assignment of such rights to the Lender.
3.4 VALIDITY OF ACCOUNTS. Grantor warrants that all Collateral
consisting of Accounts, Chattel Paper and Instruments included in Grantor's
schedules, financial statements or books and records are bona fide existing
obligations created by the sale and actual delivery of Inventory or the
rendition of services to customers in the ordinary course of business, which
Grantor then owns free and clear of any security interest other than the
security interest created by this Agreement or other Permitted Liens and
which are then unconditionally owing to Grantor without defenses, offset or
counterclaim except those arising in the ordinary course of business that are
immaterial in the aggregate and that the unpaid principal amount of any such
Chattel Paper or Instrument and any security therefor is and will be as
represented to Lender on the date of the delivery thereof to Lender.
3.5 MAINTENANCE OF TANGIBLE COLLATERAL. Grantor will maintain
the tangible Collateral in good condition and repair. At the time of
attachment and perfection of the security interest granted pursuant hereto
and thereafter, all tangible Collateral will be located and will be
maintained only at the locations set forth on Exhibit A hereto. Except as
otherwise permitted by Section 3.3, Grantor will not remove such Collateral
from such locations unless, prior to any such removal, Grantor has given
written notice to Lender of the location or locations to which Grantor
desires to remove the Collateral, Lender has given its written consent to
such removal, and Grantor has delivered to Lender acknowledgment copies of
financing statements filed where appropriate to continue the perfection of
Lender's security interest as a first priority security interest therein.
Lender's security interest attaches to all of the Collateral wherever located
and
<PAGE>
Grantor's failure to inform Lender of the location of any item or items of
Collateral shall not impair Lender's security interest therein.
3.6 NOTATION ON CHATTEL PAPER. For purposes of the security
interest granted pursuant to this Agreement, Lender has been granted a direct
security interest in all Chattel Paper constituting part of the Collateral
and such Chattel Paper is not claimed merely as Proceeds of Inventory. Upon
Lender's request, Grantor will deliver to Lender the original of all Chattel
Paper. Grantor will not execute any copies of such Chattel Paper constituting
part of the Collateral other than those which are clearly marked as a copy.
Lender may stamp any such Chattel Paper with a legend reflecting Lender's
security interest therein.
3.7 INSTRUMENTS AS PROCEEDS. Notwithstanding any other
provision in this Agreement concerning Instruments, Grantor covenants that
Instruments constituting cash Proceeds (for example, money and checks) shall
be deposited in deposit accounts with Lender containing only Proceeds.
3.8 PROTECTION OF COLLATERAL. All expenses of protecting,
storing, warehousing, insuring, handling and shipping of the Collateral, all
costs of keeping the Collateral free of any liens, encumbrances and security
interests prohibited by this Agreement and of removing the same if they
should arise, and any and all excise, property, sales and use taxes imposed
by any state, federal or local authority on any of the Collateral or in
respect of the sale thereof, shall be borne and paid by Grantor and if
Grantor fails to promptly pay any thereof when due, Lender may, at its
option, but shall not be required to pay the same whereupon the same shall
constitute Obligations and shall bear interest at the Default Rate and shall
be secured by the security interest granted hereunder.
3.9 INSURANCE. Grantor will procure and maintain, or cause to
be procured and maintained, insurance issued by responsible insurance
companies insuring the Collateral against damage and loss by theft, fire,
collision (in the case of motor vehicles), and such other risks as are
usually carried by owners of similar properties or as may be requested by
Lender in an amount equal to the replacement value thereof, and, in any
event, in an amount sufficient to avoid the application of any co-insurance
provisions and payable, in the case of any loss in excess of $50,000.00, to
Grantor and Lender jointly. All such insurance shall contain an agreement by
the insurer to provide Lender with 30 days' prior notice of cancellation and
an agreement that the interest of Lender shall not be impaired or invalidated
by any act or neglect of Grantor nor by the occupation of the premises
wherein such Collateral is located for purposes more hazardous than are
permitted by said policy. Grantor will maintain, with financially sound and
reputable insurers, insurance with respect to its properties and business
against such casualties and contingencies of such types (which may include,
without limitation, public and product liability, larceny, embezzlement,
business interruption or other criminal misappropriation insurance) and in
such amounts as may from time to time be reasonably required by Lender.
Grantor will deliver evidence of such insurance and the policies of insurance
or copies thereof to Lender upon request.
<PAGE>
3.10 COMPLIANCE WITH LAW. Grantor will not use the Collateral,
or knowingly permit the Collateral to be used, for any unlawful purpose or in
violation of any federal, state or municipal law.
3.11 BOOKS AND RECORDS; ACCESS.
(a) Grantor will permit Lender and its representatives,
at reasonable times and intervals, to examine Grantor's books and
records (including Data Processing Records and Systems) with respect to
the Collateral and make extracts therefrom and copies thereof at any
time and from time to time, and Grantor will furnish such information
and reports to Lender and its representatives regarding the Collateral
as Lender and its representatives may from time to time request.
Grantor will also permit Lender and its representatives to inspect the
Collateral at reasonable times and intervals. Grantor's obligation to
pay the Lender's cost and expenses for such examinations are set forth
in SECTION 8.5 of the Credit Agreement.
(b) Lender shall have authority, at any time, to place,
or require Grantor to place, upon Grantor's books and records relating
to Accounts, Chattel Paper and other rights to payment covered by the
security interest granted hereby a notation or legend stating that such
Accounts, Chattel Paper and other rights to payment are subject to
Lender's security interest.
3.12 NOTICE OF DEFAULT. By no later than five (5) Business Days
after any officer of Grantor obtains knowledge of the existence of any
Default or Event of Default, Grantor will give notice to Lender that such
Default or Event of Default exists, stating the nature thereof, the period of
existence thereof, and what action Grantor proposes to take with respect
thereto.
3.13 ADDITIONAL DOCUMENTATION. Grantor will execute, from time
to time, such financing statements, assignments, and other documents covering
the Collateral, including Proceeds, as Lender may reasonably request in order
to create, evidence, perfect, maintain or continue its security interest in
the Collateral (including additional Collateral acquired by Grantor after the
date hereof), and Grantor will pay the cost of filing the same in all public
offices in which Lender may deem filing to be appropriate and will notify
Lender promptly upon acquiring any additional Collateral that may require an
additional filing. Upon request, Grantor will deliver to Lender all Grantor's
Documents Chattel Paper and Instruments.
3.14 CHIEF EXECUTIVE OFFICE. The location of the chief executive
office of Grantor is located in the state set forth in the preamble hereto
and will not be changed from such state without 30 days' prior written notice
to Lender. Grantor warrants that its books and records concerning Accounts
and Chattel Paper constituting part of the Collateral are located at its
chief executive office.
3.15 NAME OF GRANTOR. Grantor's true name is as set forth in the
preamble hereto. Grantor has not used any other name within the past five
years except those described on Exhibit
<PAGE>
A attached hereto. Neither Grantor nor, to Grantor's knowledge, any
predecessor in title to any of the Collateral has executed any financing
statements or security agreements presently effective as to the Collateral
except those described on Exhibit A attached hereto.
3.16 DISPUTES; ETC. Grantor shall advise Lender promptly of
Inventory in excess of $50,000.00 for any one customer in any fiscal year or
in excess of $100,000.00 in the aggregate for all customers in any fiscal
year which are returned by a customer(s) or otherwise recovered from such
customer(s) and unless instructed to deliver such Inventory to Lender,
Grantor shall resell such Inventory for Lender and assign or deliver to
Lender the resulting Accounts or other Proceeds. Grantor shall also advise
Lender promptly of all disputes and claims in excess of $50,000.00 for any
one obligor on the Collateral in any fiscal year or in excess of $100,000.00
in the aggregate for all obligors in any fiscal year and settle or adjust
them at no expense to Lender. After the occurrence and during the continuance
of an Event of Default, Lender may at all times settle or adjust such
disputes and claims directly with the customers for amounts and upon terms
which Lender considers commercially reasonable. No discount, credit or
allowance shall be granted by Grantor to any customer without Lender's
written consent other than discounts, credits, allowances, adjustments and
returns made or granted by Grantor in the ordinary course of business.
3.17 POWER OF ATTORNEY. Grantor appoints Lender, or any other
person whom Lender may from time to time designate, as Grantor's attorney
with power, to: (a) endorse Grantor's name on any checks, notes, acceptances,
drafts or other forms of payment or security evidencing or relating to any
Collateral that may come into Lender's possession; (b) sign Grantor's name on
any invoice or bill of lading relating to any Collateral, on drafts against
customers, on schedules and confirmatory assignments of Accounts, Chattel
Paper, Documents or other Collateral, on notices of assignment, financing
statements under the Uniform Commercial Code (the "Code") and other public
records, on verifications of accounts and on notices to customers; (c) notify
the post office authorities to change the address for delivery of Grantor's
mail to an address designated by Lender; (d) to receive and open all mail
addressed to Grantor; (e) send requests for verification of Accounts, Chattel
Paper, Instruments or other Collateral to customers; and (f) do all things
necessary to carry out this Agreement; PROVIDED, HOWEVER, that so long as no
Event of Default has occurred and is continuing, Lender shall not exercise
the powers granted pursuant to Section 3.17(c) or (d). Grantor ratifies and
approves all acts of the attorney within the scope of the authority granted.
Neither Lender nor the attorney will be liable for any acts of commission or
omission nor for any error in judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable so long as any Obligation
remains unpaid. Grantor waives presentment and protest of all instruments and
notice thereof, notice of default and dishonor and all other notices to which
Grantor may otherwise be entitled.
3.18 PATENTS AND TRADEMARKS; ETC. Grantor agrees with Lender
that, until the security interest granted by this Agreement has been
terminated in accordance with the terms hereof:
(a) Grantor will perform all acts and execute all
documents including, without limitation, grants of security interest,
in form suitable for filing with the United States
<PAGE>
Patent and Trademark Office, reasonably requested by Lender at any
time to evidence, perfect, maintain, record and enforce Lender's
interest in the Collateral comprised of patents (collectively the
"Patents"), patent applications (collectively the "Patent
Applications), trademarks or service marks (collectively the
"Trademarks") or of any applications therefor (collectively the
"Trademark Applications") or otherwise in furtherance of the
provisions of this Agreement; PROVIDED, HOWEVER, that Grantor shall
be not be required to execute any assignment that, by its execution,
might cause rights in any intent-to-use trademark application or any
other rights in Patents or Trademarks to be impaired or invalid;
(b) Except to the extent that Lender shall consent in
writing, Grantor (either itself or through licensees) will, unless
Grantor shall reasonably determine that a Trademark (or the use of a
Trademark in connection with a particular class of goods or products)
is not of material economic value to Grantor, (i) continue to use each
Trademark on each and every trademark class of goods in order to
maintain each Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under each Trademark as may be necessary
to prevent impairment of such Trademark, (iii) employ each Trademark
with the appropriate notice of application or registration to the
extent required by applicable law to maintain such Trademark, (iv) not
use any Trademark except for the uses for which registration or
application for registration of such Trademark has been made, unless
such use is otherwise lawful, and (v) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated;
(c) Except to the extent that Lender shall consent in
writing, Grantor will not, unless Grantor shall reasonably determine
that a Patent is not of material economic value to Grantor relative to
associated expenses, do any act, or not to do any act, whereby any
Patent may become abandoned or dedicated;
(d) Unless Grantor shall reasonably determine that a
Patent, Patent Application, Trademark or Trademark Application is not
of material economic value to Grantor, Grantor shall notify Lender
immediately if it knows, or has reason to know, of any reason that any
Patent, Patent Application, Trademark or Trademark Application may
become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court) regarding Grantor's
ownership of any Patent or Trademark, its rights to register the same,
or to keep and maintain the same;
(e) If Grantor, either itself or through any agent,
employee, licensee or designee, shall file a Patent Application or
Trademark Application for the registration of any Trademark with the
United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof,
Grantor shall
<PAGE>
promptly inform Lender, and, upon request of Lender, shall promptly
execute and deliver any and all agreements, instruments, documents
and papers as Lender may reasonably request to evidence Lender's
security interest in such Patent or Trademark and the goodwill and
general intangibles of Grantor relating thereto or represented
thereby; PROVIDED, HOWEVER, that Grantor shall be not be required to
execute any assignment that, by its execution, might cause rights in
any intent-to-use trademark application or any other rights in
Patents or Trademarks to be impaired or invalid;
(f) Unless Grantor shall reasonably determine that a
Patent Application or Trademark Application is not of material economic
value to Grantor, Grantor will take all commercially reasonable steps,
including, without limitation, proceedings before the United States
Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to pursue each
Patent Application and Trademark Application and to maintain each
issued Patent and Trademark Registration including, without limitation,
filing of applications for renewal and affidavits of use;
(g) Unless Grantor shall reasonably determine that a
Patent or Trademark is not of material economic value to Grantor,
Grantor shall promptly notify Lender if any Patent or Trademark is
infringed, misappropriated or diluted by a third party and take such
commercially reasonable action as Grantor shall reasonably deem
appropriate under the circumstances to protect such Patent or
Trademark; and
(h) Grantor agrees that it will not enter into any
agreement (for example, a license agreement) which is inconsistent with
Grantor's obligations under this Agreement.
3.19 COPYRIGHTS. Grantor agrees with Lender that, until the
security interest granted by this Agreement has been terminated in accordance
with the terms hereof:
(a) Grantor will perform all acts and execute all
documents including, without limitation, grants of security interest,
in form suitable for filing with the United States Copyright Office,
reasonably requested by Lender at any time to evidence, perfect,
maintain, record and enforce Lender's interest in the Collateral
comprised of copyrights or copyright applications (collectively the
"Copyrights") or otherwise in furtherance of the provisions of this
Agreement; PROVIDED, HOWEVER, that Grantor shall not be required to
file any documents that might cause trade secret rights in software or
any other rights in material that is subject to copyright protection to
be impaired or invalid;
(b) Except to the extent that the Lender shall consent in
writing, Grantor (either itself or through licensees) will, unless
Grantor shall reasonably determine that a Copyright is not of material
economic value to Grantor, publish the materials for which a Copyright
has been obtained (the "Works") with any notice of copyright
registration required by applicable law to preserve the Copyright;
<PAGE>
(c) Unless Grantor shall reasonably determine that a
Copyright is not of material economic value to Grantor, Grantor shall
notify the Lender immediately if it knows, or has reason to know, of
any reason that any Copyright may become abandoned or dedicated or of
any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Copyright Office or
any court) regarding Grantor's ownership of any Copyright, its right to
register the same, or to keep and maintain the same;
(d) If Grantor, either itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Copyright with the United States Copyright Office
or any similar office or agency in any other country or any political
subdivision thereof, Grantor shall promptly inform Lender, and, upon
request of Lender, execute and deliver any and all agreements,
instruments, documents and papers as Lender may request to evidence
Lender's security interest in such Copyright and the Works relating
thereto or represented thereby; PROVIDED, HOWEVER, that Grantor shall
not be required to file any documents that might cause trade secret
rights in software or any other rights in material that is subject to
copyright protection to be impaired or invalid;
(e) Unless Grantor shall reasonably determine that a
Copyright is not of material economic value to Grantor, Grantor will
take all commercially reasonable steps, including, without limitation,
proceedings before the United States Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the
Copyrights;
(f) In the event that any Copyright is infringed by a
third party, Grantor shall promptly notify Lender and shall, unless
Grantor shall reasonably determine that such Copyright is not of
material economic value to Grantor, promptly take such commercially
reasonable actions as Grantor shall reasonably deem appropriate under
the circumstances to protect such Copyright; and
(g) Grantor agrees that it will not enter into any
agreement (for example, a license agreement) which is inconsistent with
Grantor's obligations under this Agreement.
<PAGE>
ARTICLE IV
COLLECTIONS
Except as otherwise provided in this Article IV, Grantor
shall continue to collect, at its own expense, all amounts due or to become
due to Grantor under the Accounts constituting part of the Collateral and all
other Collateral. In connection with such collections, Grantor may take (and,
at Lender's direction, shall take) such action as Grantor or Lender may deem
necessary or advisable to enforce collection of the Accounts and such other
Collateral; PROVIDED, HOWEVER, that, Lender shall have the right at any time
after the occurrence and during the continuance of a Default or Event of
Default, without giving written notice to Grantor of Lender's intention to do
so, to notify the account debtors under any Accounts or obligors with respect
to such other Collateral of the assignment of such Accounts and such other
Collateral to Lender and to direct such account debtors or obligors to make
payment of all amounts due or to become due to Grantor thereunder directly to
Lender and, upon such notification and at the expense of Grantor, to enforce
collection of any such Accounts or other Collateral, and to adjust, settle or
compromise the amount or payment thereof in the same manner and to the same
extent as Grantor might have done, but unless and until Lender does so or
gives Grantor other instructions, Grantor shall make all collections for
Lender. In addition to its rights under the preceding sentence to this
Section, Lender, at any time after the occurrence and during the continuance
of a Default or Event of Default, may require that Grantor instruct all
current and future account debtors and obligors on other Collateral to make
all payments directly to a lockbox (the "Lockbox") controlled by Lender. All
payments received in the Lockbox shall be transferred to a special bank
account (the "Collateral Account") maintained at Lender subject to withdrawal
by Lender only. After Lender's exercise of its rights to direct account
debtors or other obligors on any Collateral to make payments directly to
Lender or to require Grantor to establish a Lockbox, Grantor shall
immediately deliver all full and partial payments on any Collateral received
by Grantor to Lender in their original form, except for endorsements where
necessary. Lender at its sole discretion, may hold any collections on the
Collateral delivered to it or deposited in the Collateral Account as cash
collateral or may apply such collections to the payment of the Obligations in
such order as Lender may elect; provided, however, that after an Event of
Default has occurred and is continuing, Lender shall apply all collections in
accordance with Section 7.7. Until such payments are so delivered to Lender,
such payments shall be held in trust by Grantor for and as Lender's property,
and shall not be commingled with any funds of Grantor. Any application of any
collection to the payment of any Obligation is conditioned upon final payment
of any check or other instrument.
ARTICLE V
ASSIGNMENT OF INSURANCE
Grantor hereby assigns to Lender, as additional security for payment
of the Obligations, any and all monies due or to become due under, and any
and all other rights of Grantor with respect to, any and all policies of
insurance covering the Collateral. So long as no Default or Event of Default
has occurred and is continuing, Grantor may itself adjust and collect for any
losses of up to an aggregate amount of $100,000.00 for all occurrences during
any of Grantor's
<PAGE>
fiscal years and Grantor may use the resulting Insurance Proceeds for the
replacement, restoration or repair of the Collateral. After the occurrence
and during the continuance of a Default or an Event of Default, or after the
aggregate amount of losses arising out of all occurrences during any of
Grantor's fiscal years exceeds $100,000.00, Lender may (but need not) in its
own name or in Grantor's name execute and deliver proofs of claim, receive
such monies, and settle or litigate any claim against the issuer of any such
policy and Grantor directs the issuer to pay any such monies directly to
Lender and Lender, at its sole discretion and regardless of whether Lender
exercises its right to collect Insurance Proceeds under this sentence, may
apply any Insurance Proceeds to the payment of the Obligations, whether due
or not, in such order and manner as Lender may elect or may permit Grantor to
use such Insurance Proceeds for the replacement, restoration or repair of the
Collateral.
ARTICLE VI
EVENTS OF DEFAULT
The occurrence of any Event of Default as defined in the Credit
Agreement shall constitute an Event of Default hereunder ("Event of Default").
ARTICLE VII
RIGHTS AND REMEDIES ON DEFAULT
Upon the occurrence of an Event of Default, and at any time
thereafter until such Event of Default is cured to the satisfaction of
Lender, and in addition to the rights granted to Lender under Articles IV and
V hereof, Lender may exercise any one or more of the following rights and
remedies:
7.1 ACCELERATION OF OBLIGATIONS. Declare any and all
Obligations to be immediately due and payable, and the same shall thereupon
become immediately due and payable without further notice or demand.
7.2 RIGHT OF OFFSET. Offset any deposits, including unmatured
time deposits, then maintained by Grantor with Lender, whether or not then
due, against any indebtedness then owed by Grantor to Lender whether or not
then due.
7.3 DEAL WITH COLLATERAL. In the name of Grantor or otherwise,
demand, collect, receive and give receipt for, compound, compromise, settle
and give acquittance for and prosecute and discontinue any suits or
proceedings in respect of any or all of the Collateral.
7.4 REALIZE ON COLLATERAL. Take any action which Lender may
deem reasonably necessary or desirable in order to realize on the Collateral,
including, without limitation, the power to perform any contract, to endorse
in the name of Grantor any checks, drafts, notes, or other instruments or
documents received in payment of or on account of the Collateral.
<PAGE>
7.5 ACCESS TO PROPERTY. Enter upon and into and take possession
of all or such part or parts of the properties of Grantor, including lands,
plants, buildings, machinery, equipment, Data Processing Records and Systems
and other property as may be necessary or appropriate in the reasonable
judgment of Lender, to permit or enable Lender to store, lease, sell or
otherwise dispose of or collect all or any part of the Collateral, and use
and operate said properties for such purposes and for such length of time as
Lender may reasonably deem necessary or appropriate for said purposes without
the payment of any compensation to Grantor therefor. Grantor shall provide
Lender with all information and assistance requested by Lender to facilitate
the storage, leasing, sale or other disposition or collection of the
Collateral after an Event of Default has occurred and is continuing.
7.6 OTHER RIGHTS. Exercise any and all other rights and
remedies available to it by law or by agreement, including rights and
remedies under the Uniform Commercial Code as adopted in the relevant
jurisdiction or any other applicable law, or under the Credit Agreement and,
in connection therewith, Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender, and any notice of intended disposition of any of the Collateral
required by law shall be deemed reasonable if such notice is mailed or
delivered to Grantor at its address as shown on Lender's records at least 10
days before the date of such disposition.
7.7 APPLICATION OF PROCEEDS. All proceeds of Collateral shall
be applied in accordance with Minnesota Statutes Section 336.9-504, and such
proceeds applied toward the Obligations shall be applied in such order as
Lender may elect.
7.8 PATENTS AND TRADEMARKS. Upon the occurrence and during the
continuance of an Event of Default:
(a) Lender may, at any time and from time to time, upon
thirty (30) days' prior notice to Grantor, license or, to the extent
permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patent or Trademark, throughout the world for such term or
terms, on such conditions, and in such manner, as Lender shall in its
sole discretion determine;
(b) Lender may (without assuming any obligations or
liability thereunder), at any time enforce (and shall have the
exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one
or more license or other agreements with respect to any Patent or
Trademark and take or refrain from taking any action under any such
license or other agreement, and Grantor hereby releases Lender from,
and agrees to hold Lender free and harmless from and against, any
claims arising out of, any action taken or omitted to be taken with
respect to any such license or agreement;
<PAGE>
(c) Any and all payments received by Lender under or in
respect of any Patent or Trademark (whether from Grantor or otherwise),
or received by Lender by virtue of the exercise of the licenses or
assignments granted to Lender by this Section 7.8 shall be applied to
the Obligations in accordance with Section 7.7 hereof;
(d) Lender may exercise in respect of the Patents and
Trademarks, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code;
(e) In order to implement the sale, lease, assignment,
license, sublicense or other disposition of any of the Patents and
Trademarks pursuant to this Section 7.8, Lender may, at any time,
execute and deliver on behalf of Grantor one or more instruments of
assignment of the Patents and Trademarks (or any application or
registration thereof), in form suitable for filing, recording or
registration in any country. Grantor agrees to pay when due all
reasonable costs incurred in any such transfer of the Patents and
Trademarks, including any taxes, fees and reasonable attorneys' fees;
(f) In the event of any sale, lease, assignment, license,
sublicense or other disposition of any of the Patents or Trademarks
pursuant to this Section, Grantor shall supply to Lender or its
designee its know-how and expertise relating to the manufacture and
sale of the products relating to any Patent or Trademark subject to
such disposition, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products;
and
(g) For the purpose of enabling Lender to exercise rights
and remedies under this Agreement at such time as Lender shall be
lawfully entitled to exercise such rights and remedies, and for no
other purpose, Grantor hereby grants to Lender, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense at such time any
Patent or Trademark, now owned or hereafter acquired by Grantor, and
wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may
be recorded or stored and to all computer and automatic machinery
software and programs used for the compilation or printout thereof.
7.9 COPYRIGHTS. Upon the occurrence and during the continuance
of an Event of Default:
(a) Lender may, at any time and from time to time, upon
thirty (30) days' prior notice to Grantor, license or, to the extent
permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Copyright, for such term or terms, on such conditions, and
in such manner, as Lender shall in its sole discretion determine;
<PAGE>
(b) Lender may (without assuming any obligations or
liability thereunder), at any time , enforce (and shall have the
exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one
or more license or other agreements with respect to any Copyright and
take or refrain from taking any action under any such license or other
agreement and Grantor hereby releases Lender from, and agrees to hold
Lender free and harmless from and against, any claims arising out of,
any action taken or omitted to be taken with respect to any such
license or agreement;
(c) Any and all payments received by Lender under
or in respect of any Copyright (whether from Grantor or otherwise), or
received by Lender by virtue of the exercise of the licenses or
assignments granted to Lender by this Section 7.9 shall be applied to
the Obligations in accordance with Section 7.7;
(d) Lender may exercise in respect of the Copyrights, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code;
(e) In order to implement the sale, lease, assignment,
license, sublicense or other disposition of any of the Copyrights
pursuant to this Section 7.9, Lender may, at any time, execute and
deliver on behalf of Grantor one or more instruments of assignment of
the Copyrights (or any application or registration thereof), in form
suitable for filing, recording or registration in the Copyright Office
or any country where the relevant Copyright is of material economic
value to Grantor. Grantor agrees to pay when due all reasonable costs
incurred in any such transfer of the Copyrights, including any taxes,
fees and reasonable attorneys' fees; and
(f) For the purpose of enabling Lender to exercise rights
and remedies under this Agreement at such time as Lender shall be
lawfully entitled to exercise such rights and remedies, and for no
other purpose, Grantor hereby grants to Lender an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any Copyright,
now owned or hereafter acquired by Grantor, and wherever the same may
be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and
to all computer and automatic machinery software and programs used for
the compilation or printout thereof.
ARTICLE VIII
MISCELLANEOUS
8.1 NO LIABILITY ON COLLATERAL. It is understood that Lender
does not in any way assume any of Grantor's obligations under any of the
Collateral. Grantor hereby agrees to indemnify Lender against all liability
arising in connection with or on account of any of the Collateral, except for
any such liabilities arising on account of Lender's negligence or willful
misconduct.
<PAGE>
8.2 NO WAIVER. Lender shall not be deemed to have waived any of
its rights hereunder or under any other agreement, instrument or paper signed
by Grantor unless such waiver be 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 on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
8.3 REMEDIES CUMULATIVE. All rights and remedies of Lender
shall be cumulative and may be exercised singularly or concurrently, at their
option, and the exercise or enforcement of any one such right or remedy shall
not bar or be a condition to the exercise or enforcement of any other.
8.4 GOVERNING LAW/JURISDICTION. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties
shall be governed by, the laws of the State of Minnesota, except to the
extent that the perfection of the security interest hereunder, or the
enforcement of any remedies hereunder, with respect to any particular
Collateral shall be governed by the laws of a jurisdiction other than the
State of Minnesota. AT THE OPTION OF LENDER, THIS AGREEMENT MAY BE ENFORCED
IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST.
PAUL, MINNESOTA; AND GRANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY
SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT GRANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY
FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
8.5 EXPENSES. Grantor agrees to pay the reasonable attorneys'
fees and legal expenses incurred by Lender in the exercise of any right or
remedy available to it under this Agreement, whether or not suit is
commenced, including, without limitation, attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or judgment.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of Grantor and
Lender.
8.7 RECITALS. The above Recitals are true and correct as of the
date hereof and constitute a part of this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as
of the date and year first above written.
<PAGE>
REHABILICARE INC.
By:
Its:
<PAGE>
EXHIBIT A
I. Financing Statements on File Listing Grantor or Any Predecessor in
Title as Debtor
See SCHEDULE 7.12 to the Credit Agreement which is
incorporated herein by reference.
II. Location of Inventory
Any County of any State.
III. Prior Names
Medical Devices, Inc.
<PAGE>
STOCK PLEDGE AGREEMENT
between
Rehabilicare Inc., 1811 Old Highway 8, New Brighton, MN 55112, a corporation
organised under the laws of the State of Minnesota, one of the United States of
America
(the "Pledgor")
and
U. S. Bank National Association, at U.S. Bank Place, Minneapolis, MN 55402, a
national banking association organised under the laws of the United States of
America
(the "Bank")
WHEREAS, the Bank undertook to grant the Pledgor loans in the amount of up to
US$20,000,000.00 (the "Loan") pursuant to a Credit Agreement dated as of July
14, 1999 ___ (as amended, modified, supplement or restated from time to time,
the "Loan Agreement;" capitalised terms not otherwise defined herein being
used herein as therein defined);
WHEREAS, the terms and conditions of the Loan Agreement provide that Pledgor
and certain of its direct and indirect Subsidiaries shall secure the Loan by
way of guarantees and a pledge of assets; and
WHEREAS, Pledgor has determined that the execution, delivery and performance
of this Agreement is in Pledgor's best business and pecuniary interest.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Pledgor hereby pledges and undertakes to deliver to the Bank One
Hundred per cent (100%) of the shares (the "Shares", as evidenced by
the share certificates nos. 1a to 1d and 2 to 9) in Compex SA, a
corporation organised under the laws of Switzerland (the "Swiss
Subsidiary"). All ancillary rights related thereto are also deemed to
have been pledged. The Shares shall be endorsed in blank.
The right of pledge shall always extend to the entire asset pledged,
even if its value was increased subsequently for whatever reason.
The proceeds from the realisation of collateral security shall remain
pledged to the Bank until such time as all such obligations have been
settled.
2. The Pledgor undertakes to convene as soon as possible a shareholder
meeting and to convert the Shares into bearer shares, the newly issued
bearer shares to be pledged to the Bank immediately upon their issuance
in accordance with the terms of this Stock Pledge Agreement.
Apart from the conversion of shares referred to in the preceding
paragraph, the Pledgor undertakes not to change the share capital or to
create authorised or conditional share capital of the Swiss Subsidiary
without the prior written approval of the Bank, such approval not to be
unreasonably withheld. Furthermore, the
<PAGE>
Pledgor shall ensure that the Swiss Subsidiary refrains from issuing
any securities or rights exchangeable for or convertible into shares
of the Swiss Subsidiary or any options exercisable into such shares,
and that the Swiss Subsidiary shall enter any purchaser of the Shares
in case of their realisation in the stock register.
In case the Pledgor acquires any additional shares of the Swiss
Subsidiary or any securities or rights exchangeable for or convertible
into shares of the Swiss Subsidiary or any options exercisable into
such shares, by purchase or otherwise, then the Pledgor shall forthwith
pledge and deliver to the Bank all of such shares or securities or
rights, so that the pledged Shares always represent One Hundred per
cent (100%) of the capital and One Hundred per cent (100%) of the
voting power in the Swiss Subsidiary.
3. The Pledgor shall, at the time of the signing of this Stock Pledge
Agreement, sign a proxy in the form of Exhibit A hereto. The Bank
undertakes to use such proxy only in case the pledge created hereunder
can be realised following the occurrence of an Event of Default.
4. The pledge created by this Stock Pledge Agreement shall secure all
Obligations of Pledgor as set forth in the Loan Agreement and the
compensation of all costs and expenses incurred by or on behalf of the
Bank in connection with the perfection of the pledge over the assets
described herein and the realisation of said pledge.
5. The Pledgor shall take the necessary precautions and measures to
maintain the value of the collateral established hereunder and, after
the perfection of the pledge, shall advice the Bank on such necessary
precautions and measures if and when needed. Irrespective of whether or
not such advice has been received, the Bank shall be entitled, but not
obliged, to take, at the expense and risk of the Pledgor, such
precautions and measures as it deems necessary, such as the giving of
declarations in Switzerland and abroad which are necessary for the
creation of security interests as well as the maintenance and/or
realisation of the collateral.
6. Should the Pledgor fail to meet its Obligations secured by the pledge
created hereby, the Bank shall be entitled, at its discretion, to
realise the pledged items by enforced sale or in the open market, and,
with respect to the sale in the open market, without regard to the
formalities provided for in the Swiss Federal Act on Debt Collection
Proceedings and Bankruptcy or the respective legal provisions
applicable at the place outside Switzerland where realisation takes
place, provided that if any notification of intended realisation is
required by application law, such notification shall be deemed
reasonably and properly given if given in accordance with the notice
provisions of the Loan Agreement at least ten (10) days before such
realisation.
7. If more that one item has been pledged, these items shall serve jointly
and severally as collateral. In the absence of any written agreements
to the contrary, the Bank shall determine the order in which any
collateral (assets pledged, guarantees etc.) is realised or used. The
Bank may reduce or waive collateral without the consent of the Pledgor.
The Pledgor herewith expressly waives the defence that the Bank must
realise the collateral before it institutes attachment or bankruptcy
proceedings against it.
<PAGE>
8. The Bank agrees to release a portion of the Shares in accordance with
Section 11.13 of the Loan Agreement.
9. All communications of the Bank to the Pledgor are deemed to have been
made with legal effect if dispatched in accordance with the notice
provisions of the Loan Agreement.
10. This Stock Pledge Agreement shall be governed by and construed in
accordance with the laws of Switzerland.
11. The Pledgor irrevocably agrees that for the exclusive benefit of the
Bank any proceedings by the Bank arising out of or in connection with
this Stock Pledge Agreement may be brought by the Bank in any competent
COURT OF THE STATE OF MINNESOTA OR ANY FEDERAL COURT OF THE UNITED
STATES OF AMERICA SITTING THEREIN. The Pledgor irrevocably (a) submits
to the non-exclusive jurisdiction of such courts and (b) waives any
right it may have to the trial by jury of such proceedings in any such
court.
12. The Pledgor irrevocably waives any objection which it might now or
hereafter have to the courts referred to in Clause 11 being nominated
as the forum to hear and determine any proceeding which may arise out
of or in connection with this Stock Pledge Agreement and agrees not to
claim that any such court is not a convenient or a appropriate forum.
13. The submission to the jurisdiction of the courts referred to in Clause
11 shall not (and shall not be construed so as to) limited the right of
the Bank to take proceedings against the Pledgor in any other court of
competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdictions preclude the taking of proceedings in any other
jurisdiction (whether concurrently or not) if an to the extent
permitted by applicable law.
14. The Pledgor consents generally in respect of any proceedings arising
out of or in connection with this Stock Pledge Agreement including to
the giving of any relief or the issue of any process in connection with
such proceedings, including, without limitation, the making,
enforcement or execution against any property or assets whatsoever
(irrespective of its use or intended use) of any order or judgement
which may be made or given in such proceedings.
15. To the extent that the Pledgor may in any jurisdiction claim for itself
or its assets immunity from suit, execution, attachment (whether in aid
of execution, before judgement or otherwise) or other legal process and
to the extent that in any such jurisdiction there may be attributed to
itself or its assets such immunity (whether or not claimed), the
Pledgor hereby irrevocably agrees not to claim and hereby irrevocably
waives such immunity to the full extent permitted by the laws of such
jurisdiction.
<PAGE>
Executed and delivered at Geneva, Switzerland, as of July__, 1999.
Rehabilicare Inc.
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By:
Its:
Executed and delivered at Minneapolis, Minnesota USA, as of July__, 1999.
U. S. Bank National Association
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By: Michael J. Staloch
Its: Vice President
<PAGE>
Exhibit A
GENERAL PROXY FOR THE REPRESENTATION OF SHARES
The undersigned (the "Pledgor") has pledged One Hundred per cent (100%) of
its shares (the "Shares") of Compex SA, a corporation organised under the
laws of Switzerland (the "Swiss Subsidiary") to U. S. Bank National
Association (the "Bank").
Pursuant to Articles 689b, et seq. of the Swiss Code of Obligations, the
Pledgor hereby authorises the Bank to exercise the voting and all other
membership rights pertaining to the Shares at general shareholders' meeting
of the Swiss Subsidiary and to delegate this authority as it sees fit.
This Proxy will remain valid even in the event of the undersigned's legal
incompetence or bankruptcy.
Executed and delivered at Geneva, Switzerland, as of July__, 1999.
Rehabilicare Inc.
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By:
Its:
<PAGE>
GUARANTEE
1. Compex SA, c/o Zone industrielle Larges Pieces, chemin du Devent, 1024
Ecublens, Switzerland, a Swiss corporation ("Compex") hereby
irrevocably and unconditionally undertakes, in accordance with the
terms of Article 111 of the Swiss Federal Code of Obligations, to fully
indemnify U.S. Bank National Association, at U.S. Bank Place,
Minneapolis, MN 55402, USA, a national banking association organized
under the laws of the United States of America ("Bank") as lender under
a Credit Agreement dated as of July __, 1999, (as amended, modified,
supplement or restated from time to time, the "Loan Agreement") in the
amount of US$ 20,000,000.00 (twenty million U.S. Dollars), with
Rehabilicare Inc., at 1811 Old Highway 8, New Brighton, MN 55112, USA,
a Minnesota corporation ("Rehabilicare") as borrower, in case
Rehabilicare fails to meet its obligations (including but not limited
to the due and punctual payment of principal, interest and all fees,
costs and expenses or charges of any kind and nature) as stipulated in
said Loan Agreement.
2. Compex therefore irrevocably and unconditionally undertakes to pay on
first demand by the Bank, irrespective of the validity and the legal
effects of the above mentioned loan relationship and waiving all rights
of objection and defence arising from said Loan Agreement, any amount
up to one million two hundred and fifty thousand United States dollars
(USD 1,250,000.00) upon receipt of the written request for payment and
the confirmation in writing by the Bank that Rehabilicare has not made
the payments stipulated in the Loan Agreement in the amount called
under this Guarantee. The Bank acknowledges that Compex' directors
and/or officers shall not be held personally liable by the Bank for the
issuance of this Guarantee.
3. This Guarantee shall continue in full force and effect until all
payments to be made by Rehabilicare in respect of the Loan Agreement
shall have been received by the Bank in full. However, the Bank agrees
that this Guaranty shall be terminated in accordance with Section 11.13
of the Loan Agreement, the provisions of which are incorporated herein
by reference as though fully set forth herein.
4. Compex warrants and represents to the Bank that each of the
representations and warranties contained in the Loan Agreement
pertaining to Compex as a Subsidiary of Rehabilicare or as a Loan Party
as such term is defined in the
<PAGE>
Loan Agreement are true and correct and that such representations and
warranties are incorporated herein by reference as though fully set
forth herein. Compex further represents and warrants to the Bank that
it expects to derive benefits from transactions resulting in the
creation of the Obligations guaranteed hereby. The Bank may rely
conclusively on a continuing representation and warranty hereby made,
that Compex expects to continues to be benefited by the Bank's
extension of credit to Rehabilicare and the Bank shall have no duty
to inquire into or confirm the receipt of any such benefits, and this
Guaranty shall be effective and enforceable by the Bank without
regard to the receipt, nature or value of any such benefits.
5. Compex agrees to perform and observe the affirmative and negative
covenants respectively set forth in Articles VIII and IX of the Loan
Agreement that apply to the undersigned as a Subsidiary of the
Rehabilicare and that such covenants are incorporated herein by
reference as though fully set forth herein.
6. This Guarantee is governed by Swiss law. The place of jurisdiction for
all disputes arising in relation to this Guarantee shall be exclusively
THE ORDINARY COURTS OF THE CANTON OF VAUD, SWITZERLAND.
7. Terms and expressions not otherwise defined in this Guarantee shall
have the same meaning as in the Loan Agreement.
Geneva, ____ July 1999
Compex SA
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