<PAGE>
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
-- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 1, 1995
OR
___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 0-14980
NELLCOR INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-2789249
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4280 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
(Address of principal executive offices)
(Zip code)
TELEPHONE: (510) 463-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Number of shares of Common Stock, $.001 par value, outstanding as of
January 1, 1995 was 16,590,108.
Page 1
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<PAGE>
PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NELLCOR INCORPORATED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS January 1,1995 July 3, 1994
-------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 94,231 $ 68,163
Marketable securities 37,645 53,470
Accounts receivable, net of allowance for doubtful
accounts of $1,059 ($1,128 at July 3, 1994) 35,784 34,308
Inventories 26,134 27,238
Deferred income taxes and other current ASSETS 6,463 5,231
-------------- ------------
Total current assets 200,257 188,410
-------------- ------------
Property and equipment, at cost 76,045 73,487
Accumulated depreciation (41,620) (39,315)
-------------- ------------
Net property and equipment 34,425 34,172
-------------- ------------
Intangibles and other assets, net of accumulated amortization 13,687 15,566
-------------- ------------
$248,369 $238,148
-------------- ------------
-------------- ------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,159 $ 14,229
Accrued liabilities:
Payroll and payroll related 10,408 11,091
Warranty 2,257 1,882
Other 5,911 4,811
Income taxes payable 3,934 1,570
-------------- ------------
Total current liabilities 31,669 33,583
-------------- ------------
Deferred income taxes --- 452
Stockholders' equity:
Common stock, par value 18 17
Additional paid-in-capital 100,149 90,302
Retained earnings 141,672 127,329
Accumulated translation adjustment 227 100
Notes receivable from stockholders (5) (5)
Treasury stock, at cost (883,000 shares at January 1, 1995;
522,500 shares at July 3, 1994) (25,361) (13,630)
-------------- ------------
Total stockholders' equity 216,700 204,113
-------------- ------------
$248,369 $238,148
-------------- ------------
-------------- ------------
</TABLE>
SEE ACCOMPANYING NOTE
Page 2
<PAGE>
NELLCOR INCORPORATED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
---------------------------------- ----------------------------------
January 1, 1995 January 2, 1994 January 1, 1995 January 2, 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenue $ 64,017 $ 58,113 $ 119,731 $ 108,261
Cost of goods sold 25,327 23,418 48,163 44,344
-------------- -------------- ------------- ---------------
Gross profit 38,690 34,695 71,568 63,917
Operating expenses:
Research
and development 6,957 6,064 13,387 11,383
Selling, general
and administrative 19,343 18,088 37,411 34,853
Restructuring charge --- --- --- 500
-------------- -------------- ------------- ---------------
Income from operations 12,390 10,543 20,770 17,181
Interest and other, net 1,292 605 2,362 1,440
-------------- -------------- ------------- ---------------
Income before income taxes 13,682 11,148 23,132 18,621
Provision for income taxes 5,199 4,292 8,790 6,906
-------------- -------------- ------------- ---------------
Net Income $ 8,483 $ 6,856 $ 14,342 $ 11,715
-------------- -------------- ------------- ---------------
-------------- -------------- ------------- ---------------
Net income per common and
common equivalent share $ 0.50 $ 0.41 $ 0.85 $ 0.69
-------------- -------------- ------------- ---------------
-------------- -------------- ------------- ---------------
Weighted average common
and common equivalent
shares used in the calculation
of income per share 17,011 16,853 16,895 16,872
-------------- -------------- ------------- ---------------
-------------- -------------- ------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTE
Page 3
<PAGE>
NELLCOR INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
For the Six
Months Ended
-------------------------------
January 1, 1995 January 2, 1994
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $14,342 $11,715
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 7,954 7,383
Deferred income taxes (452) 1,607
Increases (decreases) in cash flows,
as a result of changes in:
Accounts receivable (1,292) 609
Inventories 1,104 969
Other current assets (1,388) (2,616)
Other assets (1,084) (861)
Accounts payable (5,090) 576
Accrued liabilities 754 (2,109)
Income taxes payable 2,373 2,694
--------------- ----------------
Cash provided by operating activities 17,221 19,967
--------------- ----------------
Cash flows from investing activities:
Capital expenditures (5,107) (7,579)
Cash used to purchase marketable securities (7,636) (57,581)
Proceeds from sales and maturities of 23,461 47,073
marketable securities
Other (55) ---
--------------- ----------------
Cash provided (used) by investing activities 10,663 (18,087)
--------------- ----------------
Cash flows from financing activities:
Proceeds from the sale of common stock and related
tax benefits, net of notes receivable from stockholders 9,769 2,901
Purchase of treasury shares (11,731) (3,977)
--------------- ----------------
Cash used by financing activities (1,962) (1,076)
--------------- ----------------
Effect of exchange rate changes on cash balances 146 (135)
--------------- ----------------
Increase in cash and cash equivalents 26,068 669
Cash and cash equivalents at the beginning of the period 68,163 45,906
--------------- ----------------
Cash and cash equivalents at the end of the period $94,231 $46,575
--------------- ----------------
--------------- ----------------
</TABLE>
Page 4
<PAGE>
NELLCOR INCORPORATED NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
GENERAL. The consolidated financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations as
of the end of and for the periods indicated.
The accompanying interim consolidated financial statements should be read in
conjunction with the financial statements and related notes included in the
Company's 1994 Annual Report to Stockholders. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Security and Exchange Commission rules and regulations. The
Company believes the information included in the report on Form 10-Q, when read
in conjunction with the Consolidated Financial Statements and related Notes
thereto included in the Company's 1994 Annual Report to Stockholders, is not
misleading. Information reflecting the financial position of the Company at
July 3, 1994 is derived from audited financial statements.
The results of operations for the three month and six month periods ended
January 1, 1995 are not necessarily indicative of operating results for the full
fiscal year.
INVENTORIES. Inventories are stated at the lower of cost (first-in, first-out)
or market (net realizable value). Interim and year-end inventory balances were
as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
January 1, July 3,
1995 1994
---------- ---------
<S> <C> <C>
Raw materials $ 12,038 $ 10,040
Work-in process 3,818 5,180
Finished goods 10,278 12,018
---------- ---------
$26,134 $27,238
---------- ---------
---------- ---------
</TABLE>
STATEMENT OF CASH FLOWS. The Company paid income taxes of approximately $5.7
million and $4.4 million in the six months ended January 1, 1995 and January 2,
1994, respectively.
PROPERTY AND EQUIPMENT. Depreciation expense was approximately $5.0 million in
the first six months of fiscal 1995 and $5.2 million in the first six months of
fiscal 1994.
Page 5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS - YEAR-TO-DATE PERIOD AND SECOND QUARTER ENDED JANUARY 1,
1995, COMPARED WITH THE YEAR-TO-DATE PERIOD AND SECOND QUARTER ENDED JANUARY 2,
1994.
The Company's net revenue for the second quarter of fiscal 1995 increased to
$64.0 million from $58.1 million in the second quarter of fiscal 1994 and
increased to $119.7 million for the first six months of fiscal 1995 from $108.3
million in the same period last year. The increase in net revenue principally
resulted from higher sales of oximetry products across the Company's domestic
and international markets as well as increased sales of EDENTEC[REGISTERED
TRADEMARK] apnea products. The Company's oximetry products include oximetry
instruments, sensors, and OEM modules.
The Company's principal oximetry instruments include the N-20 portable pulse
oximeter, the N-180, N-185, N-200, and N-250 standalone pulse oximeters, and
the N-3000 pulse oximeter, which is the oximetry module in the NELLCOR SYMPHONY-
TM- multiparameter monitoring system. For the second quarter and first six
months of fiscal 1995, net revenue from oximetry instruments increased primarily
due to international sales of the N-3000, which was first introduced to
international markets in the third quarter of fiscal 1994, and higher sales of
the N-20 portable pulse oximeter. Standalone and portable pulse oximetry
instrument average selling prices were comparable to the same periods a year
ago.
Oximetry sensors include adhesive, reusable, and recycled sensor product lines.
Revenue from oximetry sensors increased for the second quarter and first six
months of fiscal 1995 primarily due to continued growth in the installed base of
the Company's monitors and the products of the Company's licensees and OEM
customers.
Revenue from OEM oximetry modules for the second quarter of fiscal 1995 was
comparable to the same period a year ago as higher unit shipments were partially
offset by slightly lower average selling prices. For the first six months of
fiscal 1995, OEM oximetry module revenue increased primarily due to higher unit
shipments. With the recent addition of four new international OEM customers,
Nellcor now has more than 30 OEM agreements with medical systems and monitoring
customers worldwide.
The Company's primary gas products include the ULTRA CAP[REGISTERED TRADEMARK]
combination pulse oximeter and capnograph, the STAT CAP[REGISTERED TRADEMARK]
airway carbon dioxide indicator and EASY CAP[REGISTERED TRADEMARK]
end-tidal carbon dioxide detector, and related accessories. Revenue from
gas products for the second quarter and first six months of fiscal 1995
decreased compared to the same periods a year ago primarily due to lower sales
of the discontinued N-1000 multi-function monitor, N-1500 anesthetic agent
monitor, and the N-2500 anesthesia safety monitor. Sales of these discontinued
monitors represented approximately 2 percent and less than 1 percent of net
revenue for the first six months of fiscal 1994 and fiscal 1995, respectively.
Page 6
<PAGE>
The principal apnea monitoring and recording products sold by EdenTec include
the ASSURANCE[REGISTERED TRADEMARK] 2000 heart and respiration monitor, the
ASSURANCE 3000 heart and respiration monitor, and the EDENTRACE[REGISTERED
TRADEMARK] II and EDENTRACE II PLUS-TM- multi-channel recording systems, and
related accessories. Revenue from apnea products for the second quarter and
first six months of fiscal 1995 increased from the same periods a year ago due
primarily to higher sales of the ASSURANCE 2000 and EDENTRACE II PLUS products
into alternate care markets, including the home.
International revenue increased 40 percent in the second quarter of fiscal 1995
to $14.3 million from $10.2 million for the second quarter of fiscal 1994. For
the first six months of fiscal 1995, international revenue increased 34 percent
to $24.2 million from $18.1 million for the same period a year ago.
International revenue increased across all markets during the quarter primarily
due to higher sales of oximetry sensors and OEM modules, and sales of the N-
3000 pulse oximeter. Favorable foreign currency exchange rates accounted for 8
and 7 percentage points of the international revenue growth during the second
quarter and first six months of fiscal 1995, respectively.
During the second quarter of fiscal 1995, the Company received marketing
clearance from the U.S. Food and Drug Administration (FDA) for the PEDI-CAP-TM-
end-tidal carbon dioxide detector. The Company also filed a 510(K) with the FDA
to obtain approval to market the N-3100 noninvasive blood pressure monitor
domestically. The N-3100, which is the second module of the NELLCOR SYMPHONY
multiparameter monitoring system, was introduced to international markets in the
first quarter of fiscal 1995.
Sales of the HEALTHQUIZ-TM- system, a patient-driven automated medical history
system that electronically captures patient information, have been limited since
the product was first introduced during the fourth quarter of fiscal 1994. The
Company continues to devote substantial marketing, sales, and engineering
resources to the product. During the third quarter of fiscal 1995, the Company
will establish a dedicated HEALTHQUIZ sales force to further focus its efforts
on sales of the product.
In the second half of fiscal 1991, the Company began commercial shipments of the
N-CAT[REGISTERED TRADEMARK] non-invasive continuous blood pressure monitor
developed and manufactured by Colin Electronics of Japan (Colin). Shipments of
the N-CAT monitor to date have been limited, and since the fourth quarter of
fiscal 1992, shipments have been suspended pending evaluation of new versions of
the product software developed by Colin intended to improve the product's
operating performance. Costs associated with this evaluation were not material
during the second quarter of fiscal 1995 and were expensed as incurred. After
evaluating the most recent enhancements to the product's software, the Company
is now satisfied with the performance of the N-CAT monitor. Because of
modifications made to the product's software, Colin plans to resubmit a 510(K)
to the FDA to gain clearance to market the product in the U.S. While there is
no assurance that U.S. marketing clearance will be granted by the FDA, the
Company may consider marketing the N-CAT monitor internationally in order to
begin recovering its investment in N-CAT monitor assets and marketing rights.
Gross profit as a percentage of net revenue for the second quarter of fiscal
1995 at 60 percent was comparable to the second quarter of fiscal 1994. For the
first six months of fiscal 1995, gross margin increased to 60 percent from 59
percent for the same period last year primarily due to the favorable effect
foreign currency exchange rates had upon revenue, margin improvement at EdenTec,
and a decrease in revenue from lower margin discontinued gas products.
Page 7
<PAGE>
Operating expenses for the second quarter of fiscal 1995 decreased to 41 percent
of net revenue from 42 percent for the second quarter last year. Operating
expenses for the first six months of fiscal 1995 decreased to 42 percent from 43
percent of net revenue for the same period a year ago.
Research and development expenses at 11 percent of net revenue for the second
quarter of fiscal 1995 were comparable to the same period in fiscal 1994.
Research and development expenses increased in absolute dollars primarily due to
higher OEM oximetry module and HEALTHQUIZ development costs. For the second
quarter of fiscal 1995, selling, general, and administrative expenses decreased
to 30 percent of net revenue from 31 percent for the same period in fiscal 1994.
Selling, general, and administrative expenses increased in absolute dollars in
the second quarter of fiscal 1995 due primarily to higher funding of the
Company's profit sharing and bonus programs.
Liquidity and Capital Resources
At January 1, 1995, the Company had cash, cash equivalents and marketable
securities of approximately $131.9 million compared to $121.6 million at the end
of fiscal 1994. The Company has met its liquidity and capital requirements from
internally generated cash.
Operating activities provided positive cash flows of approximately $17.2 million
during the first six months of fiscal 1995. Depreciation and amortization were
significant non-cash operating activities during the period. Sales of
marketable securities, partially offset by capital expenditures, principally for
manufacturing equipment, were significant sources of cash from investing
activities during the first six months of fiscal 1995.
Shares of Nellcor common stock issued under the Company's stock option plans
were significant sources of cash from financing activities for the first six
months of fiscal 1995. Repurchases of shares of Nellcor common stock during the
first six months of fiscal 1995 under the Company's Limited Stock Repurchase
Program were significant uses of cash from financing activities. Shares
repurchased under the Limited Stock Repurchase Program are repurchased to offset
the dilutive effects of the Company's stock option plans and the 1986 Employee
Stock Participation Plan, as amended. No shares were repurchased under the
Company's General Stock Repurchase Program, which authorizes the repurchase and
retirement of up to a total of one million shares of common stock from time to
time in the open market. The Company does not plan to resume share repurchases
under the General Stock Repurchase Program in the near term.
Page 8
<PAGE>
During the second quarter of fiscal 1995, the Company secured a $50 million
credit facility with a syndicate of banks. The credit facility is available to
the Company for general corporate purposes and provides the Company with
additional financial resources to take advantage of strategic business
opportunities. As of January 1, 1995, the Company had not drawn against this
credit facility and had no long term debt obligations. The Company anticipates
that current capital resources combined with cash generated from operating
activities will be sufficient to meet its liquidity and capital expenditure
requirements at least through the end of fiscal 1995.
The Company adopted Statement of Financial Accounting Standards Number 115
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115)
during the first quarter of fiscal 1995. Implementation of SFAS 115 did not
have a material effect on Nellcor's financial position or results of operations.
Page 9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
With regard to the patent litigation with BOC Health Care, Inc., claims by BOC
that certain Nellcor patents are invalid or, if found by the court to be valid,
then not infringed by BOC, remain to be resolved in litigation between Nellcor
and BOC, Inc. currently pending in Delaware federal district court. The Company
completed trial and post trial briefing work in this litigation, and awaits the
opinion of the federal district court. The Company is vigorously defending its
patents in this litigation, and believes that the outcome of this legal
proceeding will not have an adverse effect on the Company's financial position
or results of operations.
ITEM 5. OTHER INFORMATION.
CREDIT FACILITY
During the second quarter of fiscal 1995, the Company entered into a Credit
Agreement with a syndicate of banks led by ABN AMRO Bank N.V., San Francisco
International Branch as agent for the banks. Under the Credit Agreement, the
Company has available an unsecured credit facility of up to $50,000,000 for use
for general corporate purposes.
SEVERANCE AGREEMENTS
During the second quarter of fiscal 1995, the Board of Directors of the Company
determined that it is in the best interests of the Company and its stockholders
to ensure the continued dedication and services of the Company's executive
officers and certain key employees in the event of a change in control. In
furtherance of this determination, the Board approved the entering into by the
Company of severance agreements with its executive officers and certain key
employees. The Company has entered into severance agreements (the "Severance
Agreements") with each of C. Raymond Larkin, Jr., President and Chief Executive
Officer, executive officers Boudewijn L. Bollen, Charles H. Bowden, M.D.,
Laureen DeBuono, Michael P. Downey, David J. Illingworth, Lee M. Middleman,
Ph.D., Kenneth Sumner, Ph.D. and David B. Swedlow, M.D., and certain other key
employees of the Company (each of such individuals being hereinafter referred to
as the "Executive" or collectively as the "Executives").
Each Severance Agreement has a twenty-four month term, with an automatic one
year extension on each anniversary date thereof beginning the second anniversary
date, unless the Company or the Executive gives written notice to the other that
the term of the Severance Agreement shall not be extended. However, in no event
will a Severance Agreement expire prior to the expiration of twenty-four months
after the occurrence of a "change in control", as defined below.
Page 10
<PAGE>
Under the Severance Agreements, if an Executive's employment with the Company is
terminated by the Company for "cause" (as defined below), disability or death,
or by the Executive other than for "good reason" (as defined below) during the
term of the Severance Agreement and within two years following a "change in
control", the Executive shall be entitled to accrued but unpaid compensation
and, if such termination is other than by the Company for "cause", a prorated
bonus.
If an Executive's employment with the Company is terminated by the Company
without "cause" or by the Executive for "good reason" during the term of the
Severance Agreement and within two years following a "change in control", the
Executive shall be entitled to: (i) a lump-sum severance payment equal to three
times base salary plus bonus in the case of Mr. Larkin, two times base salary
plus bonus in the case of other executive officers and one time base salary plus
bonus in the case of certain key employees; (ii) accrued but unpaid compensation
and a prorated bonus for the year in which the Executive is terminated; (iii)
medical and insurance benefits for the Executive and the Executive's dependents
for three years in the case of Mr. Larkin, two years in the case of other
executive officers and one year in the case of certain key employees, such
benefits to be limited to the extent that the Executive obtains comparable
benefits pursuant to subsequent employment; (iii) the immediate vesting of, and
lapsing of restrictions on, all outstanding equity incentive awards held by the
Executive, including stock options and restricted stock; and (iv) outplacement
and career counseling services.
Each Severance Agreement provides that if any amounts due to an Executive
thereunder become subject to the "golden parachute" rules set forth in Section
280G of the Internal Revenue Code, then such amounts will be reduced to the
extent necessary to avoid the application of such rules.
A termination of employment is for "cause" under the Severance Agreements if the
basis of the termination is fraud, misappropriation, embezzlement or willful
engagement by the Executive in misconduct which is demonstrably and materially
injurious to the Company and its subsidiaries taken as a whole. "Good reason"
includes, among other things, (i) an adverse change in the Executive's status,
title, position, duties or responsibilities; (ii) a reduction in the Executive's
base compensation or benefits; (iii) the relocation of the Executive; (iv) the
discontinuance by the Company of any material compensation or employee benefit
plan in which the Executive participates; (v) the insolvency or the filing of a
petition for bankruptcy of the Company; (vi) breach by the Company of the
Severance Agreement; and (vii) failure or refusal of any successor to the
Company to assume and perform the Severance Agreement.
Page 11
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Pursuant to the Severance Agreements, a "change in control" shall be deemed to
have occurred (i) upon the acquisition by any person, entity or group (other
than the Company, certain affiliated entities, or other person described in
(iii) (A) through (C) below) of beneficial ownership of twenty-five percent or
more of the combined voting power of the Company's then outstanding voting
securities; (ii) if the individuals who constitute the Board of Directors of the
Company as of the date that the Severance Agreements are approved by the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any new director approved by a vote of at least two-
thirds of the Incumbent Board shall be considered a member of the Incumbent
Board (other than an individual initially assuming office as a result of either
an actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a person, entity or group
other than the Incumbent Board); (iii) upon approval by the stockholders of the
Company of a merger, consolidation or reorganization involving the Company,
unless (A) the stockholders of the Company immediately before such merger,
consolidation or reorganization own immediately thereafter at least fifty one
percent of the combined voting power of the outstanding voting securities of the
surviving corporation in substantially the same proportion as their ownership of
securities immediately before any such transaction; (B) the individuals
constituting the Incumbent Board immediately prior to such merger, consolidation
or reorganization constitute at least a majority of the board of the surviving
corporation; and (C) no person, entity or group (other than the Company and/or
certain affiliated entities) has beneficial ownership of twenty five percent or
more of the combined voting power of the surviving corporation's then
outstanding voting securities; (iv) upon a complete liquidation or dissolution
of the Company; or (v) upon an agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any person, entity or
group (other than a transfer to a Company subsidiary).
Page 12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits.
10.1 Credit facility agreement
10.2 Form of President / Chief Executive Officer Severance Agreement
10.3 Form of Executive Officer Severance Agreement
10.4 Form of Key Employee Severance Agreement
11.1 Statement of computation of net income per share.
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended January 1, 1995.
Page 13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
NELLCOR INCORPORATED
DATED February 13, 1995 By /s/ Michael P. Downey
----------------------- ------------------------------------
Michael P. Downey
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 14
<PAGE>
EXHIBIT INDEX
Exhibit Location in Form
No. Description 10-Q
------- ----------- ----------------
10.1 Credit line facility agreement ------
10.2 Form of President / Chief Executive ------
Officer Severance Agreement
10.3 Form of Executive Officer Severance ------
Agreement
10.4 Form of Key Employee Severance ------
Agreement
11.1 Statement of computation of net income ------
per share
Page 15
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EXECUTION COPY
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- - - - - -------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
NELLCOR INCORPORATED
AND
THE BANKS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
SAN FRANCISCO INTERNATIONAL BRANCH
AS AGENT FOR THE BANKS
As of November 16, 1994
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
<PAGE>
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
SECTION I. INTERPRETATION
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04. Plural Terms . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 2
1.07. Construction . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 2
1.09. Calculation of Interest and Fees . . . . . . . . . . . . . . 2
1.10. Other Interpretive Provisions . . . . . . . . . . . . . . . 3
SECTION II. CREDIT FACILITIES
2.01. Revolving Loan Facility . . . . . . . . . . . . . . . . . . 3
2.02. Term Loan Facility . . . . . . . . . . . . . . . . . . . . . 8
2.03. Total Commitment, Commitment Reductions, Etc. . . . . . . . 11
2.04. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.05. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 13
2.06. Other Payment Terms . . . . . . . . . . . . . . . . . . . . 13
2.07. Notes and Interest Account . . . . . . . . . . . . . . . . . 15
2.08. Loan Funding . . . . . . . . . . . . . . . . . . . . . . . . 16
2.09. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . 17
2.10. Change of Circumstances . . . . . . . . . . . . . . . . . . 18
2.11. Taxes on Payments . . . . . . . . . . . . . . . . . . . . . 21
2.12. Replacement of Banks . . . . . . . . . . . . . . . . . . . . 22
2.13. Funding Loss Indemnification . . . . . . . . . . . . . . . . 23
2.14. Guaranties and Pledges . . . . . . . . . . . . . . . . . . . 24
SECTION III. CONDITIONS PRECEDENT
3.01. Initial Conditions Precedent . . . . . . . . . . . . . . . . 25
3.02. Conditions Precedent to Term Loan Borrowing . . . . . . . . 25
3.03. Conditions Precedent to Each Credit Event . . . . . . . . . 25
3.04. Covenant to Deliver . . . . . . . . . . . . . . . . . . . . 25
SECTION IV. REPRESENTATIONS AND WARRANTIES
4.01. Borrower's Representations and Warranties . . . . . . . . . 26
4.02. Reaffirmation . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION V. COVENANTS
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 31
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 36
SECTION VI. DEFAULT
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 43
6.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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SECTION VII. AGENT AND RELATIONS AMONG BANKS
7.01. Appointment, Powers and Immunities . . . . . . . . . . . . . 46
7.02. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . 47
7.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . 47
7.05. Non-Reliance . . . . . . . . . . . . . . . . . . . . . . . . 48
7.06. Resignation or Removal of Agent . . . . . . . . . . . . . . 48
7.07. Authorization . . . . . . . . . . . . . . . . . . . . . . . 49
7.08. Agent in Its Individual Capacity . . . . . . . . . . . . . . 49
SECTION VIII. MISCELLANEOUS
8.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.03. Indemnification . . . . . . . . . . . . . . . . . . . . . . 51
8.04. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . 51
8.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . 52
8.06. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.07. No Third Party Rights . . . . . . . . . . . . . . . . . . . 56
8.08. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . 56
8.09. Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 56
8.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 56
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SCHEDULES
I Banks (Preamble)
1.01 Definitions
2.01(c) Pricing Grid
3.01 Initial Conditions Precedent
3.02 Term Loan Conditions Precedent
4.01(g) Litigation
4.01(j) Outstanding Options
4.01(q) Subsidiaries
5.02(b) Liens Existing on the Closing Date
EXHIBITS
A Notice of Revolving Loan Borrowing (2.01(b))
B Notice of Revolving Loan Conversion (2.01(d))
C Notice of Revolving Loan Interest Period
Selection (2.01(e))
D Revolver Extension Request (2.01(h))
E Notice of Term Loan Borrowing (2.02(b))
F Notice of Term Loan Conversion (2.02(d))
G Notice of Term Loan Interest Period Selection (2.02(e))
H Revolving Loan Note (2.07(a))
I Term Loan Note (2.07(b))
J Guaranty (2.14(a))
K Borrower Pledge Agreement (2.14(a))
L Assignment Agreement (8.05(c))
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 16, 1994, is entered into by
and among:
(1) NELLCOR INCORPORATED, a Delaware corporation ("BORROWER");
(2) Each of the financial institutions from time to time listed in
SCHEDULE I hereto, as amended from time to time (such financial
institutions to be referred to herein collectively as the "BANKS"); and
(3) ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL BRANCH, as agent
for the Banks (in such capacity, "AGENT").
RECITALS
A. Borrower has requested the Banks to provide certain credit facilities
to Borrower.
B. The Banks are willing to provide such credit facilities upon the terms
and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION I. INTERPRETATION.
1.01. DEFINITIONS. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth in SCHEDULE 1.01, when used in this
Agreement or any other Credit Document, shall have the respective meaning given
to that term in SCHEDULE 1.01 or in the provision of this Agreement or other
Credit Document referenced in SCHEDULE 1.01.
1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, Borrower, the Banks and Agent agree to negotiate in good faith to
amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating Borrower's financial
<PAGE>
condition to substantially the same criteria as were effective prior to such
change in GAAP; PROVIDED, HOWEVER, that, until Borrower, the Banks and Agent so
amend this Agreement, all such covenants shall be calculated in accordance with
GAAP as in effect immediately prior to such change.
1.03. HEADINGS. Headings in this Agreement and each of the other
Credit Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.04. PLURAL TERMS. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and VICE VERSA.
1.05. TIME. All references in this Agreement and each of the other
Credit Documents to a time of day shall mean San Francisco, California time,
unless otherwise indicated.
1.06. GOVERNING LAW. This Agreement and each of the other Credit
Documents shall be governed by and construed in accordance with the laws of the
State of California without reference to conflicts of law rules.
1.07. CONSTRUCTION. This Agreement is the result of negotiations
among, and has been reviewed by, Borrower, each Bank, Agent and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower, any Bank or Agent.
1.08. ENTIRE AGREEMENT. This Agreement, the fee letter dated
September 8, 1994 between Borrower and Agent (the "AGENT'S FEE LETTER") and each
of the other Credit Documents dated on or after the date hereof, taken together,
constitute and contain the entire agreement of Borrower, the Banks and Agent and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof (including the commitment letter dated
September 8, 1994 between Borrower and Agent as amended by a letter dated
November 4, 1994).
1.09. CALCULATION OF INTEREST AND FEES. All calculations of interest
and fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any Loan bears interest based upon
the Base Rate, such interest shall be calculated on the basis of a year of 365
or 366 days, as appropriate, for actual days elapsed.
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1.10. OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and
schedules herein and hereto unless otherwise indicated. References in this
Agreement and each of the other Credit Documents to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents, instruments or agreements issued or
executed in replacement thereof, and (c) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time. The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement or any other Credit Document shall refer to this Agreement or such
other Credit Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Credit Document, as the case may be.
The words "include" and "including" and words of similar import when used in
this Agreement or any other Credit Document shall not be construed to be
limiting or exclusive.
SECTION II. CREDIT FACILITIES.
2.01. REVOLVING LOAN FACILITY.
(a) REVOLVING LOAN AVAILABILITY. Subject to the terms and conditions
of this Agreement (including the amount limitations set forth in PARAGRAPH
2.03), each Bank severally agrees to advance to Borrower from time to time
during the period beginning on the Closing Date and ending on the Revolving
Loan Maturity Date such revolving loans as Borrower may request under this
PARAGRAPH 2.01 (individually, a "REVOLVING LOAN"); PROVIDED, HOWEVER, that
(i) the aggregate principal amount of all Revolving Loans made by such Bank
at any time outstanding shall not exceed such Bank's Commitment at such
time and (ii) the aggregate principal amount of all Revolving Loans made by
all Banks at any time outstanding shall not exceed the Total Commitment.
All Revolving Loans shall be made on a pro rata basis by the Banks in
accordance with their respective Proportionate Shares, with each Revolving
Loan Borrowing to be comprised of a Revolving Loan by each Bank equal to
such Bank's Proportionate Share of such Revolving Loan Borrowing. Except
as otherwise provided herein, Borrower may borrow, repay and reborrow
Revolving Loans until the Revolving Loan Maturity Date.
(b) NOTICE OF REVOLVING LOAN BORROWING. Borrower shall request each
Revolving Loan Borrowing by delivering to Agent an irrevocable written
notice in the form of EXHIBIT A, appropriately completed (a "NOTICE OF
REVOLVING LOAN BORROWING"), which specifies, among other things:
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(i) The principal amount of the requested Revolving Loan
Borrowing, which shall be in the amount of $1,000,000 or an integral
multiple of $500,000 in excess thereof for Revolving Base Rate Loans
and which shall be in the amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof for Revolving LIBOR Loans;
(ii) Whether the requested Revolving Loan Borrowing is to consist
of (A) Revolving Loans which bear interest as provided in CLAUSE (I)
OF SUBPARAGRAPH 2.01(c) (individually, a "REVOLVING BASE RATE LOAN")
or (b) Revolving Loans which bear interest as provided in CLAUSE (II)
OF SUBPARAGRAPH 2.01(c) (individually, a "REVOLVING LIBOR LOAN");
(iii) If the requested Revolving Loan Borrowing is to consist of
Revolving LIBOR Loans, the initial Interest Periods selected by
Borrower for such Revolving Loans in accordance with SUBPARAGRAPH
2.01(e); and
(iv) The date of the requested Revolving Loan Borrowing, which
shall be a Business Day.
Borrower shall give each Notice of Revolving Loan Borrowing to Agent (i) at
least three (3) Business Days before the date of the requested Revolving
Loan Borrowing in the case of a Revolving Loan Borrowing consisting of
Revolving LIBOR Loans and (ii) on the date of the requested Revolving Loan
Borrowing in the case of a Revolving Loan Borrowing consisting of Revolving
Base Rate Loans. Each Notice of Revolving Loan Borrowing shall be
delivered by first-class mail or facsimile to Agent at the office or
facsimile number and during the hours specified in PARAGRAPH 8.01;
PROVIDED, HOWEVER, that Borrower shall promptly deliver to Agent the
original of any Notice of Revolving Loan Borrowing initially delivered by
facsimile. Borrower may request that one or more Revolving Loan Borrowings
be made on the same day. Agent shall promptly notify each Bank of the
contents of each Notice of Revolving Loan Borrowing and of the amount and
Type of each Revolving Loan to be made by such Bank as part of the
requested Revolving Loan Borrowing.
(c) REVOLVING LOAN INTEREST RATES. Borrower shall pay interest on
the unpaid principal amount of each Revolving Loan from the date of such
Revolving Loan until the maturity thereof, at one of the following rates
per annum:
(i) During such periods as such Revolving Loan is a Revolving
Base Rate Loan, at a rate per annum equal to the Base Rate, such rate
to change from time to time as the Base Rate shall change; and
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(ii) During such periods as such Revolving Loan is a Revolving
LIBOR Loan, at a rate per annum equal, at all times during each
Interest Period for such Revolving LIBOR Loan, to the LIBO Rate for
such Interest Period PLUS the Applicable Margin therefor, such rate to
change from time to time during such Interest Period as the Applicable
Margin shall change;
PROVIDED, HOWEVER, that each of the rates set forth in CLAUSES (I) and (II)
of this SUBPARAGRAPH 2.01(c) shall be increased by two percent (2.00%) per
annum on the date any payment Default or any Event of Default occurs and
shall continue at such increased rate unless and until such payment Default
or Event of Default is waived in accordance with this Agreement. The
Applicable Margin for Revolving LIBOR Loans shall be determined as provided
in SCHEDULE 2.01(c) (the "PRICING GRID") and may change for each calendar
quarter. All Revolving Loans in each Revolving Loan Borrowing shall, at
any given time prior to maturity, bear interest at one, and only one, of
the above rates.
(d) CONVERSION OF REVOLVING LOANS. Borrower may convert any
Revolving Loan Borrowing from one Type of Revolving Loan Borrowing to the
other Type. Borrower shall request such a conversion by an irrevocable
written notice to Agent in the form of EXHIBIT B, appropriately completed
(a "NOTICE OF REVOLVING LOAN CONVERSION"), which specifies, among other
things:
(i) The Revolving Loan Borrowing which is to be converted;
(ii) The Type(s) of Loans into which such Revolving Loans are to
be converted;
(iii) If such Revolving Loans are to be converted into Revolving
LIBOR Loans, the initial Interest Period selected by Borrower for such
Revolving Loans in accordance with SUBPARAGRAPH 2.01(e); and
(iv) The date of the requested conversion, which shall be a
Business Day; PROVIDED, HOWEVER, that any conversion of a Revolving
LIBOR Loan into a Revolving Base Rate Loan shall be made on, and only
on, the last day of an Interest Period for such Revolving LIBOR Loan.
Borrower shall give each Notice of Revolving Loan Conversion to Agent (i)
at least three (3) Business Days before the date of the requested
conversion in the case of a conversion into Revolving LIBOR Loans and (ii)
on the Business Day of the requested conversion in the case of a conversion
into Revolving Base Rate Loans. Each Notice of Revolving Loan Conversion
shall be delivered by first-class mail or
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facsimile to Agent at the office or to the facsimile number and during the
hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER, that Borrower shall
promptly deliver to Agent the original of any Notice of Revolving Loan
Conversion initially delivered by facsimile. Agent shall promptly notify
each Bank of the contents of each Notice of Revolving Loan Conversion.
(e) REVOLVING LIBOR LOAN INTEREST PERIODS.
(i) The initial and each subsequent Interest Period selected by
Borrower for a Revolving LIBOR Loan shall be one (1), two (2), three
(3) or six (6) months; PROVIDED, HOWEVER, that (A) any Interest Period
which would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day unless such next
Business Day falls in another calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period which begins on the last Business 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 Business Day of a calendar month; and
(C) no such Interest Period shall end after the Revolving Loan
Maturity Date.
(ii) Borrower shall notify Agent by an irrevocable written notice
in the form of EXHIBIT C, appropriately completed (a "NOTICE OF
REVOLVING LOAN INTEREST PERIOD SELECTION"), at least three (3)
Business Days prior to the last day of each Interest Period for
Revolving LIBOR Loans of the Interest Period selected by Borrower for
the next succeeding Interest Period for such Revolving LIBOR Loans.
Each Notice of Revolving Loan Interest Period Selection shall be given
by first-class mail or facsimile to the office or the facsimile number
and during the hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER,
that Borrower shall promptly deliver to Agent the original of any
Notice of Revolving Loan Interest Period Selection initially delivered
by facsimile. If Borrower fails to notify Agent of the next Interest
Period for Revolving LIBOR Loans in accordance with this SUBPARAGRAPH
2.01(e), such Revolving LIBOR Loans shall automatically convert to
Revolving Base Rate Loans on the last day of the current Interest
Period therefor.
(f) SCHEDULED REVOLVING LOAN PAYMENTS. Borrower shall repay the
unpaid principal amount of all Revolving Loans on the Revolving Loan
Maturity Date. Borrower shall pay accrued interest on the unpaid principal
amount of the Revolving Loans (i) in the case of Revolving Base Rate Loans,
on the last Business Day in each calendar quarter,
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(ii) in the case of Revolving LIBOR Loans, on the last day of each Interest
Period therefor (and, if any such Interest Period is longer than three (3)
months, every three (3) months after the first day of such Interest
Period); and (iii) in the case of all Revolving Loans, upon prepayment (to
the extent thereof) and at maturity.
(g) PURPOSE. Borrower shall use the proceeds of the Revolving Loans
for Borrower's general corporate purposes, including the financing of
Permitted Acquisitions.
(h) REVOLVING LOAN MATURITY DATE EXTENSIONS. On or before the last
Business Day which is seventy-five (75) days prior to each anniversary of
the Closing Date, Borrower may request the Banks to extend the Revolving
Loan Maturity Date then in effect for an additional one-year period.
Borrower shall request each such extension by appropriately completing,
executing and delivering to Agent a written request in the form of
EXHIBIT D (a "REVOLVER EXTENSION REQUEST"). Borrower understands that this
SUBPARAGRAPH 2.01(h) is included in this Agreement for Borrower's
convenience in requesting extensions and acknowledges that neither Agent
nor any Bank has promised (either expressly or by implication), and neither
Agent nor any Bank has any obligation or commitment, to extend the
Revolving Loan Maturity Date at any time. Agent shall promptly deliver to
each Bank three (3) copies of each Revolver Extension Request received by
Agent. If a Bank, in its sole and absolute discretion, consents to any
Revolver Extension Request, such Bank shall evidence such consent by
executing and returning two (2) copies of the Revolver Extension Request to
Agent not later than the last Business Day which is fifty (50) days prior
to the next anniversary of the Closing Date. Any failure by any Bank so to
execute and return a Revolver Extension Request shall be deemed a denial
thereof. If Borrower shall deliver a Revolver Extension Request to Agent
pursuant to the first sentence of this SUBPARAGRAPH 2.01(h), then not later
than the last Business Day which is forty-five (45) days prior to the next
anniversary of the Closing Date, Agent shall notify Borrower in writing
whether (i) Agent has received a copy of the Revolver Extension Request
executed by each Bank, in which case the definition of "Revolving Loan
Maturity Date" set forth in SCHEDULE 1.01 shall be deemed amended as
provided in the Revolver Extension Request as of the date of such written
notice from Agent to Borrower, or (ii) Agent has not received a copy of the
Revolver Extension Request executed by each Bank, in which case such
Revolver Extension Request shall be deemed denied. Agent shall deliver to
Borrower, with each written notice under CLAUSE (I) of the preceding
sentence which notifies Borrower that Agent has received a Revolver
Extension Request executed by each Bank, a copy of the Revolver Extension
Request so executed by each Bank.
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2.02. TERM LOAN FACILITY.
(a) TERM LOAN AVAILABILITY. Subject to the terms and conditions of
this Agreement (including the amount limitations set forth in PARAGRAPH
2.03), each Bank severally agrees to advance to Borrower on the Revolving
Loan Maturity Date a term loan under this PARAGRAPH 2.02 (individually, a
"TERM LOAN") in the principal amount of such Bank's Commitment; PROVIDED,
HOWEVER, that the aggregate principal amount of all Term Loans made by all
Banks shall not exceed the lesser of (i) the aggregate principal amount of
the Revolving Loans outstanding on the Revolving Loan Maturity Date, and
(ii) the Total Commitment on the Revolving Loan Maturity Date. The Term
Loans shall be made on a pro rata basis by the Banks in accordance with
their respective Proportionate Shares, with the Term Loan Borrowing to be
comprised of a Term Loan by each Bank equal to such Bank's Proportionate
Share of the Term Loan Borrowing. Each Bank shall advance its Term Loan in
a single advance. Borrower may not reborrow the principal amount of a Term
Loan after repayment or prepayment thereof.
(b) NOTICE OF TERM LOAN BORROWING. Borrower shall request the Term
Loan Borrowing by delivering to Agent an irrevocable written notice in the
form of EXHIBIT E, appropriately completed (a "NOTICE OF TERM LOAN
BORROWING"), which specifies, among other things:
(i) The principal amount of the Term Loan Borrowing, which shall
be in a minimum amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof;
(ii) (A) The principal portion of the Term Loan Borrowing which
is to bear interest as provided in CLAUSE (I) OF SUBPARAGRAPH 2.02(c)
(individually, a "TERM BASE RATE BORROWING PORTION") and (B) the
principal portion of the Term Loan Borrowing which is to bear interest
as provided in CLAUSE (II) OF SUBPARAGRAPH 2.02(c) (individually, a
"TERM LIBOR BORROWING PORTION"); and
(iii) If any Portion of the Term Loan Borrowing is initially to be
a Term LIBOR Borrowing Portion, the initial Interest Period selected
by Borrower for each such Portion in accordance with SUBPARAGRAPH
2.04(e).
Borrower shall give the Notice of Term Loan Borrowing to Agent at least
three (3) Business Days before the Revolving Loan Maturity Date. The
Notice of Term Loan Borrowing shall be delivered by first-class mail or
facsimile to Agent at the office or facsimile number and during the hours
specified in PARAGRAPH 8.01; PROVIDED, HOWEVER, that Borrower shall
promptly deliver to Agent the original of the
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Notice of Term Loan Borrowing if initially delivered by facsimile. Agent
shall promptly notify each Bank of the contents of the Notice of Term Loan
Borrowing. Each Portion of the Term Loan Borrowing shall be in a minimum
amount of $1,000,000 or an integral multiple of $500,000 in excess thereof
in the case of a Term Base Rate Borrowing Portion and $5,000,000 or an
integral multiple of $1,000,000 in excess thereof in the case of a Term
LIBOR Borrowing Portion.
(c) TERM LOAN INTEREST RATES. Borrower shall pay interest on the
unpaid principal amount of each Term Loan from the date of such Term Loan
until the maturity thereof, at the following rates per annum:
(i) During such periods as any Portion of such Term Loan is a
Term Base Rate Loan Portion, at a rate per annum on such Portion equal
to the Base Rate, such rate to change from time to time as the Base
Rate shall change; and
(ii) During such periods as any Portion of such Term Loan is a
Term LIBOR Loan Portion, at a rate per annum on such Portion equal, at
all times during each Interest Period for such Portion, to the LIBO
Rate for such Interest Period PLUS the Applicable Margin therefor,
such rate to change from time to time as the Applicable Margin shall
change.
PROVIDED, HOWEVER, that each of the rates set forth in CLAUSES (I) and (II)
of this SUBPARAGRAPH 2.02(c) shall be increased by two percent (2.00%) per
annum on the date a payment Default or any Event of Default occurs and
shall continue at such increased rate unless and until such payment Default
or Event of Default is waived in accordance with this Agreement. The
Applicable Margin for Term LIBOR Loan Portions shall be determined as
provided in the Pricing Grid and may change for each calendar quarter.
(d) CONVERSION OF TERM LOANS. Borrower may convert any Portion of
the Term Loan Borrowing from one Type of Portion to another Type. Borrower
shall request such a conversion by an irrevocable written notice to Agent
in the form of EXHIBIT F, appropriately completed (a "NOTICE OF TERM LOAN
CONVERSION"), which specifies, among other things:
(i) The Portion of the Term Loan Borrowing which is to be
converted;
(ii) The amount and Type of each Portion of the Term Loan
Borrowing into which it is to be converted;
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(iii) If any Portion of the Term Loan Borrowing is to be converted
into a Term LIBOR Borrowing Portion, the initial Interest Period
selected by Borrower for such Portion in accordance with
SUBPARAGRAPH 2.02(e); and
(iv) The date of the requested conversion, which shall be a
Business Day; PROVIDED, HOWEVER, that any conversion of a Term LIBOR
Borrowing Portion into a Term Base Rate Borrowing Portion shall be
made on, and only on, the last day of an Interest Period for such Term
LIBOR Borrowing Portion.
Borrower shall give each Notice of Term Loan Conversion to Agent at least
three (3) Business Days before the date of the requested conversion in the
case of any conversion into Term LIBOR Loan Portions and on the date of the
requested conversion in the case of any conversion into Term Base Rate Loan
Portions. Each Notice of Term Loan Conversion shall be delivered by
first-class mail or facsimile to Agent at the office or to the facsimile
number and during the hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER,
that Borrower shall promptly deliver to Agent the original of any Notice of
Term Loan Conversion initially delivered by facsimile. Agent shall
promptly notify each Bank of the contents of each Notice of Term Loan
Conversion.
(e) TERM LIBOR LOAN PORTION INTEREST PERIODS.
(i) The initial and each subsequent Interest Period selected by
Borrower for all Term LIBOR Loan Portions in a Term LIBOR Borrowing
Portion shall be one (1), two (2), three (3) or six (6) months;
PROVIDED, HOWEVER, that (A) any Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day unless such next Business Day falls in another
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day; (B) any Interest Period which
begins on the last Business 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 Business Day
of a calendar month; (C) no Interest Period shall end after a Term
Loan Installment Date unless, after giving effect to such Interest
Period, the aggregate principal amount of all Portions having Interest
Periods ending on or prior to such Term Loan Installment Date and all
Term Base Rate Portions equals or exceeds the principal payment due on
such Term Loan Installment Date; and (D) no Interest Period shall end
after the Term Loan Maturity Date.
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(ii) Borrower shall notify Agent by an irrevocable written notice
in the form of EXHIBIT G, appropriately completed (a "NOTICE OF TERM
LOAN INTEREST PERIOD SELECTION"), at least three (3) Business Days
prior to the last day of each Interest Period for the Term LIBOR Loan
Portions in a Term LIBOR Borrowing Portion of the Interest Period
selected by Borrower for the next succeeding Interest Period for such
Portions. Each Notice of Term Loan Interest Period Selection shall be
given by first-class mail or facsimile to the office or the facsimile
number and during the hours specified in PARAGRAPH 8.01; PROVIDED,
HOWEVER, that Borrower shall promptly deliver to Agent the original of
any Notice of Term Loan Interest Period Selection initially delivered
by facsimile. If Borrower fails to notify Agent of the next Interest
Period for the Term LIBOR Loan Portions in a Term LIBOR Borrowing
Portion in accordance with this SUBPARAGRAPH 2.04(e), such Portions
shall automatically convert to Term Base Rate Loan Portions on the
last day of the current Interest Period therefor.
(f) SCHEDULED TERM LOAN PAYMENTS. Borrower shall repay the principal
amount of the Term Loans in sixteen (16) equal amortizing installments
payable on the last Business Day in each calendar quarter, commencing with
the last Business Day of the first calendar quarter immediately following
the Revolving Loan Maturity Date and ending on the Term Loan Maturity Date
(each such date to be referred to herein as a "TERM LOAN INSTALLMENT DATE")
PROVIDED, HOWEVER, that the principal payment due on the Term Loan Maturity
Date shall be in the amount necessary to pay all remaining unpaid principal
on all Term Loans. Borrower shall pay accrued interest on the unpaid
principal amount of the Term Loans (A) in the case of Term Base Rate Loan
Portions, on the last Business Day in each calendar quarter, (B) in the
case of Term LIBOR Loan Portions, on the last day of each Interest Period
therefor (and, if any such Interest Period is longer than three (3) months,
every three (3) months after the first day of such Interest Period); and
(C) in the case of all Term Loans, upon prepayment (to the extent thereof)
and at maturity.
(g) PURPOSE. Borrower shall use the proceeds of the Term Loans
solely to repay the outstanding Revolving Loans on the Revolving Loan
Maturity Date.
2.03. TOTAL COMMITMENT, COMMITMENT REDUCTIONS, ETC.
(a) TOTAL COMMITMENT. Neither the aggregate principal amount of all
Revolving Loans outstanding at any time nor the aggregate amount of the
Term Loan Borrowing shall exceed Fifty Million Dollars ($50,000,000) or, if
reduced pursuant to SUBPARAGRAPH 2.03(b) or otherwise, the lesser amount to
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which so reduced (such amount, as so reduced from time to time, to be
referred to herein as the "TOTAL COMMITMENT").
(b) OPTIONAL REDUCTION OR CANCELLATION OF COMMITMENTS. Prior to the
Revolving Loan Maturity Date, Borrower may, upon ten (10) Business Days
written notice to Agent permanently reduce the Total Commitment by the
amount of Five Million Dollars ($5,000,000) or an integral multiple thereof
or cancel the Total Commitment; PROVIDED, HOWEVER, that:
(i) Borrower may not reduce the Total Commitment if, after
giving effect to such reduction, the aggregate principal amount of all
Revolving Loans outstanding would exceed the Total Commitment as so
reduced; and
(ii) Borrower may not cancel the Total Commitment if, after
giving effect to such cancellation, any Revolving Loan would remain
outstanding.
(c) EFFECT OF COMMITMENT REDUCTIONS. From the effective date of any
reduction of the Total Commitment, the Commitment Fees payable pursuant to
SUBPARAGRAPH 2.09(b) shall be computed on the basis of the Total Commitment
as so reduced. Once reduced or cancelled, the Total Commitment may not be
increased or reinstated without the prior written consent of all Banks.
Any reduction of the Total Commitment pursuant to this PARAGRAPH 2.03 shall
be applied ratably to reduce each Bank's Revolving Loan Commitment in
accordance with CLAUSE (I) OF SUBPARAGRAPH 2.09(a).
2.04. FEES.
(a) AGENT'S FEES. Borrower shall pay to Agent, for its own account,
the fees in the amounts and at the times set forth in the Agent's Fee
Letter.
(b) COMMITMENT FEES. Borrower shall pay to Agent, for the benefit of
the Banks as provided in CLAUSE (IV) OF SUBPARAGRAPH 2.09(a), commitment
fees (the "COMMITMENT FEES") equal to one-quarter percent (0.25%) per annum
on the daily average Unused Commitment for the period beginning on the date
this Agreement is executed by Borrower, the Banks and Agent and ending on
the Revolving Loan Maturity Date (or if the Total Commitment is cancelled
on a date prior to the Revolving Loan Maturity Date, on such prior date).
Borrower shall pay the Commitment Fees quarterly in arrears on the last
Business Day in each calendar quarter (commencing December 31, 1994) and on
the Revolving Loan Maturity Date (or if the Total Commitment is cancelled
on a date prior to the Revolving Loan Maturity Date, on such prior date).
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2.05. PREPAYMENTS.
(a) TERMS OF ALL PREPAYMENTS. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under SUBPARAGRAPH
2.05(b), a mandatory prepayment required by SUBPARAGRAPH 2.05(c) or a
mandatory prepayment required by any other provision of this Agreement or
the other Credit Documents, including, without limitation, a prepayment
upon acceleration), Borrower shall pay to the Bank which made such Loan
(i) all accrued interest to the date of such prepayment on the amount
prepaid, and (ii) if such prepayment is the prepayment of a Revolving LIBOR
Loan or a Term LIBOR Loan Portion on a day other than the last day of an
Interest Period for such Loan or Portion, all amounts payable to such Bank
pursuant to PARAGRAPH 2.13.
(b) OPTIONAL PREPAYMENTS. At its option, Borrower may, (i) upon
three (3) Business Days notice to Agent in the case of prepayment of any
Revolving LIBOR Loan or any Term LIBOR Loan Portion, prepay any Borrowing
in part, in an aggregate principal amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof, or in whole, and (ii) upon one
(1) Business Days notice to Agent in the case of prepayments of any
Revolving Base Rate Loan or any Term Base Rate Loan Portion, prepay any
Borrowing in part, in an aggregate principal amount of $1,000,000 or an
integral multiple of $500,000 in excess thereof.
(c) MANDATORY PREPAYMENTS. If, at any time, the aggregate principal
amount of all Revolving Loans exceeds the Total Commitment at such time,
Borrower shall immediately prepay Revolving Loans in an aggregate principal
amount equal to such excess.
(d) APPLICATION OF LOAN PREPAYMENTS. All prepayments made by
Borrower pursuant to SUBPARAGRAPH 2.05(b) which are applied to the Term
Loans shall reduce the aggregate principal amount payable by Borrower on
the then remaining Term Loan Installment Dates in inverse order commencing
with the Term Loan Maturity Date. Without modifying the order of
application of prepayments set forth above, (i) all prepayments of the
Revolving Loans shall, to the extent possible, be first applied to prepay
Revolving Base Rate Loans and then, if any funds remain, to prepay
Revolving LIBOR Loans, and (ii) all prepayments of the Term Loan shall, to
the extent possible, be first applied to prepay Term Base Rate Loan
Portions and then, if any funds remain, to prepay Term LIBOR Loan Portions.
2.06. OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Except as otherwise expressly provided herein,
Borrower shall make all payments due to each Bank hereunder by payments to
Agent, for the account of
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such Bank and such Bank's Applicable Lending Office, at Agent's office,
located at the address specified in SUBPARAGRAPH 8.01(a), in lawful money
of the United States and in same day or immediately available funds not
later than 10:00 a.m. on the date due. Agent shall promptly disburse to
each Bank each such payment received by Agent for such Bank.
(b) DATE. Whenever any payment due hereunder shall fall due on a day
other than 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 interest or fees, as the case may be.
(c) LATE PAYMENTS. If any amounts required to be paid by Borrower
under this Agreement or the other Credit Documents (including, without
limitation, principal or interest payable on any Loan, any fees or other
amounts) remain unpaid after such amounts are due, Borrower shall pay
interest on the aggregate, outstanding balance of such amounts from the
date due until those amounts are paid in full at a per annum rate equal to
the Base Rate PLUS two percent (2.00%), such rate to change from time to
time as the Base Rate shall change.
(d) APPLICATION OF PAYMENTS. All payments hereunder shall be applied
first to unpaid fees, costs and expenses then due and payable under this
Agreement or the other Credit Documents, second to accrued interest then
due and payable under this Agreement or the other Credit Documents, and
finally to reduce the principal amount of outstanding Loans.
(e) FAILURE TO PAY AGENT. Unless Agent shall have received notice
from Borrower at least one (1) Business Day prior to the date on which any
payment is due to the Banks hereunder that Borrower will not make such
payment in full, Agent may assume that Borrower has made such payment in
full to Agent on such date and Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to
the amount then due such Bank. If and to the extent Borrower shall not
have so made such payment in full to Agent, such Bank shall repay to Agent
forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to Agent, at (i) the
Federal Funds Rate for the first three (3) days and (ii) the per annum rate
applicable to Base Rate Loans thereafter. A certificate of Agent submitted
to any Bank with respect to any amounts owing by such Bank under this
SUBPARAGRAPH 2.06(e) shall be conclusive absent manifest error.
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2.07. NOTES AND INTEREST ACCOUNT.
(a) REVOLVING LOAN NOTES. The obligation of Borrower to repay the
Revolving Loans made by each Bank and to pay interest thereon at the rates
provided herein shall be evidenced by a promissory note in the form of
EXHIBIT H (individually, a "REVOLVING LOAN NOTE") which note shall be
(i) payable to the order of such Bank, (ii) in the amount of such Bank's
Commitment, (iii) dated the Closing Date and (iv) otherwise appropriately
completed. Borrower authorizes each Bank to record on the schedule annexed
to such Bank's Revolving Loan Note the date and amount of each Revolving
Loan made by such Bank and of each payment or prepayment of principal
thereon made by Borrower, and agrees that all such notations shall
constitute prima facie evidence of the matters noted; PROVIDED, HOWEVER,
that the failure by any Bank to make such notation shall not affect
Borrower's obligation hereunder or thereunder (including with respect to
any Revolving Loans made). Borrower further authorizes each Bank to attach
to and make a part of such Bank's Revolving Loan Note continuations of the
schedule attached thereto as necessary; PROVIDED, HOWEVER, that the failure
by any Bank to make such notation shall not affect Borrower's obligation
hereunder or thereunder (including with respect to any Revolving Loans
made). If, because any Bank designates separate Applicable Lending Offices
for Revolving Base Rate Loans or Revolving LIBOR Loans, such Bank requests
that separate promissory notes be executed to evidence separately such
Loans, then each such note shall be in the form of EXHIBIT H, MUTATIS
MUTANDIS to reflect such division, and shall be (w) payable to the order of
such Bank, (x) in the amount of such Bank's Commitment, (y) dated the
Closing Date and (z) otherwise appropriately completed. Such notes shall,
collectively, constitute a Revolving Loan Note.
(b) TERM LOAN NOTES. The obligation of Borrower to repay the Term
Loan made by each Bank and to pay interest thereon at the rates provided
herein shall be evidenced by a promissory note in the form of EXHIBIT I
(individually, a "TERM LOAN NOTE") which note shall be (i) payable to the
order of such Bank, (ii) in the amount of such Bank's Term Loan,
(iii) dated the Revolving Loan Maturity Date and (iv) otherwise
appropriately completed. If, because any Bank designates separate
Applicable Lending Offices for Term Base Rate Loan Portions or Term LIBOR
Loan Portions, such Bank requests that separate promissory notes be
executed to evidence separately such Portions, then each such note shall be
in the form of EXHIBIT I, MUTATIS MUTANDIS to reflect such division, and
shall be (w) payable to the order of such Bank, (x) in the amount of such
Bank's Term Loan, (y) dated the Revolving Loan Maturity Date and
(z) otherwise appropriately completed. Such notes shall, collectively,
constitute a Term Loan Note.
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(c) INTEREST ACCOUNT. Borrower authorizes Agent to record in an
account or accounts maintained by Agent on its books (the "INTEREST
ACCOUNT") (i) the interest rates applicable to all Loans and Portions and
the effective dates of all changes thereto, (ii) the Interest Period for
each Revolving LIBOR Loan and Term LIBOR Portion, (iii) the date and amount
of each principal and interest payment on each Loan and Portion and
(iv) such other information as Agent may determine is necessary for the
computation of interest payable by Borrower hereunder.
2.08. LOAN FUNDING.
(a) BANK FUNDING AND DISBURSEMENT TO BORROWER. Each Bank shall,
before 10:00 a.m. on the date of each Revolving Loan Borrowing and the Term
Loan Borrowing, make available to Agent at its office specified in
PARAGRAPH 8.01, in same day or immediately available funds, such Bank's
Proportionate Share of such Borrowing. After Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in SECTION III,
Agent will promptly disburse such funds in same day or immediately
available funds to Borrower. Unless otherwise directed by Borrower, Agent
shall disburse the proceeds of each Revolving Loan Borrowing and the Term
Loan Borrowing to Borrower by disbursement to the account or accounts
specified in the applicable Notice of Borrowing. The proceeds of the Term
Loan Borrowing shall be applied to repay the Revolving Loans and shall be
disbursed directly to the Banks.
(b) BANK FAILURE TO FUND. Unless Agent shall have received notice
from a Bank prior to the date of any Revolving Loan Borrowing or the Term
Loan Borrowing that such Bank will not make available to Agent such Bank's
Proportionate Share of such Borrowing, Agent may assume that such Bank has
made such portion available to Agent on the date of such Borrowing in
accordance with SUBPARAGRAPH 2.08(a), and Agent may, in reliance upon such
assumption, make available to Borrower (or otherwise disburse) on such date
a corresponding amount. If any Bank does not make the amount of its
Proportionate Share of any Revolving Loan Borrowing or the Term Loan
Borrowing available to Agent on or prior to the date of such Borrowing,
such Bank shall pay to Agent, on demand, interest which shall accrue on
such amount until made available to Agent at rates equal to (i) the daily
Federal Funds Rate during the period from the date of such Borrowing
through the third Business Day thereafter and (ii) the Base Rate
thereafter. A certificate of Agent submitted to any Bank with respect to
any amounts owing under this SUBPARAGRAPH 2.08(b) shall be conclusive
absent manifest error. If any Bank's Proportionate Share of any Revolving
Loan Borrowing or the Term Loan Borrowing is not in fact made available to
Agent by such Bank within three (3) Business Days after the
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date of such Borrowing, Borrower shall pay to Agent, on demand, an amount
equal to such Proportionate Share together with interest thereon, for each
day from the date such amount was made available to Borrower until the date
such amount is repaid to Agent, at the interest rate applicable at the time
to the Loans comprising such Borrowing.
(c) BANKS' OBLIGATIONS SEVERAL. The failure of any Bank to make the
Loan to be made by it as part of any Revolving Loan Borrowing or the Term
Loan Borrowing shall not relieve any other Bank of its obligation hereunder
to make its Loan on the date of such Borrowing, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made
by such other Bank on the date of any Borrowing.
2.09. PRO RATA TREATMENT.
(a) BORROWINGS, COMMITMENT REDUCTIONS, ETC. Except as otherwise
provided herein:
(i) Each Revolving Loan Borrowing, each reduction of the Total
Commitment and the Term Loan Borrowing shall be made or shared among
the Banks pro rata according to their respective Proportionate Shares;
(ii) Each payment of principal of Loans in any Borrowing shall be
made or shared among the Banks which made or funded the Loans in such
Borrowing pro rata according to the respective unpaid principal
amounts of such Loans so made or funded by such Banks;
(iii) Each payment of interest on Loans in any Borrowing shall be
made or shared among the Banks which made or funded the Loans in such
Borrowing pro rata according to (A) the respective unpaid principal
amounts of such Loans so made or funded by such Banks and (B) the
dates on which such Banks so made or funded such Loans;
(iv) Each payment of Commitment Fees shall be shared among the
Banks pro rata according to (A) their respective Proportionate Shares
and (B) in the case of each Bank which becomes a Bank hereunder after
the date hereof, the date upon which such Bank so became a Bank;
(v) Each payment of interest (other than interest on Loans)
shall be shared among the Banks and Agent owed the amount upon which
such interest accrues pro rata according to (A) the respective amounts
so owed Agent and such Banks and (B) the dates on which such amounts
become owing to Agent and such Banks; and
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(vi) All other payments under this Agreement and the other Credit
Documents shall be for the benefit of the Person or Persons specified.
(b) SHARING OF PAYMENTS, ETC. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of Loans owed to it in excess of its
ratable share of payments on account of such Loans obtained by all Banks
entitled to such payments, such Bank shall forthwith purchase from the
other Banks such participations in the Loans as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with each of them;
PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase shall be
rescinded and each other Bank shall repay to the purchasing Bank the
purchase price to the extent of such recovery together with an amount equal
to such other Bank's ratable share (according to the proportion of (i) the
amount of such other Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
Borrower agrees that any Bank so purchasing a participation from another
Bank pursuant to this SUBPARAGRAPH 2.09(b) may, to the fullest extent
permitted by law, exercise its right of setoff, but only as provided in
PARAGRAPH 8.06, with respect to such participation as fully as if such Bank
were the direct creditor of Borrower in the amount of such participation.
2.10. CHANGE OF CIRCUMSTANCES.
(a) INABILITY TO DETERMINE RATES. If, on or before the first day of
any Interest Period for any Revolving LIBOR Loan or Term LIBOR Borrowing
Portion, Agent shall determine that (i) the LIBO Rate for such Interest
Period cannot be adequately and reasonably determined due to the
unavailability of funds in or other circumstances affecting the London
interbank market or (ii) the rates of interest for such Revolving LIBOR
Loans or Term LIBOR Borrowing Portions, as the case may be, do not
adequately and fairly reflect the cost to the Banks of making or
maintaining such Revolving LIBOR Loans or Term LIBOR Borrowing Portions,
Agent shall immediately give notice of such condition to Borrower and the
Banks. After the giving of any such notice and until Agent shall otherwise
notify Borrower that the circumstances giving rise to such condition no
longer exist, Borrower's right to request the making of or conversion to,
and the Banks' obligations to make or convert to Revolving LIBOR Loans or
Term LIBOR Borrowing Portions shall be suspended. Any Revolving LIBOR
Loans or Term LIBOR Borrowing Portions outstanding at the commencement of
any such suspension shall be converted at the end of the then
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current Interest Period for such Revolving LIBOR Loans or Term LIBOR
Borrowing Portions into Revolving Base Rate Loans or Term Base Rate
Borrowing Portions, as the case may be, unless such suspension has then
ended.
(b) ILLEGALITY. If, after the date of this Agreement the adoption of
any Governmental Rule, any change in any Governmental Rule or the
application or requirements thereof (whether such change occurs in
accordance with the terms of such Governmental Rule as enacted, as a result
of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority, or
compliance by any Bank with any request or directive (whether or not having
the force of law) of any Governmental Authority (a "CHANGE OF LAW") shall
make it unlawful or impossible for any Bank to make or maintain any
Revolving LIBOR Loan or Term LIBOR Borrowing Portion, such Bank shall
immediately notify Agent and Borrower of such Change of Law. Upon receipt
of such notice, (i) Borrower's right to request the making of or conversion
to, and such Bank's obligation to make or convert to, Revolving LIBOR Loans
or Term LIBOR Borrowing Portions shall be terminated, and (ii) Borrower
shall, at the request of such Bank, either (A) pursuant to SUBPARAGRAPH
2.01(d) or SUBPARAGRAPH 2.02(d) convert any such then outstanding Revolving
LIBOR Loans or Term LIBOR Borrowing Portions of such Bank into Revolving
Base Rate Loans or Term Base Rate Borrowing Portions, as the case may be,
at the end of the current Interest Period for such Revolving LIBOR Loans or
Term LIBOR Borrowing Portions, or (B) immediately repay or convert any such
Revolving LIBOR Loans or Term LIBOR Borrowing Portions if such Bank shall
notify Borrower that such Bank may not lawfully continue to fund and
maintain such Revolving LIBOR Loans or Term LIBOR Borrowing Portions. Any
conversion or prepayment of Revolving LIBOR Loans or Term LIBOR Borrowing
Portions made pursuant to the preceding sentence prior to the last day of
an Interest Period for such Revolving LIBOR Loans or Term LIBOR Borrowing
Portions shall be deemed a prepayment thereof for purposes of PARAGRAPH
2.13. After any Bank notifies Agent and Borrower of such a Change of Law
and until such Bank notifies Agent and Bank that it is no longer unlawful
or impossible for such Bank to make or maintain any Revolving LIBOR Loan or
Term LIBOR Borrowing Portion, all Revolving Loans and all Portions of the
Term Loan of such Bank shall be Revolving Base Rate Loans and Term Base
Rate Borrowing Portions, respectively. Notwithstanding the foregoing,
before giving any notice to Agent and Borrower pursuant to this
SUBPARAGRAPH 2.10(b), the affected Bank shall designate a different
Applicable Lending Office with respect to its Revolving LIBOR Loans or Term
LIBOR Borrowing Portions if such designation will avoid the need for giving
such notice, or making such demand, and will not, in the sole judgment of
such Bank, be illegal or otherwise disadvantageous to such Bank.
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(c) INCREASED COSTS. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject any Bank to any tax, duty or other charge with
respect to any Revolving LIBOR Loan or Term LIBOR Borrowing Portion,
or shall change the basis of taxation of payments by Borrower to any
Bank on such a Revolving LIBOR Loan or Term LIBOR Borrowing Portion or
in respect to such a Revolving LIBOR Loan or Term LIBOR Borrowing
Portion under this Agreement (except for changes in the rate of
taxation on the overall net income of any Bank imposed by any
jurisdiction, other than a jurisdiction that asserts a change in the
rate of taxation solely as a result of such Bank having executed,
delivered, performed or enforced this Agreement and the other Loan
Documents or having received any payments hereunder or thereunder); or
(ii) Without duplication of any Reserve Requirement already
reflected in the LIBO Rate pursuant to the definition thereof, shall
impose, modify or hold applicable any reserve, special deposit or
similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or any
other acquisition of funds by any Bank for any Revolving LIBOR Loan or
Term LIBOR Borrowing Portion; or
(iii) Shall impose on any Bank any other condition related to any
Revolving LIBOR Loan or Term LIBOR Borrowing Portion or such Bank's
Commitments;
And the effect of any of the foregoing is to increase the cost to such Bank
of making, renewing, or maintaining any such Revolving LIBOR Loan or Term
LIBOR Borrowing Portion or such Bank's Commitments or to reduce any amount
receivable by such Bank hereunder; then Borrower shall from time to time,
upon demand by such Bank, pay to such Bank additional amounts sufficient to
reimburse such Bank for such increased costs or to compensate such Bank for
such reduced amounts. A certificate in reasonable detail as to the amount
of such increased costs or reduced amounts, submitted by such Bank to
Borrower shall, in the absence of manifest error, be conclusive and binding
on Borrower for all purposes. The obligations of Borrower under this
SUBPARAGRAPH 2.10(c) shall survive the payment and performance of the
Obligations and the termination of this Agreement. Notwithstanding the
foregoing, any Bank making a demand under this SUBPARAGRAPH 2.10(c) for
additional amounts to reimburse such Bank for such increased costs or to
compensate such Bank for such reduced amounts shall make such demand within
ninety (90) days from the date such Bank becomes subject to such increased
costs and/or reduced amounts; PROVIDED, HOWEVER,
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that with respect to any Change of Law which is retroactive in application,
Borrower shall not be liable to any Bank for any increased costs or reduced
amounts incurred more than one (1) year prior to the date such Change in
Law occurred or was enacted.
(d) CAPITAL REQUIREMENTS. If, after the date of this Agreement, any
Bank determines that (i) any Change of Law affects the amount of capital
required or expected to be maintained by such Bank or any Person
controlling such Bank (a "CAPITAL ADEQUACY REQUIREMENT") and (ii) the
amount of capital maintained by such Bank or such Person which is
attributable to or based upon the Loans, the Commitments or this Agreement
must be increased as a result of such Capital Adequacy Requirement (taking
into account such Bank's or such Person's policies with respect to capital
adequacy), Borrower shall pay to such Bank or such Person, upon demand of
such Bank, such amounts as such Bank or such Person shall determine are
necessary to compensate such Bank or such Person for the increased costs to
such Bank or such Person of such increased capital. A certificate of any
Bank setting forth in reasonable detail the computation of any such
increased costs, delivered by such Bank to Borrower shall, in the absence
of manifest error, be conclusive and binding on Borrower for all purposes.
The obligations of Borrower under this SUBPARAGRAPH 2.10(d) shall survive
the payment and performance of the Obligations and the termination of this
Agreement.
2.11. TAXES ON PAYMENTS.
(a) PAYMENTS FREE OF TAXES. All payments made by Borrower under this
Agreement and the other Credit Documents shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority (except net income taxes and franchise
taxes in lieu of net income taxes imposed on Agent or any Bank by its
jurisdiction of incorporation) (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions and withholdings being hereinafter called
"TAXES"). If any Taxes are required to be withheld from any amounts payable to
Agent or any Bank hereunder or under the other Credit Documents, the amounts so
payable to Agent or such Bank shall be increased to the extent necessary to
yield to Agent or such Bank (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the other Credit Documents. Whenever any Taxes are payable by
Borrower, as promptly as possible thereafter, Borrower shall send to Agent for
its own account or for the account of such Bank, as the case may be, a certified
copy of an original official receipt received by Borrower showing payment
thereof. If Borrower fails to pay any
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Taxes when due to the appropriate taxing authority or fails to remit to Agent
the required receipts or other required documentary evidence, Borrower shall
indemnify Agent and the Banks for any incremental taxes, interest or penalties
that may become payable by Agent or any Bank as a result of any such failure.
The obligations of Borrower under this SUBPARAGRAPH 2.11(a) shall survive the
payment and performance of the Obligations and the termination of this
Agreement.
(b) WITHHOLDING EXEMPTION CERTIFICATES. At least three (3) Business Days
prior to the Closing Date, each Bank which is not incorporated under the laws of
the United States of America or a state thereof will deliver to Borrower and
Agent two duly completed copies of either United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may be, certifying
in each case that such Bank is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes.
Each Bank which delivers to Borrower and Agent a Form 1001 or 4224 pursuant to
the immediately preceding sentence further undertakes to deliver to Borrower and
Agent two further copies of the said letter and Form 1001 or 4224, or successor
applicable forms, or other manner of certification or procedure, as the case may
be, on or before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent letter and form previously delivered by it to Borrower and Agent, and
such extensions or renewals thereof as may reasonably be requested by Borrower
or Agent, certifying in the case of a Form 1001 or 4224 that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such cases
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent a Bank
from duly completing and delivering any such letter or form with respect to it
and such Bank advises Borrower and Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax.
(c) TAX RETURNS. Nothing contained in this PARAGRAPH 2.11 shall require
Agent or any Bank to make available any of its tax returns (or any other
information relating to its taxes which it deems to be confidential).
2.12. REPLACEMENT OF BANKS. If any Bank (a "NOTICE BANK") either
directly or through Agent makes demand under SUBPARAGRAPH 2.10(c), SUBPARAGRAPH
2.10(d) or PARAGRAPH 2.11 or gives notice under SUBPARAGRAPH 2.10(b) that it can
no longer make or maintain Revolving LIBOR Loans or Term LIBOR Borrowing
Portions, then in each such event Borrower shall have the right, with the prior
written consent of Agent (which consent shall not be unreasonably withheld), if
no Default or Event of Default exists, and subject to the terms and conditions
of SUBPARAGRAPH
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8.05(c), to designate an Assignee Bank (a "REPLACEMENT BANK") to purchase the
Notice Bank's share of Revolving Loans, Term Loans and Commitments and to assume
the Notice Bank's Commitment and all other rights, duties and obligations of
such Notice Bank to Borrower under this Agreement and the other Loan Documents.
Subject to the foregoing, the Notice Bank agrees to assign without recourse to
the Replacement Bank its share of outstanding Revolving Loans, Term Loans and
Commitments and to delegate to the Replacement Bank its rights, duties and
obligations to Borrower under this Agreement and the other Loan Documents and
its future obligations to Agent under this Agreement. Upon such sale and
delegation by the Notice Bank and the purchase and assumption by the Replacement
Bank in compliance with the provisions of SUBPARAGRAPH 8.05(c), the Notice Bank
shall cease to be a "Bank" hereunder and the Replacement Bank shall become a
"Bank" under this Agreement; PROVIDED, HOWEVER, that, notwithstanding such sale
and delegation the Notice Bank shall at all times remain entitled to the
benefits and remain subject to the obligations arising out of this Agreement and
the other Loan Documents in respect of any and all matters occurring or alleged
to have occurred prior to the effective date of such sale and delegation.
2.13. FUNDING LOSS INDEMNIFICATION. If Borrower shall (a) repay or
prepay any Revolving LIBOR Loan or Term LIBOR Borrowing Portion on any day other
than the last day of an Interest Period therefor (whether an optional
prepayment, a mandatory prepayment, a payment upon acceleration or otherwise),
(b) fail to borrow any Revolving LIBOR Loan or Term LIBOR Borrowing Portion for
which a Notice of Borrowing has been delivered to Agent (whether as a result of
the failure to satisfy any applicable conditions or otherwise) or (c) fail to
convert any Revolving Loans into Revolving LIBOR Loans or any Portion of any
Term Loan Borrowing into a Term LIBOR Borrowing Portion in accordance with a
Notice of Conversion delivered to Agent (whether as a result of the failure to
satisfy any applicable conditions or otherwise), Borrower shall, upon demand by
any Bank, reimburse such Bank and hold such Bank harmless for all costs and
losses incurred by such Bank as a result of such repayment, prepayment or
failure which reimbursement shall be equal to the amount (if any) by which (i)
the additional interest which would have been payable had such amount not been
repaid or prepaid or if such amount had been borrowed or converted exceeds (ii)
the interest which would have been recoverable by such Bank on the amount of
such payment, prepayment, borrowing or conversion by placing the amount of such
payment, prepayment, borrowing or conversion in a comparable market for a period
approximately equal to the period starting on the date on which it was paid, or
prepaid, or not borrowed or converted and ending on the last day of the
applicable Interest Period therefor. Each Bank demanding payment under this
PARAGRAPH 2.13 shall deliver to Borrower, with a copy to Agent, a certificate
setting forth the amount of costs and losses for which demand is made. Such a
certificate so delivered to Borrower shall, in the absence of
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manifest error, be conclusive and binding on Borrower as to the amount of such
loss for all purposes. The obligations of Borrower under this PARAGRAPH 2.13
shall survive the payment and performance of the Obligations and the termination
of this Agreement.
2.14. GUARANTIES AND PLEDGES.
(a) GUARANTIES AND PLEDGES IN SUPPORT OF THE OBLIGATIONS. The
Obligations shall be secured by the following:
(i) Guaranties, each in the form of EXHIBIT J, duly executed by
each domestic Subsidiary of Borrower (each, a "GUARANTY" and,
collectively, the "GUARANTIES");
(ii) Pledge Agreement, in the form of EXHIBIT K, duly executed by
Borrower, by which Borrower pledges the stock of each Material Foreign
Subsidiary owned by Borrower to Agent for the benefit of Agent and the
Banks (the "BORROWER PLEDGE AGREEMENT"); PROVIDED, HOWEVER, that
Borrower shall not be required to pledge the stock of any Material
Foreign Subsidiary in excess of the amounts specified in the Borrower
Pledge Agreement;
(iii) Pledge Agreements, substantially in the form of the Borrower
Pledge Agreement and otherwise in form and substance satisfactory to
Agent and the Banks (including, without limitation, the addition of
guarantor waiver provisions), duly executed by each Subsidiary of
Borrower which owns stock in a Material Foreign Subsidiary (the
"SUBSIDIARY PLEDGE AGREEMENTS"); and
(iv) Such other documents, instruments and agreements as Agent
may reasonably request to evidence the Guaranties and to grant to
Agent, for the benefit of Agent and the Banks, the security interests
and Liens described in the Pledge Agreements.
(b) FURTHER ASSURANCES. Borrower shall deliver (or shall cause each
Subsidiary to deliver) to Agent the Guaranties, the Pledge Agreements and
such other instruments, agreements, certificates, opinions and documents as
Agent may request to evidence and maintain the Guaranties and Pledge
Agreements and the rights of Agent and the Banks therein and to grant,
perfect, maintain, protect and evidence the security interest in favor of
Agent for the benefit of the Banks in all present or future Collateral
under the Pledge Agreements prior to the Liens or other interests of any
Person. Borrower shall fully cooperate with Agent and the Banks and
perform all additional acts
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reasonably requested by Agent or either Bank to effect the purposes of this
PARAGRAPH 2.14.
SECTION III. CONDITIONS PRECEDENT.
3.01. INITIAL CONDITIONS PRECEDENT. The obligations of the Banks to
make the Loans comprising the initial Borrowing are subject to receipt by Agent,
on or prior to the Closing Date, of each item listed in SCHEDULE 3.01, each in
form and substance satisfactory to the Banks, and with sufficient copies for,
Agent and each Bank.
3.02. CONDITIONS PRECEDENT TO TERM LOAN BORROWING. The obligations of
the Banks to make the Term Loans comprising the Term Loan Borrowing are subject
to receipt by Agent, on or prior to the Revolving Loan Maturity Date, of each
item listed in SCHEDULE 3.02, each in form and substance satisfactory to the
Banks, and with sufficient copies for, Agent and each Bank.
3.03. CONDITIONS PRECEDENT TO EACH CREDIT EVENT. The occurrence of
each Credit Event (including the initial Borrowing) is subject to the further
conditions that:
(a) Borrower shall have delivered to Agent the Notice of Borrowing,
Notice of Conversion, Notice of Interest Period Selection or Revolver
Extension Request, as the case may be, for such Credit Event in accordance
with this Agreement; and
(b) On the date such Credit Event is to occur and after giving effect
to such Credit Event, the following shall be true and correct:
(i) The representations and warranties set forth in PARAGRAPH
4.01 are true and correct in all material respects as if made on such
date;
(ii) No Default or Event of Default has occurred and is
continuing or will result from such Credit Event; and
(iii) Each of the Credit Documents remains in full force and
effect.
The submission by Borrower to Agent of each Notice of Borrowing, each Notice of
Conversion, each Notice of Interest Period Selection and each Revolver Extension
Request shall be deemed to be a representation and warranty by Borrower as of
the date thereon as to the above.
3.04. COVENANT TO DELIVER. Borrower agrees (not as a condition but as
a covenant) to deliver to Agent each item required to be delivered to Agent as a
condition to the
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occurrence of any Credit Event if such Credit Event occurs. Borrower expressly
agrees that the occurrence of any such Credit Event prior to the receipt by
Agent of any such item shall not constitute a waiver by Agent or any Bank of
Borrower's obligation to deliver such item.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to induce
Agent and the Banks to enter into this Agreement, Borrower hereby represents and
warranties to Agent and the Banks as follows:
(a) DUE INCORPORATION, QUALIFICATION, ETC. Each of Borrower and
Borrower's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation;
(ii) has the power and authority to own, lease and operate its properties
and carry on its business as now conducted; and (iii) is duly qualified,
licensed to do business and in good standing as a foreign corporation in
each jurisdiction where the failure to be so qualified or licensed could
reasonably be expected to have a Material Adverse Effect.
(b) AUTHORITY. The execution, delivery and performance by Borrower
and the Subsidiaries of each Credit Document to be executed by such Person
and the consummation of the transactions contemplated thereby (i) are
within the power of such Person and (ii) have been duly authorized by all
necessary actions on the part of such Person.
(c) ENFORCEABILITY. Each Credit Document executed, or to be
executed, by Borrower and the Subsidiaries has been, or will be, duly
executed and delivered by such Person and constitutes, or will constitute,
a legal, valid and binding obligation of such Person, enforceable against
such Person in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting
the enforcement of creditors' rights generally and general principles of
equity.
(d) NON-CONTRAVENTION. The execution and delivery by Borrower and
the Subsidiaries of the Credit Documents executed by such Person and the
performance and consummation of the transactions contemplated thereby do
not (i) violate any Requirement of Law applicable to such Person;
(ii) violate any provision of, or result in the breach or the acceleration
of, or entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of such
Person; or (iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of such Person.
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(e) APPROVALS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or
other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Credit Documents executed by Borrower and the Subsidiaries and the
performance and consummation of the transactions contemplated thereby.
(f) NO VIOLATION OR DEFAULT. Neither Borrower nor any of Borrower's
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; or (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if not
in effect, would result in such a violation or default), where, in each
case, such violation or default could reasonably be expected to have a
Material Adverse Effect. Without limiting the generality of the foregoing,
neither Borrower nor any of Borrower's Subsidiaries (A) has violated any
Environmental Laws, (B) has any liability under any Environmental Laws or
(C) has received notice or other communication of an investigation or is
under investigation by any Governmental Authority having authority to
enforce Environmental Laws, where such violation, liability or
investigation could reasonably be expected to have a Material Adverse
Effect. No Event of Default or Default has occurred and is continuing.
(g) LITIGATION. Except as set forth (with estimates, to the extent
available, of the dollar amounts involved) in SCHEDULE 4.01(G), no actions
(including, without limitation, derivative actions), suits, proceedings or
investigations are pending or, to the knowledge of Borrower, threatened
against Borrower or any of Borrower's Subsidiaries at law or in equity in
any court or before any other Governmental Authority which (i) could (alone
or in the aggregate) reasonably be expected to have a Material Adverse
Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance of the Credit Documents or the
transactions contemplated thereby.
(h) TITLE; POSSESSION UNDER LEASES. Borrower and Borrower's
Subsidiaries own and have good and marketable title, or valid leasehold
interests in, all their respective properties and assets as reflected in
the most recent Financial Statements delivered to Agent (except those
assets and properties disposed of in the ordinary course of business or
otherwise in compliance with this Agreement since the date of such
Financial Statements) and all respective assets and properties acquired by
Borrower and Borrower's Subsidiaries since such date (except those disposed
of in the ordinary course of business or otherwise in compliance with this
Agreement). Such assets and properties are subject to no Lien, except for
Permitted
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Liens. Each of Borrower and Borrower's Subsidiaries has complied
with all material obligations under all material leases to which it is a
party and all such leases are in full force and effect. Each of Borrower
and Borrower's Subsidiaries enjoys peaceful and undisturbed possession
under such leases.
(i) FINANCIAL STATEMENTS. The Financial Statements of Borrower which
have been delivered to Agent, (i) are in accordance with the books and
records of Borrower, which have been maintained in accordance with good
business practice; (ii) have been prepared in conformity with GAAP; and
(iii) fairly present the financial condition and results of operations of
Borrower as of the date thereof and for the period covered thereby.
Neither Borrower nor any of Borrower's Subsidiaries has any contingent
obligations, liability for taxes or other outstanding obligations which are
material in the aggregate, except as disclosed in the audited Financial
Statements dated July 3, 1994, furnished by Borrower to Agent prior to the
date hereof, or in the Financial Statements delivered to Agent pursuant to
SUBPARAGRAPH 5.01(a)(i) OR (ii).
(j) EQUITY SECURITIES. All outstanding Equity Securities of Borrower
are duly authorized, validly issued, fully paid and non-assessable. Except
as set forth on SCHEDULE 4.01(J), as of the Closing Date there are no
outstanding subscriptions, options, conversion rights, warrants or other
agreements or commitments of any nature whatsoever (firm or conditional)
obligating Borrower to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional Equity Securities of Borrower, or
obligating Borrower to grant, extend or enter into any such agreement or
commitment. All Equity Securities of Borrower have been offered and issued
in compliance with all federal and state securities laws and all other
Requirements of Law.
(k) NO AGREEMENTS TO SELL ASSETS; ETC. Neither Borrower nor any of
Borrower's Subsidiaries has any legal obligation, absolute or contingent,
to any Person to sell the assets of Borrower or any of Borrower's
Subsidiaries (other than sales in the ordinary course of business), or to
effect any merger, consolidation or other reorganization of Borrower or any
of Borrower's Subsidiaries or to enter into any agreement with respect
thereto, other than in connection with any Permitted Acquisition and solely
as permitted by the definition thereof.
(l) EMPLOYEE BENEFIT PLANS.
(i) Based on the latest valuation of each "employee pension
benefit plan" (within the meaning of section 3(2) of ERISA) that
either Borrower or any ERISA Affiliate maintains or contributes to, or
has any
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obligation under (which occurred within twelve months of the
date of this representation), the aggregate benefit liabilities of
such plan within the meaning of SECTION 4001 of ERISA did not exceed
the aggregate value of the assets of such plan. Neither Borrower nor
any ERISA Affiliate has any liability with respect to any
post-retirement benefit under any Employee Benefit Plan which is a
welfare plan (as defined in section 3(1) of ERISA), other than
liability for health plan continuation coverage described in Part 6 of
Title I(B) of ERISA, which liability for health plan contribution
coverage will not have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the
Code, and no condition exists or event has occurred with respect to
any such plan which would result in the incurrence by either Borrower
or any ERISA Affiliate of any material liability, fine or penalty.
Each Employee Benefit Plan, related trust agreement, arrangement and
commitment of Borrower or any ERISA Affiliate is legally valid and
binding and in full force and effect. No Employee Benefit Plan is
being audited or investigated by any government agency or is subject
to any pending or threatened claim or suit. Neither Borrower nor any
ERISA Affiliate nor any fiduciary of any Employee Benefit Plan has
engaged in a prohibited transaction under section 406 of ERISA or
section 4975 of the Code.
(iii) Neither Borrower nor any ERISA Affiliate contributes to any
Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has
incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA.
Neither Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within
the meaning of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
(m) OTHER REGULATIONS. Neither Borrower nor any Subsidiary is
subject to regulation under the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code or to any other federal or
state statute or regulation limiting its ability to incur Indebtedness.
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(n) PATENT AND OTHER RIGHTS. Except as set forth (with estimates, to
the extent available, of the dollar amounts involved) in SCHEDULE 4.01(g),
Borrower and Borrower's Subsidiaries own, and have the full right to
license without the consent of any other Person, all patents, licenses,
trademarks, trade names, trade secrets, service marks, copyrights and all
rights with respect thereto, which are required to conduct their businesses
as now conducted.
(o) GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. Borrower and
Borrower's Subsidiaries have filed or caused to be filed all tax returns
which are required to be filed by them. Borrower and Borrower's
Subsidiaries have paid, or made provision for the payment of, all taxes and
other Governmental Charges which have or may have become due pursuant to
said returns or otherwise and all other Indebtedness, except such tax and
other Governmental Charges or Indebtedness, if any, which are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which could not reasonably be
expected to have a Material Adverse Effect if unpaid.
(p) MARGIN STOCK. Borrower owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of Borrower,
and no proceeds of any Loan will be used to purchase or carry, directly or
indirectly, any Margin Stock or to extend credit, directly or indirectly,
to any Person for the purpose of purchasing or carrying any Margin Stock.
(q) SUBSIDIARIES, ETC. Set forth in SCHEDULE 4.01(q) (as
supplemented by written notice to Agent from time to time in accordance
with SUBPARAGRAPH 5.01(c)(vi)) is a complete list of all of Borrower's
Subsidiaries, the jurisdiction of incorporation of each, the classes of
Equity Securities of each and the number of shares and percentages of
shares of each such class owned directly or indirectly by Borrower, and for
each foreign Subsidiary whether or not such Subsidiary is a Material
Foreign Subsidiary. Except as set forth on SCHEDULE 4.01(q) (as
supplemented by written notice to Agent from time to time in accordance
with SUBPARAGRAPH 5.01(a)(vi)), Borrower has no Subsidiaries, is not a
partner in any partnership or a joint venturer in any joint venture.
(r) SOLVENCY, ETC. Borrower is Solvent and, after the execution and
delivery of the Credit Documents and the consummation of the transactions
contemplated thereby, will be Solvent.
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(s) CATASTROPHIC EVENTS. Neither Borrower nor any of Borrower's
Subsidiaries and none of their properties is or has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty that could
reasonably be expected to have a Material Adverse Effect. There are no
disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower or any
of Borrower's Subsidiaries is a party, and there are no strikes, lockouts,
work stoppages or slowdowns, or, to the best knowledge of Borrower,
jurisdictional disputes or organizing activity occurring or threatened
which could reasonably be expected to have a Material Adverse Effect.
(t) PLEDGE AGREEMENTS, ETC. Agent has a first priority perfected
Lien on the Collateral described in the Pledge Agreements, subject to no
other Liens.
(u) NO MATERIAL ADVERSE EFFECT. No event has occurred and no
condition exists which could reasonably be expected to have a Material
Adverse Effect.
(v) ACCURACY OF INFORMATION FURNISHED. None of the Credit Documents
and none of the other certificates, statements or information furnished to
Agent or any Bank by or on behalf of Borrower or any of Borrower's
Subsidiaries in connection with the Credit Documents or the transactions
contemplated thereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that any forecasted financial
information furnished to Agent or any Bank by or on behalf of Borrower or
any of Borrower's Subsidiaries has been prepared by representatives of
Borrower and is based on their subjective estimates and assumptions about
circumstances and events that have not taken place and, accordingly, there
can be no assurance that such forecasted results will be achieved.
4.02. REAFFIRMATION. Borrower shall be deemed to have reaffirmed, for
the benefit of the Banks and Agent, each representation and warranty contained
in PARAGRAPH 4.01 on and as of the date of each Credit Event.
SECTION V. COVENANTS.
5.01. AFFIRMATIVE COVENANTS. Until the termination of this Agreement
and the satisfaction in full by Borrower of all Obligations, Borrower will
comply, and will cause compliance,
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with the following affirmative covenants, unless Required Banks shall otherwise
consent in writing:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish to
Agent for each Bank the following, each in such form and such detail as
Agent shall reasonably request:
(i) Within sixty (60) days after the last day of each fiscal
quarter of Borrower, a copy of the Financial Statements of Borrower
and Borrower's Subsidiaries for such quarter and for the fiscal year
to date (prepared on a consolidated and consolidating basis),
certified by the chief financial officer of Borrower to present fairly
the financial condition, results of operations and other information
reflected therein and to have been prepared in accordance with GAAP
(subject to normal year-end audit adjustments);
(ii) Within one hundred (100) days after the close of each fiscal
year of Borrower, (A) copies of the audited Financial Statements of
Borrower and Borrower's Subsidiaries for such year (prepared on a
consolidated and consolidating basis), audited by independent
certified public accountants of recognized national standing
acceptable to Agent, (B) copies of the unqualified opinions (or
qualified opinions reasonably acceptable to Agent) and management
letters delivered by such accountants in connection with all such
Financial Statements and (C) certificates of all such accountants to
Agent stating that in making the examination necessary for their
opinion they have reviewed this Agreement and have obtained no
knowledge of any Default or Event of Default which has occurred and is
continuing, or if, in the opinion of such accountants, a Default or
Event of Default has occurred and is continuing, a statement as to the
nature thereof;
(iii) Contemporaneously with the quarterly and year-end Financial
Statements required by the foregoing CLAUSES (I) AND (II), a
compliance certificate of the chief financial officer of Borrower
which (A) states that no Default or Event of Default has occurred and
is continuing, or, if any such Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and
what action Borrower proposes to take with respect thereto, and
(B) sets forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as the case
may be), the calculation of the financial ratios and tests provided in
SUBPARAGRAPH 5.02(k);
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(iv) As soon as possible and in no event later than five (5)
Business Days after any executive officer of Borrower knows of the
occurrence or existence of (A) any Reportable Event under any Employee
Benefit Plan or Multiemployer Plan; (B) any actual or threatened
litigation, suits, claims or disputes against Borrower or its
Subsidiaries involving potential monetary damages payable by Borrower
or any of its Subsidiaries of $10,000,000 or more (alone or in the
aggregate); (C) any other event or condition which could reasonably be
expected to have a Material Adverse Effect; or (D) any Default or
Event of Default; the statement of the president or chief financial
officer of Borrower setting forth details of such event, condition,
Default or Event of Default and the action which Borrower proposes to
take with respect thereto;
(v) As soon as possible and in no event later than five (5)
Business Days after they are sent, made available or filed, copies of
(A) all registration statements and reports filed by Borrower or any
of its Subsidiaries with any securities exchange or the Securities and
Exchange Commission (including all 10-Q, 10-K and 8-Q reports and S-1
registration statements); (B) all reports, proxy statements and
financial statements sent or made available by Borrower or any of its
Subsidiaries to its security holders; and (C) all press releases and
other statements concerning any material developments in the business
of Borrower or any of its Subsidiaries made available by Borrower or
any of its Subsidiaries to the public generally;
(vi) As soon as possible and in no event later than five (5)
Business Days after the acquisition or formation of a new Subsidiary
by Borrower or any Subsidiary, a statement of the chief financial
officer of Borrower setting forth the details as to such acquisition
or formation including, without limitation, the information described
in SUBPARAGRAPH 4.01(q);
(vii) As soon as possible and in no event later than (A) five (5)
Business Days before the completion of a Permitted Acquisition for
which the proceeds of any Loans are used hereunder or (B) fifteen (15)
Business Days after the completion of any other Permitted Acquisition,
a statement of the chief financial officer of Borrower setting forth
the details of such Permitted Acquisition; and
(viii) Such other certificates, opinions, statements, documents and
information relating to the operations or condition (financial or
otherwise) of Borrower or any of its Subsidiaries, and compliance by
Borrower and its Subsidiary with the terms of this
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Agreement and the other Credit Documents as Agent may from time to
time reasonably request.
(b) BOOKS AND RECORDS. Borrower and its Subsidiaries shall at all
times keep proper books of record and account in which full, true and
correct entries will be made of their transactions in accordance with GAAP.
(c) INSPECTIONS. Borrower and its Subsidiaries shall permit any
Person designated by Agent or any Bank, upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Borrower and its Subsidiaries, to examine the books and records
of Borrower and its Subsidiaries and make copies thereof and to discuss the
affairs, finances and accounts of Borrower and its Subsidiaries with, and
to be advised as to the same by, their officers, auditors and accountants,
all at such times and intervals as Agent or any Bank may reasonably
request. Prior to any Default or Event of Default, Borrower and its
Subsidiaries shall only be obligated to pay the costs and expenses of two
(2) inspections per year.
Notwithstanding the foregoing, neither Agent nor any Bank shall have access
to, nor may they request copies of, any information constituting trade
secrets relating to technology unless Agent or such Bank shall have
executed and delivered a confidentiality agreement relating to such trade
secrets reasonably satisfactory to Borrower.
(d) INSURANCE. Borrower and its Subsidiaries shall (i) maintain
insurance of the types and in the amounts customarily maintained from time
to time during the term of this Agreement by others engaged in
substantially the same business as such Person and operating in the same
geographic area as such Person, including, but not limited to, fire, public
liability, property damage and worker's compensation, such insurance (A) to
be maintained with companies and in amounts reasonably satisfactory to
Agent or (B) with respect to worker's compensation, to be maintained
pursuant to a self-insurance program by Borrower in form and substance
reasonably satisfactory to Agent, and (ii) deliver to Agent from time to
time, as Agent may request, schedules setting forth all insurance then in
effect.
(e) GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. Borrower and its
Subsidiaries shall promptly pay and discharge when due (i) all taxes and
other Governmental Charges prior to the date upon which penalties accrue
thereon, (ii) all Indebtedness which, if unpaid, could become a Lien upon
the property of Borrower or its Subsidiaries and (iii) all other
Indebtedness which, if unpaid, could reasonably be expected to have a
Material Adverse Effect; except with respect to the foregoing clauses (i),
(ii) and (iii) such taxes, Governmental Charges and
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Indebtedness as may in good faith be contested or disputed, or for which
arrangements for deferred payment have been made, provided that in each
such case appropriate reserves are maintained to the reasonable
satisfaction of Agent.
(f) USE OF PROCEEDS. Borrower shall use the proceeds of the Loans
only for the respective purposes set forth in SUBPARAGRAPHS 2.01(g) and
2.02(g). Borrower shall not use any part of the proceeds of any Loan,
directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock or for the purpose of purchasing or carrying or trading in any
securities under such circumstances as to involve Borrower, any Bank or
Agent in a violation of Regulations G, T, U or X issued by the Federal
Reserve Board.
(g) GENERAL BUSINESS OPERATIONS. Each of Borrower and its
Subsidiaries shall (i) preserve and maintain its corporate existence and
all of its rights, privileges and franchises reasonably necessary to the
conduct of its business PROVIDED, HOWEVER, that any foreign Subsidiary may
be permitted to dissolve or liquidate if both immediately before and after
giving effect to such dissolution or liquidation no Default or Event of
Default shall have occurred or be continuing and such dissolution or
liquidation could not reasonably be expected to have a Material Adverse
Effect, (ii) conduct its business activities in compliance with all
Requirements of Law and Contractual Obligations applicable to such Person,
the violation of which could reasonably be expected to have a Material
Adverse Effect, (iii) keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear
excepted, (iv) pay all Contractual Obligations as and when due (except to
the extent disputed in good faith by Borrower or the appropriate Subsidiary
and where non-payment could not reasonably be expected to have a Material
Adverse Effect), and (v) shall at all times maintain its chief executive
office and principal place of business in the United States of America and
shall not change the location of its chief executive office and principal
place of business (as of the Closing Date, 4280 Hacienda Drive, Pleasanton,
CA 94588) without 60 days' prior written notice to Agent.
(h) NEW DOMESTIC SUBSIDIARIES AND MATERIAL FOREIGN SUBSIDIARIES.
Borrower shall cause:
(i) each Subsidiary which, after the Closing Date, becomes a
domestic Subsidiary, to, promptly as possible, and in any event within
fifteen (15) days after becoming a domestic Subsidiary, (1) provide to
Agent a guaranty substantially in the form of the Guaranty, duly
executed by such Subsidiary; and (2) execute and deliver to Agent such
instruments,
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agreements, certificates, opinions and documents as Agent
may reasonably request to evidence such Guaranty; and
(ii) Borrower or any Subsidiary, which, after the Closing Date,
acquires a Material Foreign Subsidiary or owns capital stock in a
Subsidiary which becomes a Material Foreign Subsidiary, to, promptly
as possible, and in any event within fifteen (15) days after becoming
a Material Foreign Subsidiary, (1) provide to Agent a pledge
agreement, substantially in the form of the Pledge Agreements, duly
executed by Borrower or such Subsidiary which holds the capital stock
in such Material Foreign Subsidiary; and (2) execute and deliver to
Agent such instruments, agreements, certificates, opinions and
documents as Agent may reasonably request to evidence such Pledge
Agreement and the security interests and Liens granted thereunder.
5.02. NEGATIVE COVENANTS. Until the termination of this Agreement and
the satisfaction in full by Borrower of all Obligations, Borrower will comply,
and will cause compliance, with the following negative covenants, unless
Required Banks shall otherwise consent in writing:
(a) INDEBTEDNESS. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Indebtedness except for the
following ("PERMITTED INDEBTEDNESS"):
(i) The Obligations of Borrower and its Subsidiaries under the
Credit Documents;
(ii) Indebtedness to trade creditors incurred in the ordinary
course of business;
(iii) Indebtedness arising from the endorsement of instruments for
collection in the ordinary course of Borrower's or a Subsidiary's
business;
(iv) Indebtedness of any of Borrower's Subsidiaries to Borrower
with respect to any Permitted Investment by Borrower in such
Subsidiary pursuant to SUBPARAGRAPH 5.02(e) which Permitted Investment
is made as an intercompany loan from Borrower to such Subsidiary;
(v) Indebtedness of Borrower and its Subsidiaries under
interest rate protection, currency swap and foreign exchange
arrangements, provided that all such arrangements are entered into in
connection with bona fide hedging operations and not for speculation;
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(vi) Indebtedness of Borrower and its Subsidiaries with respect
to (A) standby letters of credit issued in connection with Borrower's
self-insurance program for worker's compensation as permitted under
SUBPARAGRAPH 5.01(d), and (B) standby letters of credit issued in
connection with foreign sales, in an aggregate stated amount for all
such letters of credit not to exceed Fifteen Million Dollars
($15,000,000) at any time;
(vii) Indebtedness of Borrower with respect to low-income housing
participations entered into for the purpose of obtaining certain tax
credits, which Indebtedness constitutes a permitted investment under
clause (ii) OF SUBPARAGRAPH 5.02(e);
(viii) Indebtedness not covered by the preceding classes (i)-(vii)
which Indebtedness constitutes a Permitted Investment under
SUBPARAGRAPH 5.02(e); and
(ix) Other Indebtedness in an aggregate amount not exceeding
$15,000,000 at any time.
(b) LIENS. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to any
of its assets or property of any character, whether now owned or hereafter
acquired, except for the following ("PERMITTED LIENS") :
(i) Liens in favor of Agent with respect to the Pledge
Agreements;
(ii) Liens for taxes or other Governmental Charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith, provided provision is made to the reasonable
satisfaction of Agent for the eventual payment thereof if subsequently
found payable;
(iii) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided provision
is made to the reasonable satisfaction of Agent for the eventual
payment thereof if subsequently found payable;
(iv) Deposits under workers' compensation, unemployment insurance
and social security laws or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations of surety or appeal bonds
or to secure indemnity, performance or other similar bonds in the
ordinary course of business;
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(v) Zoning restrictions, easements, rights-of-way and other
similar encumbrances incurred in the ordinary course of business,
which alone or in the aggregate are not substantial in amount and do
not materially detract from the value of the property subject thereto
or interfere with the ordinary conduct of the business of Borrower or
any of its Subsidiaries;
(vi) Liens on property existing at the time such property is
acquired by Borrower or any of its Subsidiaries provided that in each
case such Lien was not created in contemplation of such acquisition by
Borrower or such Subsidiary;
(vii) Liens existing on the Closing Date and set forth on SCHEDULE
5.02(b);
(viii) Judgment Liens, provided that such Liens are released,
stayed or vacated within thirty (30) days after issue or levy and, if
so stayed, such stay is not thereafter removed;
(ix) Liens on property or assets of any corporation which becomes
a Subsidiary after the date of this Agreement, provided that (A) such
Liens exist at the time such corporation becomes a Subsidiary, and
(B) such Liens were not created in contemplation of such creation or
acquisition of such Subsidiary;
(x) Liens securing Indebtedness with respect to purchase money
loans and Capital Leases incurred by Borrower or any of its
Subsidiaries to finance the acquisition by such Person of real
property, fixtures or equipment provided that in each case, (A) such
Indebtedness constitutes permitted Indebtedness under CLAUSE (IX) of
SUBPARAGRAPH 5.02(a), (B) such Lien and Indebtedness are incurred by
such Person, at the time of, or not later than twenty (20) days after
the acquisition by such Person of the property so financed, and
(C) such Lien (x) covers only those assets, the acquisition of which
was financed by Permitted Indebtedness, (y) such Indebtedness does not
exceed the purchase price of the property so financed, and (z) secures
only such Permitted Indebtedness;
(xi) Banker's Liens and similar Liens (including setoff rights)
in respect of bank deposits, provided that (A) such deposit account is
not a dedicated cash collateral account and is not subject to
restrictions against access in excess of those set forth by the
regulations promulgated by the Federal Reserve Board and (B) such
deposit account is not intended to provide collateral to the
depository institution; and
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(xii) Liens securing Indebtedness permitted under CLAUSE (VII) of
SUBPARAGRAPH 5.02(a), provided that such Lien (A) covers only those
assets, the acquisition of which was financed by such Permitted
Indebtedness, (B) does not exceed the purchase price of the property
so financed, and (C) secures only such Permitted Indebtedness.
(c) ASSET DISPOSITIONS. Neither Borrower nor any of its Subsidiaries
shall sell, lease, transfer or otherwise dispose of any of its assets or
property, whether now owned or hereafter acquired, except for the
following:
(i) Sales of inventory by Borrower and its Subsidiaries in the
ordinary course of business;
(ii) Sales of used, surplus, damaged, worn or obsolete equipment
by Borrower and its Subsidiaries for not less than fair market value;
(iii) Sales of equipment in connection with the replacement or
substitution (within ninety (90) days of such disposition) of
equipment being sold with newly acquired like-kind equipment having a
fair market value equalling or exceeding the fair market value of the
equipment being sold, for cash consideration for such sale at least
equal to the fair market value of such equipment;
(iv) Sales of assets or property acquired through a Permitted
Acquisition for cash consideration for such sale at least equal to the
fair market value of such assets or property being sold;
(v) Sales of accounts receivable for cash in the ordinary course
of business, provided such sales are on a non-recourse basis and at a
discount rate not exceeding fifteen percent (15%) of the face amount
of such accounts; provided, however, that the aggregate face amount of
accounts receivable which can be sold in any fiscal year of Borrower
and its Subsidiaries shall not exceed in the aggregate Five Million
Dollars ($5,000,000);
(vi) Charitable dispositions of equipment where the aggregate
fair market value of such equipment being donated does not exceed
$1,000,000 in any fiscal year of Borrower;
(vii) Sales of assets or property not covered by the preceding
CLAUSES (i)-(vi), provided that (A) such sales shall be for cash
consideration at least equal to the fair market value of the assets or
property being sold, (B) both immediately before and after giving
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effect to any such sale, no Default or Event of Default shall have
occurred or be continuing, and (C) the aggregate amount of all such
sales shall not exceed Five Million Dollars ($5,000,000) in any fiscal
year of Borrower.
(d) MERGERS, ACQUISITIONS, ETC. Neither Borrower nor any of its
Subsidiaries shall consolidate with or merge into any other Person or
permit any other Person to merge into it, or acquire all or substantially
all of the assets of any other Person, except that
(i) Any Subsidiary of Borrower may merge into any other
wholly-owned Subsidiary of Borrower provided that such wholly-owned
Subsidiary is the surviving corporation;
(ii) Any Subsidiary may merge into Borrower provided that
Borrower is the surviving corporation; and
(iii) Borrower and its Subsidiaries may make Permitted
Acquisitions.
(e) INVESTMENTS. Neither Borrower nor any of its Subsidiaries shall
make any Investment in Margin Stock nor shall Borrower or any of its
Subsidiaries make any other Investment except the following ("PERMITTED
INVESTMENTS"):
(i) Investments in Short-Term Cash Equivalents and Medium-Term
Marketable Securities (as such terms are defined in Borrower's
Investment Policy) in accordance with Borrower's Investment Policy;
(ii) Investments in Other Investment Vehicles and Strategic
Investments (as such terms are defined in Borrower's Investment
Policy) in accordance with Borrower's Investment Policy so long as,
both immediately before and after giving effect any such Investment,
(A) Funded Debt of Borrower is less than cash on hand of Borrower, and
(B) no Default or Event of Default shall have occurred or be
continuing;
(iii) Investments in domestic Subsidiaries of Borrower so long as,
both immediately before and after giving effect to such Investment, no
Default or Event of Default shall have occurred or be continuing;
PROVIDED, HOWEVER, that in the event any domestic Subsidiary of
Borrower is insolvent, Borrower may make Investments in such
Subsidiary only if immediately before and after giving effect to any
such Investment, Funded Debt of Borrower is less than cash on hand of
Borrower;
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(iv) Investments in foreign Subsidiaries and joint ventures of
Borrower so long as, both immediately before and after giving effect
to such Investment, no Default or Event of Default shall have occurred
or be continuing; PROVIDED, HOWEVER, that in the event the Funded Debt
of Borrower exceeds cash on hand of Borrower, calculated both
immediately before and after giving effect to any Investment, such
Investments shall be limited to an aggregate of $5,000,000 per fiscal
year of Borrower; PROVIDED, FURTHER, that in the event any Subsidiary
or joint venture is insolvent, Borrower may make Investments in such
Subsidiary or joint venture only if immediately before and after
effect to any such Investment, Funded Debt of Borrower is less than
cash on hand of Borrower;
(v) Investments which are Permitted Acquisitions; and
(vi) Investments consisting of loans to employees of Borrower to
enable such employees to purchase Equity Securities of Borrower in any
aggregate amount not to exceed Five Million Dollars ($5,000,000) at
any time.
(f) DIVIDENDS, REDEMPTIONS, ETC. Borrower shall not pay any
dividends or make any distributions on its Equity Securities; purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Securities; return any capital to any holder of its Equity Securities as
such; make any distribution of assets, Equity Securities, obligations or
securities to any holder of its Equity Securities as such; or set apart any
sum for any such purpose, if both immediately before and after giving
effect to any of the foregoing, (i) a Default or Event of Default shall
have occurred or be continuing, and (ii) such payments, disbursements or
other such actions could reasonably be expected to have a Material Adverse
Effect.
(g) CHANGE IN BUSINESS. Neither Borrower nor any of its Subsidiaries
shall engage, either directly or indirectly through Affiliates, in any
business which is not a Similar Business Line.
(h) ERISA. Neither Borrower nor any ERISA Affiliate shall (i) adopt
or institute any Employee Benefit Plan that is an employee pension benefit
plan within the meaning of Section 3(2) of ERISA, (ii) take any action
which will result in the partial or complete withdrawal, within the
meanings of sections 4203 and 4205 of ERISA, from a Multiemployer Plan,
(iii) engage or permit any Person to engage in any transaction prohibited
by section 406 of ERISA or section 4975 of the Code involving any Employee
Benefit Plan or Multiemployer Plan which would subject either Borrower or
any ERISA Affiliate to any tax, penalty or other
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liability including a liability to indemnify, (iv) incur or allow to exist
any accumulated funding deficiency (within the meaning of section 412 of
the Code or section 302 of ERISA), (v) fail to make full payment when due
of all amounts due as contributions to any Employee Benefit Plan or
Multiemployer Plan, (vi) fail to comply with the requirements of section
4980B of the Code or Part 6 of Title I(B) of ERISA, or (vii) adopt any
amendment to any Employee Benefit Plan which would require the posting of
security pursuant to section 401(a)(29) of the Code, where singly or
cumulatively, the above would have a Material Adverse Effect.
(i) TRANSACTIONS WITH AFFILIATES. Neither Borrower nor any of its
Subsidiaries shall enter into any Contractual Obligation with any Affiliate
or engage in any other transaction with any Affiliate except upon terms at
least as favorable to Borrower or such Subsidiary as an arms-length
transaction with unaffiliated Persons.
(j) ACCOUNTING CHANGES. Neither Borrower nor any of its Subsidiaries
shall change (i) its fiscal year (as of the Closing Date, ending on the
first Sunday in July in any calendar year) without first providing to Agent
and the Banks a written letter of Borrower's certified public accountants
certifying as to the good financial condition of Borrower and its
Subsidiaries and subject to amendment of the covenants contained herein as
may be necessary to conform those covenants as criteria for evaluating
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in fiscal year or (ii) its accounting
practices except as required by GAAP.
(k) FINANCIAL COVENANTS.
(i) Borrower shall not permit its Interest Coverage Ratio to be
less than 3.00 to 1.00 at any time.
(ii) Borrower shall not permit its Current Ratio to be less than
2.50 to 1.00 at any time.
(iii) Borrower shall not permit its Leverage Ratio to be greater
than 0.75 to 1.00 at any time.
(iv) Borrower shall not permit its Net Worth at any time to be
less than the lesser of (A) the sum of (1) $185,000,000 PLUS (2) 50%
of cumulative Net Income (if positive) for each fiscal quarter from
and including the fiscal quarter ending October 2, 1994, plus (3) 100%
of the Net Equity Proceeds from the sale or issuance of Equity
Securities by Borrower after the date hereof as reduced by the cash
consideration paid
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by Borrower after the date hereof to purchase in the secondary market
outstanding Equity Securities of Borrower in order to mitigate the
dilutive effects of Equity Securities issued to employees and
directors under Borrower's benefit plans for employees and directors
after the date hereof; or (B) the sum of (1) $170,000,000, PLUS (2)
100% of cumulative Net Income (if positive) for each fiscal quarter
from and including the fiscal quarter ending October 2, 1994, PLUS (3)
100% of the Net Equity Proceeds from the sale or issuance of Equity
Securities by Borrower after the date hereof as reduced by the cash
consideration paid by Borrower after the date hereof to purchase in
the secondary market outstanding Equity Securities of Borrower in
order to mitigate the dilutive effects of Equity Securities issued to
employees and directors under Borrower's benefit plans for employees
and directors after the date hereof.
(l) BORROWER'S INVESTMENT POLICY. Borrower shall not amend, modify,
waive or terminate any provision of Borrower's Investment Policy if such
amendment, modification, waiver or termination would materially change the
credit quality of Borrower's Investments or the term thereof or otherwise
could reasonably be expected to have a Material Adverse Effect.
(m) CERTAIN INDEBTEDNESS AND MODIFICATIONS. Neither Borrower nor any
of its Subsidiaries shall directly or indirectly (i) pay, prepay, redeem,
purchase, defease or otherwise satisfy in any manner prior to the scheduled
payment thereof any Indebtedness or (ii) amend, modify or otherwise change
the terms of any document, instrument or agreement evidencing any
Indebtedness so as to increase its obligations thereunder or accelerate the
scheduled payment thereof, if, immediately prior to and after giving effect
thereto, any Default or Event of Default shall have occurred or be
continuing or such action could reasonably be expected to have a Material
Adverse Effect.
SECTION VI. DEFAULT.
6.01. EVENTS OF DEFAULT. The occurrence or existence of any one or
more of the following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) Borrower shall fail to pay when due (i) any principal or interest
payment or (ii) any other payment required under the terms of this
Agreement or any of the other Credit Documents and with respect to this
clause (ii) such failure to pay shall continue for five (5) days; or
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(b) Borrower shall fail to observe or perform any covenant,
obligation, condition or agreement set forth in SUBPARAGRAPH 5.01(d),
SUBPARAGRAPH 5.01(g)(i) or PARAGRAPH 5.02; or
(c) Borrower or any Subsidiary shall fail to observe or perform any
other covenant, obligation, condition or agreement contained in this
Agreement or the other Credit Documents and such failure shall continue for
thirty (30) days after the earlier of the date that Borrower has notice of
or should have known of such failure; or
(d) Any representation, warranty, certificate, or other statement
(financial or otherwise) made or furnished by or on behalf of Borrower or
any Subsidiary to Agent or any Bank in or in connection with this Agreement
or any of the other Credit Documents, or as an inducement to Agent or any
Bank to enter into this Agreement, shall be false, incorrect, incomplete or
misleading in any material respect when made or furnished; or
(e) Borrower or any Subsidiary (i) shall fail to make a payment or
payments in an aggregate amount of $10,000,000 or more when due under the
terms of any bond, debenture, note or other evidence of Indebtedness to be
paid by such Person (excluding this Agreement and the other Credit
Documents but including any other evidence of Indebtedness of Borrower or
any Subsidiary to any Bank) and such failure shall continue beyond any
period of grace provided with respect thereto, or (ii) shall fail to make
any other payment or payments when due under or otherwise default in the
observance or performance of any other agreement, term or condition
contained in any such bond, debenture, note or other evidence of
Indebtedness, and the effect of such failure or default is to cause, or
permit the holder or holders thereof to cause Indebtedness in an aggregate
amount of $10,00,000 or more to become due prior to its stated date of
maturity; or
(f) Borrower or any Subsidiary shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or of
all or a substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they mature,
(iii) make a general assignment for the benefit of its or any of its
creditors, (iv) other than as expressly permitted under SUBPARAGRAPH
5.01(g), be dissolved or liquidated in full or in part, (v) solely with
respect to Borrower, become insolvent (as such term may be defined or
interpreted under any applicable statute), (vi) commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief
or to the
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appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of affecting any of the foregoing; or
(g) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Borrower or any Subsidiary or of all or a
substantial part of the property thereof, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to Borrower or any Subsidiary or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding shall
not be dismissed or discharged within thirty (30) days of commencement; or
(h) A final judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against Borrower or any of its Subsidiaries
and the same shall remain undischarged for a period of thirty (30) days
during which execution shall not be effectively stayed, or any judgment,
writ, assessment, warrant of attachment, or execution or similar process
shall be issued or levied against a substantial part of the property of
Borrower or any of its Subsidiaries and such judgment, writ, or similar
process shall not be released, stayed, vacated or otherwise dismissed
within thirty (30) days after issue or levy; or
(i) Any Credit Document or any material term thereof shall cease to
be, or be asserted by Borrower or any Subsidiary not to be, a legal, valid
and binding obligation of Borrower or such Subsidiary enforceable in
accordance with its terms; or
(j) Any Reportable Event occurs which constitutes grounds for the
termination of any Employee Benefit Plan by the PBGC or for the appointment
of a trustee to administer any Employee Benefit Plan, or any Employee
Benefit Plan shall be terminated within the meaning of Title IV of ERISA or
a trustee shall be appointed to administer any Employee Benefit Plan; or
(k) Any Change of Control shall occur; or
(l) One or more conditions exist or events have occurred which might
reasonably indicate, or reasonably result in, a Material Adverse Effect.
6.02. REMEDIES. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in SUBPARAGRAPH 6.01(f) or
6.01(g)) and at any time thereafter during the continuance of such Event of
Default, Agent may, with the consent of the Required Banks, or shall, upon
instructions from the Required Banks, by written notice to Borrower,
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(a) terminate the Commitments and the obligations of the Banks to make Loans and
(b) declare all outstanding Obligations payable by Borrower to be immediately
due and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Notes to the contrary notwithstanding. Upon the occurrence or existence of
any Event of Default described in SUBPARAGRAPH 6.01(f) or 6.01(g), immediately
and without notice, (1) the Commitments and the obligations of the Banks to make
Loans shall automatically terminate and (2) all outstanding Obligations payable
by Borrower hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Notes to
the contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Agent may exercise any right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both. Immediately after taking any action under this PARAGRAPH 6.02,
Agent shall notify each Bank of such action.
6.03. DEFAULTS. At the election of Required Banks upon the occurrence
of any Default, the obligations of the Banks to make Loans or to convert any
Loan shall be suspended until such event is either waived by the Required Banks
or, to the extent allowed hereunder, cured by Borrower.
SECTION VII. AGENT AND RELATIONS AMONG BANKS.
7.01. APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby appoints
and authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, be a trustee for any Bank or have any fiduciary duty to
any Bank. Notwithstanding anything to the contrary contained herein, Agent
shall not be required to take any action which is contrary to this Agreement or
any other Credit Document or applicable law. Neither Agent nor any Bank shall
be responsible to any other Bank for any recitals, statements, representations
or warranties made by Borrower or any Subsidiary contained in this Agreement or
in any other Credit Document, for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, or any other
Credit Document or for any failure by Borrower or any Subsidiary to perform
their respective obligations hereunder or thereunder. Agent may employ agents
and attorneys-in-fact and shall not be responsible to any Bank for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Agent and its directors, officers, employees or agents
shall not be
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responsible to any Bank for any action taken or omitted to be taken
by it or them hereunder or under any other Credit Document or in connection
herewith or therewith, except for its or their own gross negligence or wilful
misconduct. Except as otherwise provided under this Agreement, Agent shall take
such action with respect to the Credit Documents as shall be directed by the
Required Banks.
7.02. RELIANCE BY AGENT. Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent with reasonable care. As to any other matters not
expressly provided for by this Agreement, Agent shall not be required to take
any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions of the Required Banks and shall in all
cases be fully protected by the Banks in acting, or in refraining from acting,
hereunder or under any other Credit Document in accordance with the instructions
of the Required Banks, and such instructions of the Required Banks and any
action taken or failure to act pursuant thereto shall be binding on all of the
Banks.
7.03. DEFAULTS. Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default unless Agent has received a
notice from a Bank or Borrower, referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "Notice of
Default". If Agent receives such a notice of the occurrence of a Default or
Event of Default, Agent shall give prompt notice thereof to the Banks. Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Banks; PROVIDED, HOWEVER, that until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interest of
the Banks.
7.04. INDEMNIFICATION. Without limiting the Obligations of Borrower
hereunder, each Bank agrees to indemnify Agent, ratably in accordance with their
Proportionate Shares, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against Agent in any way relating to or arising out of this Agreement
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof or of any such other documents; PROVIDED, HOWEVER, that
no Bank shall be liable for any of the foregoing to the extent they arise from
Agent's gross negligence or wilful
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misconduct. Agent shall be fully justified in refusing to take or to continue
to take any action hereunder unless it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
obligations of each Bank under this PARAGRAPH 7.04 shall survive the payment and
performance of the Obligations, the termination of this Agreement and any Bank
ceasing to be a party to this Agreement.
7.05. NON-RELIANCE. Each Bank represents that it has, independently
and without reliance on Agent, or any other Bank, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of Borrower and the Subsidiaries and its own
decision to enter into this Agreement and agrees that it will, independently and
without reliance upon Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement.
Neither Agent nor any Bank shall be required to keep any other Bank informed as
to the performance or observance by Borrower or any Subsidiary of the
obligations under this Agreement or any other document referred to or provided
for herein or to make inquiry of, or to inspect the properties or books of
Borrower or any Subsidiary. Except for notices, reports and other documents and
information expressly required to be furnished to the Bank by Agent hereunder,
neither Agent nor any Bank shall have any duty or responsibility to provide any
Bank with any credit or other information concerning Borrower or any Subsidiary,
which may come into the possession of Agent, or such Bank or any of its or their
Affiliates.
7.06. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Banks, and Agent may be removed at any time with
or without cause by the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint a successor Agent, which
Agent shall be reasonably acceptable to Borrower; PROVIDED, HOWEVER, that
Borrower shall have no right to approve a successor Agent if an Event of Default
has occurred or is continuing. If no successor Agent shall have been appointed
by the Required Banks and shall have accepted such appointment within thirty
(30) days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a bank having a
combined capital, surplus and retained earnings of not less than U.S.
$500,000,000 and which shall be reasonably acceptable to Borrower. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and
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obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this SECTION VII shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
7.07. AUTHORIZATION. Agent is hereby authorized by the Banks to
execute, deliver and perform, each of the Credit Documents to which Agent is or
is intended to be a party and each Bank agrees to be bound by all of the
agreements of Agent contained in the Credit Documents.
7.08. AGENT IN ITS INDIVIDUAL CAPACITY. Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with Borrower and its Subsidiaries and affiliates as though such Agent were not
an Agent hereunder. With respect to Loans, if any, made by ABN AMRO Bank N.V.,
as a Bank, ABN AMRO Bank N.V. shall have the same rights and powers under this
Agreement and the other Credit Documents as any other Bank and may exercise the
same as though it were not an Agent, and the terms "Bank" or "Banks" shall
include ABN AMRO Bank N.V. in its individual capacity.
SECTION VIII. MISCELLANEOUS.
8.01. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower, any Bank or Agent under this Agreement or the other Credit Documents
shall be in writing and faxed, mailed or delivered, if to Borrower or Agent, at
its respective facsimile number or addresses set forth below or, if to any Bank,
at the address or facsimile number specified beneath the heading "Address for
Notices" under the name of such Bank in SCHEDULE I (or to such other facsimile
number or address for any party as indicated in any notice given by that party
to the other party). All such notices and communications shall be effective (a)
when sent by Federal Express or other overnight service of recognized standing,
on the Business Day following the deposit with such service; (b) when mailed,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when faxed, upon confirmation of receipt; PROVIDED, HOWEVER, that any notice
delivered to Agent under SECTION II shall not be effective until received by
Agent.
Agent: ABN AMRO Bank N.V.
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
Telephone: (415) 984-3700
Facsimile: (415) 362-3524
49
<PAGE>
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
Telephone: (212) 370-8509
Facsimile: (212) 682-0364
Borrower: Nellcor Incorporated
4280 Hacienda Drive
Pleasanton, CA 94588
Attn: Richard Powell
Telephone: (510) 463-4196
Facsimile: (510) 463-4220
Each Notice of Borrowing, Notice of Conversion and Notice of Interest Period
Selection shall be given by Borrower to Agent's office located at the address
referred to above during Agent's normal business hours; PROVIDED, HOWEVER, that
any such notice received by Agent after 9:00 a.m. on any Business Day shall be
deemed received by Agent on the next Business Day. In any case where this
Agreement authorizes notices, requests, demands or other communications by
Borrower to Agent to be made by telephone or facsimile, Agent may conclusively
presume that anyone purporting to be a person designated in any incumbency
certificate or other similar document received by Agent is such a person.
8.02. EXPENSES. Borrower shall pay on demand, whether or not any Loan
is made, (a) all reasonable fees and expenses, including reasonable attorneys'
fees and expenses, incurred by Agent in connection with the preparation,
negotiation, execution and delivery of, and the exercise of its duties under,
the commitment letter dated as of September 8, 1994 (as amended) between
Borrower and Agent and the Agent's Fee Letter and their structuring of, due
diligence relating to and syndication of the credit facilities set forth in this
Agreement; (b) all reasonable fees and expenses, including reasonable attorneys'
fees and expenses, incurred by Agent in connection with the preparation,
negotiation, execution and delivery of, and the exercise of its duties under,
this Agreement and the other Credit Documents, and the preparation, negotiation,
execution and delivery of amendments and waivers hereunder and thereunder; and
(c) all reasonable fees and expenses, including reasonable attorneys' fees and
expenses, incurred by Agent and the Banks in the enforcement or attempted
enforcement of any of the Obligations or in preserving any of Agent's or the
Banks' rights and remedies (including, without limitation, all such fees and
expenses incurred in connection with any "workout" or restructuring affecting
the Credit Documents or the Obligations or any bankruptcy or similar proceeding
involving Borrower or any of its Subsidiaries). As used herein, the term
"reasonable attorneys' fees and expenses" shall include, without limitation,
allocable costs and expenses of Agent's or any Bank's in-house legal counsel and
staff. The obligations of Borrower under this
50
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PARAGRAPH 8.02 shall survive the payment and performance of the Obligations and
the termination of this Agreement.
8.03. INDEMNIFICATION. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and hold harmless Agent, the Banks
and their Affiliates and their respective directors, officers, employees, agents
and advisors ("INDEMNITEES") from and against any and all liabilities, losses,
damages or expenses of any kind or nature and from any suits, claims or demands
(including in respect of or for reasonable attorney's fees and other expenses)
arising on account of or in connection with any matter or thing or action or
failure to act by Indemnitees, or any of them, arising out of or relating to the
Credit Documents or any transaction contemplated thereby, including without
limitation (a) any use by Borrower of any proceeds of the Loans, (b) any
violation or alleged violation of any Requirement of Law by Borrower, any
Subsidiary or any of their Affiliates, (c) any Default or Event of Default,
(d) any acquisition or proposed acquisition by Borrower or any of its
Subsidiaries of the stock or assets (in whole or in part) of any other Person or
(e) the execution, delivery and performance of this Agreement and the other
Credit Documents by any of the Indemnitees (unless arising out of any violation
by Agent or any Bank or any of its Affiliates of any applicable law governing
its banking powers); except to the extent such liability arises from the willful
misconduct or gross negligence of the Indemnitees. Upon receiving knowledge of
any suit, claim or demand asserted by a third party that Agent or any Bank
believes is covered by this indemnity, Agent or such Bank shall give Borrower
notice of the matter and an opportunity to defend it, at Borrower's sole cost
and expense, with legal counsel satisfactory to Agent or such Bank, as the case
may be. Agent or such Bank may also require Borrower to defend the matter. Any
failure or delay of Agent or any Bank to notify Borrower of any such suit, claim
or demand shall not relieve Borrower of its obligations under this
PARAGRAPH 8.03 but shall reduce such obligations to the extent of any increase
in those obligations caused solely by any such failure or delay which is
unreasonable. The obligations of Borrower under this PARAGRAPH 8.03 shall
survive the payment and performance of the Obligations and the termination of
this Agreement.
8.04. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Credit Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and the Required
Banks; PROVIDED, HOWEVER that:
(a) Any amendment, waiver or consent which (i) increases the Total
Commitment, (ii) extends the Revolving Loan Maturity Date or Term Loan
Maturity Date, (iii) reduces the principal of or interest on any Loan or
any fees or other amounts payable for the account of the Banks hereunder,
(iv) postpones any date fixed for any
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<PAGE>
payment of the principal of or interest on any Loans or any fees or other
amounts payable for the account of the Banks hereunder or thereunder, (v)
amends this PARAGRAPH 8.04, (vi) releases any Guaranty, Pledge Agreement or
any of the Collateral or (vii) amends the definition of Required Banks,
must be in writing and signed by all Banks;
(b) Any amendment, waiver or consent which increases or decreases the
Proportionate Share of any Bank must be in writing and signed by such Bank;
and
(c) Any amendment, waiver or consent which affects the rights of
Agent must be in writing and signed by Agent.
No failure or delay by Agent or any Bank in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
8.05. SUCCESSORS AND ASSIGNS.
(a) BINDING EFFECT. This Agreement and the other Credit Documents
shall be binding upon and inure to the benefit of Borrower, the Banks,
Agent, all future holders of the Notes and their respective successors and
permitted assigns, except that Borrower may not assign or transfer any of
its rights or obligations under any Credit Document without the prior
written consent of Agent and each Bank. All references in this Agreement
to any Person shall be deemed to include all successors and assigns of such
Person.
(b) PARTICIPATIONS. Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any
time sell to one or more banks or other financial institutions
("PARTICIPANTS") participating interests in any Loan owing to such Bank,
any Note held by such Bank, any Commitment of such Bank or any other
interest of such Bank under this Agreement and the other Credit Documents;
PROVIDED, HOWEVER, that no Bank may sell a participating interest in its
Loans or Commitment in a principal amount of less than Five Million Dollars
($5,000,000), provided that, in the event the Term Loan is Ten Million
Dollars ($10,000,000) or less, such amount shall be Two Million Dollars
($2,000,000). In the event of any such sale by a Bank of participating
interests to a Participant, such Bank's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Bank shall
remain solely responsible for the performance thereof, such Bank shall
remain the holder of any such Note for all purposes under this Agreement
and Borrower and Agent shall continue to deal solely and
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<PAGE>
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement; PROVIDED, HOWEVER, that any agreement
pursuant to which any Bank sells a participating interest to a Participant
may require the selling Bank to obtain the consent of such Participant in
order for such Bank to agree in writing to any amendment of a type
specified in CLAUSE (i), (ii), (iii) OR (iv) OF SUBPARAGRAPH 8.04(a).
Borrower agrees that if amounts outstanding under this Agreement and the
other Credit Documents are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall, to the fullest extent permitted by law, be
deemed to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement and any other Credit Documents to the
same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement or any other Credit
Documents; PROVIDED, HOWEVER, that such rights of setoff shall be subject
to the obligation of such Participant to share with the Banks, and the
Banks agree to share with such Participant, as provided in SUBPARAGRAPH
2.09(b). Borrower also agrees that any Bank which has transferred all or
part of its interests in the Commitments and the Loans to one or more
Participants shall, notwithstanding any such transfer, be entitled to the
full benefits accorded such Bank under PARAGRAPH 2.10, PARAGRAPH 2.11, and
PARAGRAPH 2.13, as if such Bank had not made such transfer.
(c) ASSIGNMENTS. Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any
time, sell and assign to any Bank, any affiliate of a Bank or any other
bank or financial institution (individually, an "ASSIGNEE BANK") all or a
portion of its rights and obligations under this Agreement and the other
Credit Documents (such a sale and assignment to be referred to herein as an
"ASSIGNMENT") pursuant to an assignment agreement in the form of EXHIBIT L
(an "ASSIGNMENT AGREEMENT"), executed by each Assignee Bank and such
assignor Bank (an "ASSIGNOR BANK") and delivered to Agent for its
acceptance and recording in the Register; PROVIDED, HOWEVER, that
(i) Without the written consent of Borrower and Agent (which
consents shall not be unreasonably withheld), no Bank may make any
Assignment to any Assignee Bank which is not, immediately prior to
such Assignment, a Bank hereunder or an affiliate thereof; or
(ii) Without the written consent of Borrower and Agent (which
consent shall not be unreasonably withheld), no Bank may make any
Assignment to any Assignee Bank if, after giving effect to such
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Assignment, the Assignee Bank's Commitment or Term Loan would be less
than Five Million Dollars ($5,000,000), provided that, in the event
the Term Loan is Ten Million Dollars ($10,000,000) or less, such
amount shall be Two Million Dollars ($2,000,000); or
(iii) No Bank may make any Assignment which does not assign and
delegate an equal pro rata interest in such Bank's Revolving Loans,
Term Loan, Commitments and all other rights, duties and obligations of
such Bank under this Agreement and the other Credit Documents.
Upon such execution, delivery, acceptance and recording of each Assignment
Agreement, from and after the Assignment Effective Date determined pursuant
to such Assignment Agreement, (A) each Assignee Bank thereunder shall be a
Bank hereunder with a Proportionate Share as set forth on ATTACHMENT 1 TO
SUCH ASSIGNMENT AGREEMENT and shall have the rights, duties and obligations
of such a Bank under this Agreement and the other Credit Documents, and
(B) the Assignor Bank thereunder shall be a Bank with a Proportionate Share
as set forth on ATTACHMENT 1 TO SUCH ASSIGNMENT AGREEMENT, or, if the
Proportionate Share of the Assignor Bank has been reduced to 0%, the
Assignor Bank shall cease to be a Bank; PROVIDED, HOWEVER, that any such
Assignor Bank which ceases to be a Bank shall continue to be entitled to
the benefits of any provision of this Agreement which by its terms survives
the termination of this Agreement. Each Assignment Agreement shall be
deemed to amend SCHEDULE I to the extent, and only to the extent, necessary
to reflect the addition of each Assignee Bank, the deletion of each
Assignor Bank which reduces its Proportionate Share to 0% and the resulting
adjustment of Proportionate Shares arising from the purchase by each
Assignee Bank of all or a portion of the rights and obligation of an
Assignor Bank under this Agreement and the other Credit Documents. On or
prior to the Assignment Effective Date determined pursuant to each
Assignment Agreement, Borrower, at its own expense, shall execute and
deliver to Agent, in exchange for the surrendered Revolving Loan Note or
Term Loan Note of the Assignor Bank thereunder, a new Revolving Loan Note
and Term Loan Note to the order of each Assignee Bank thereunder (with each
new Revolving Loan Note to be in an amount equal to the Commitment assumed
by such Assignee Bank and each new Term Loan Note to be in the original
principal amount of the Term Loan then held by such Assignee Bank) and, if
the Assignor Bank is continuing as a Bank hereunder, a new Revolving Loan
Note and Term Loan Note to the order of the Assignor Bank (with the new
Revolving Loan Note to be in an amount equal to the Commitment retained by
it and the new Term Loan Note to be in the original principal amount of the
Term Loan retained by it). Each such new Revolving Loan Note shall be
dated the Closing Date and each new Term Loan Note shall be dated the
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Revolving Loan Maturity Date and each such new Note shall otherwise be in
the form of the Note replaced thereby. The Notes surrendered by the
Assignor Bank shall be returned by Agent to Borrower marked "replaced".
Each Assignee Bank which was not previously a Bank hereunder shall, within
three (3) Business Days of becoming such a Bank, deliver to Borrower and
Agent a statement or letter and form as described in CLAUSE (i) OR (ii) OF
SUBPARAGRAPH 2.11(b).
(d) REGISTER. Agent shall maintain at its address referred to in
PARAGRAPH 8.01 a copy of each Assignment Agreement delivered to it and a
register (the "REGISTER") for the recordation of the names and addresses of
the Banks and the Proportionate Shares of each Bank from time to time. The
entries in the Register shall be conclusive in the absence of manifest
error, and Borrower, Agent and the Banks may treat each Person whose name
is recorded in the Register as the owner of the Loans recorded therein for
all purposes of this Agreement. The Register shall be available for
inspection by Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) REGISTRATION. Upon its receipt of an Assignment Agreement
executed by an Assignor Bank and an Assignee Bank (and, in the case of an
Assignee Bank that is not then a Bank, by Borrower and Agent) together with
payment to Agent by Assignor Bank of a registration and processing fee of
$2,500, Agent shall (i) promptly accept such Assignment Agreement and
(ii) on the Effective Date determined pursuant thereto record the
information contained therein in the Register and give notice of such
acceptance and recordation to the Banks and Borrower. Agent may, from time
to time at its election, prepare and deliver to the Banks and Borrower a
revised SCHEDULE I reflecting the names, addresses and respective
Proportionate Shares of all Banks then parties hereto.
8.06. SETOFF. In addition to any rights and remedies of the Banks
provided by law, each Bank shall have the right, with the prior consent of Agent
but without prior notice to Borrower, any such notice being expressly waived by
Borrower to the extent permitted by applicable law, upon the occurrence and
during the continuance of an Event of Default, to set-off and apply against any
indebtedness, whether matured or unmatured, of Borrower to such Bank, any amount
owing from such Bank to Borrower, at or at any time after, the happening of any
of the above mentioned events, and as security for such indebtedness, Borrower
hereby grants to each Bank a continuing security interest in any and all
deposits, accounts or moneys of Borrower then or thereafter maintained with such
Bank, subject in each case to SUBPARAGRAPH 2.09(b). The aforesaid right of
set-off may be exercised by such Bank against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of
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Borrower or against anyone else claiming through or against Borrower or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Bank prior to the occurrence of an Event of Default. Each
Bank agrees promptly to notify Borrower after any such set-off and application
made by such Bank, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application.
8.07. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any
Person, other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
8.08. PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
8.09. JURY TRIAL. EACH OF BORROWER, THE BANKS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.10. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
8.11. CONFIDENTIALITY. Each Bank and Agent shall not disclose to any
Person any information with respect to Borrower or any of its Subsidiaries which
is furnished pursuant to this Agreement, except that any Bank or Agent may
disclose any such information (a) to its own directors, officers, employees,
auditors, counsel and other professional advisors and to its Affiliates if such
Bank or Agent or such Bank's or such Agent's holding or parent company
reasonably determines that any such party should have access to such
information; (b) to another Bank or Agent; (c) if generally available to the
public other than through any Bank or Agent; (d) if required or appropriate in
any report, statement or testimony submitted to any Governmental Authority
having or claiming to have jurisdiction over such Bank or Agent; (e) if required
or appropriate in response to any summons or subpoena or in connection with any
litigation, to the extent permitted or deemed advisable by counsel, provided
that Borrower is first notified to the extent not prohibited by any
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<PAGE>
Requirement of Law and given an opportunity to obtain confidential treatment to
the extent not prohibited by any Requirement of Law and the Banks and Agent, as
applicable, shall work with Borrower to obtain such treatment; (f) to comply
with any Requirement of Law applicable to such Bank or Agent; (g) to any
Participant or Assignee Bank or any prospective Participant or Assignee Bank,
provided such Participant or Assignee or prospective Participant or Assignee
agrees to be bound by this PARAGRAPH 8.11, provided, further, that with respect
to prospective Participants and Assignee Banks, neither Agent nor any Bank shall
disclose any non-public information with respect to Borrower and its
Subsidiaries without the prior consent of Borrower, which consent shall not be
unreasonably withheld; or (h) otherwise with the prior consent of Borrower.
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IN WITNESS WHEREOF, Borrower, the Banks and Agent have caused this
Agreement to be executed as of the day and year first above written.
BORROWER:
NELLCOR INCORPORATED
By: /s/ Michael P. Downey
-----------------------------------
Michael P. Downey
Vice President and
Chief Financial Officer
AGENT:
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL
BRANCH, as Agent
By: /s/ R. Clay Jackson
-----------------------------------
R. Clay Jackson
Senior Vice President
By: /s/ Dianne D. Waggoner
-----------------------------------
Dianne D. Waggoner
Vice President
BANKS:
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL
BRANCH, as a Bank
By: /s/ R. Clay Jackson
-----------------------------------
R. Clay Jackson
Senior Vice President
By: /s/ Dianne D. Waggoner
-----------------------------------
Dianne D. Waggoner
Vice President
<PAGE>
THE BANK OF CALIFORNIA, N.A.,
As a Bank
By: /s/ Wanda Headrick
-----------------------------------
Name: WANDA HEADRICK
-----------------------------
Title: VICE PRESIDENT
----------------------------
CREDIT LYONNAIS CAYMAN ISLAND BRANCH, As a Bank
By: /s/ Xavier Ratouis
-----------------------------------
Name: XAVIER RATOUIS
------------------------------
Title: AUTHORIZED SIGNATURE
-----------------------------
WACHOVIA BANK OF GEORGIA, N.A.,
As a Bank
By: /s/ Douglas Williams
-----------------------------------
Name: DOUGLAS WILLIAMS
------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------
<PAGE>
SCHEDULE I
BANKS
BANK PROPORTIONATE SHARE
ABN AMRO BANK N.V. 30%
Applicable Lending Office:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
Telephone (415) 984-3700
Facsimile: (415) 362-3524
Addresses for Notices:
San Francisco:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
Telephone (415) 984-3700
Facsimile: (415) 362-3524
New York:
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
Telephone: (212) 370-8509
Facsimile: (212) 682-0364
Wiring Instructions:
(VIA CHIPS)
ABN AMRO Bank N.V., New York Branch
335 Madison Avenue
New York, NY 10017
ABA #: 958
For further credit to:
ABN AMRO San Francisco
Account #: 651-001-0545-41
REFERENCE: Nellcor Incorporated
I-1
<PAGE>
(VIA FED)
Federal Reserve Bank of New York, NY
For Account:
ABN AMRO Bank N.V., New York Branch
Fed. Routing #: 026009580
335 Madison Avenue
New York, NY 10017
For further credit to:
ABN AMRO San Francisco
Account #: 651-001-0545-41
REFERENCE: Nellcor Incorporated
THE BANK OF CALIFORNIA, N.A. 25%
Applicable Lending Office:
The Bank of California, N.A.
400 California Street
San Francisco, CA 94104
Attn: Wanda R. Headrick
Telephone: (415) 765-3003
Facsimile: (415) 765-2634
Address for Notices:
The Bank of California, N.A.
400 California Street
San Francisco, CA 94104
Attn: Wanda R. Headrick
Telephone: (415) 765-3003
Facsimile: (415) 765-2634
Wiring Instructions:
ABA # 121000015
For Credit to Bank Control
Account # 001060235
Ref: Nellcor, Inc.
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<PAGE>
CREDIT LYONNAIS 25%
Applicable Lending Office:
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais
Health Care Group
1301 Avenue of the Americas
New York, NY 10019
Primary Attn: Francoise O. Giacalone
Telephone: (212) 261-7748
Secondary Attn: Farboud Tavangar
Telephone: (212) 261-7832
Facsimile: (212) 261-3440
Address for Notices:
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais
Health Care Group
Credit Lyonnais
1301 Avenue of the Americas
New York, NY 10019
Attn: Francoise O. Giacalone
Telephone: (212) 261-7748
Secondary Attn: Farboud Tavangar
Telephone: (212) 261-7832
Facsimile: (212) 261-3440
Wiring Instructions:
Credit Lyonnais
ABA # 0260-0807-3
Attn: Loan Servicing
Account # 01-00882000100
Ref: Nellcor, Inc.
WACHOVIA BANK OF GEORGIA, N.A. 20%
Applicable Lending Office:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: Todd J. Eagle
Telephone: (404) 332-4392
Facsimile: (404) 332-6898
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Address for Notices:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: Todd J. Eagle
Telephone: (404) 332-4392
Facsimile: (404) 332-6898
and
Attn: Hugette Jones
Telephone: (404) 332-4466
Facsimile: (404) 332-1118
Wiring Instructions:
Wachovia Bank of Georgia
ABA # 061000010
Money Transfer Suspense Account # 18171498
Attn: Loan Specialist
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<PAGE>
SCHEDULE 1.01
DEFINITIONS
"AFFILIATE" shall mean, with respect to any Person, (a) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person or (b) each of such Person's officers, directors, joint
venturers and partners; PROVIDED, HOWEVER, that in no case shall Agent or any
Bank be deemed to be an Affiliate of Borrower or any of its Subsidiaries for
purposes of this Agreement. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" shall have the meaning given to that term in CLAUSE (3) OF THE
INTRODUCTORY PARAGRAPH hereof.
"AGENT'S FEE LETTER" shall have the meaning given to that term in PARAGRAPH
1.08.
"AGREEMENT" shall mean this Credit Agreement.
"APPLICABLE LENDING OFFICE" shall mean, with respect to any Bank,
(a) initially, its office designated as such in SCHEDULE I and (b) subsequently,
such other office or offices as such Bank may designate to Agent as the office
at which such Bank's Loans will thereafter be maintained and for the account of
which all payments of principal of, and interest on, such Bank's Loans will
thereafter be made.
"APPLICABLE MARGIN" shall mean, with respect to any Revolving Loan or Term
Loan at any time, the per annum margin which is determined pursuant to the
Pricing Grid and added to the LIBO Rate for such Loan.
"ASSIGNEE BANK" shall have the meaning given to that term in SUBPARAGRAPH
8.05(c).
"ASSIGNMENT" shall have the meaning given to that term in SUBPARAGRAPH
8.05(c).
"ASSIGNMENT AGREEMENT" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(c).
"ASSIGNMENT EFFECTIVE DATE" shall have, with respect to each Assignment
Agreement, the meaning set forth therein.
"ASSIGNOR BANK" shall have the meaning given to that term in SUBPARAGRAPH
8.05(c).
1.10-1
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"BANKS" shall have the meaning given to that term in CLAUSE (2) OF THE
INTRODUCTORY PARAGRAPH HEREOF.
"BASE RATE" shall mean, on any day, the greater of (a) the Prime Rate in
effect on such date and (b) the Federal Funds Rate for such day PLUS one-half
percent (0.50%).
"BORROWER" shall have the meaning given to that term in CLAUSE (1) OF THE
INTRODUCTORY PARAGRAPH hereof.
"BORROWER PLEDGE AGREEMENT" shall have the meaning given to that term in
SUBPARAGRAPH 2.13(a).
"BORROWER'S INVESTMENT POLICY" shall mean the Nellcor Incorporated Treasury
Operations Policy on Investments dated July 1, 1993.
"BORROWING" shall mean a Revolving Loan Borrowing or the Term Loan
Borrowing.
"BUSINESS DAY" shall mean any day on which (a) commercial banks are not
authorized or required to close in San Francisco, California, Chicago, Illinois
or New York, New York and (b) if such Business Day is related to a Loan or
Portion which bears or is to bear interest based on a LIBO Rate, dealings in
Dollar deposits are carried out in the London interbank market.
"CAPITAL ADEQUACY REQUIREMENT" shall have the meaning given to that term in
SUBPARAGRAPH 2.10(d).
"CAPITAL ASSET" shall mean, with respect to any Person, tangible property
owned or leased (in the case of a Capital Lease) by such Person, or any expense
incurred by any Person that is required by GAAP to be reported as a non-current
asset on such Person's balance sheet.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person and any
period, all amounts expended and Indebtedness incurred or assumed by such Person
during such period for the acquisition of real property and other Capital Assets
(including amounts expended and Indebtedness incurred or assumed in connection
with Capital Leases).
"CAPITAL LEASES" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.
"CHANGE OF CONTROL" shall mean with respect to Borrower, the occurrence of
any of the following events: (a) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall (i) acquire beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of twenty-five
1.01-2
<PAGE>
percent (25%) or more of the outstanding Equity Securities of Borrower entitled
to vote for members of the board of directors, or (ii) acquire all or
substantially all of the assets of Borrower and its Subsidiaries taken as a
whole, or (b) individuals who are directors of Borrower on the Closing Date
("INITIAL DIRECTORS") and any directors of Borrower who are previously-approved
by two-thirds of the Initial Directors and previously-approved Approved
Directors ("APPROVED DIRECTORS") shall cease to constitute a majority of the
Board of Directors of Borrower.
"CHANGE OF LAW" shall have the meaning given to that term in
SUBPARAGRAPH 2.10(b).
"CLOSING DATE" shall mean the date of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall have the meaning given to that term in the Pledge
Agreements.
"COMMITMENT" shall mean, with respect to any Bank at any time, such Bank's
Proportionate Share of the Total Commitment at such time.
"COMMITMENT FEES" shall have the meaning given to that term in SUBPARAGRAPH
2.04(b).
"CONTINGENT OBLIGATION" shall mean, with respect to any Person, (a) any
Guaranty Obligation of that Person; and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) as a
partner or joint venturer in any partnership or joint venture, (iii) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered, or (iv) incurred pursuant to any interest rate swap,
currency swap, forward, cap, floor or other similar contract that is not entered
into in connection with a bona fide hedging operation that provides offsetting
benefits to such Person. The amount of any Contingent Obligation shall
(subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof in accordance with GAAP.
1.01-3
<PAGE>
"CONTRACTUAL OBLIGATION" of any Person shall mean, any indenture, note,
loan agreement, security, deed of trust, mortgage, security agreement, lease,
guaranty, instrument, contract, agreement or other form of contractual
obligation or undertaking to which such Person is a party or by which such
Person or any of its property is bound.
"CREDIT DOCUMENTS" shall mean and include this Agreement, the Notices of
Borrowing, the Notices of Interest Period Selection, the Notices of Conversion,
the Revolver Extension Requests, the Notes, the Guaranties, the Pledge
Agreements, the Agent's Fee Letter and all other documents, instruments and
agreements delivered to Agent or any Bank on or after the date hereof in
connection with this Agreement (including, without limitation, those documents
set forth on SCHEDULE 3.01).
"CREDIT EVENT" shall mean the making of any Loan, the conversion of any
Revolving Base Rate Loan or Term Base Rate Borrowing Portion into a Revolving
LIBOR Loan or Term LIBOR Borrowing Portion, the selection of a new Interest
Period for any Revolving LIBOR Loan or Term LIBOR Borrowing Portion, the
issuance of any Revolver Extension Request and the extension of the Revolving
Loan Maturity Date under SUBPARAGRAPH 2.01(h).
"CURRENT ASSETS" shall mean, with respect to any Person as of any date, the
aggregate amount of all assets of such Person and its Subsidiaries that would,
determined on a consolidated basis in accordance with GAAP, be classified as
current assets on the consolidated balance sheet of such Person and its
Subsidiaries as of such date.
"CURRENT LIABILITIES" shall mean, with respect to any Person as of any
date, the aggregate amount of all of the liabilities of such Person and its
Subsidiaries that would, determined on a consolidated basis in accordance with
GAAP, be classified as current liabilities on the consolidated balance sheet of
such Person and its Subsidiaries as of such date, excluding current maturities
of long-term Indebtedness of such Person and its Subsidiaries as determined in
accordance with GAAP).
"CURRENT RATIO" shall mean with respect to any Person at any time, the
ratio of Current Assets to Current Liabilities.
"DEFAULT" shall mean any event or circumstance not yet constituting an
Event of Default which, with the giving of any notice or the lapse of any period
of time or both, would become an Event of Default.
"DOLLARS" and "$" shall mean the lawful currency of the United States of
America and, in relation to any payment under this Agreement or any of the other
Credit Documents, same day or immediately available funds.
1.01-4
<PAGE>
"EBIT" shall mean, with respect to any Person for any period, the sum,
determined on a consolidated basis in accordance with GAAP, of the following:
(a) The net income or net loss of such Person and its Subsidiaries for
such period before provision for income taxes, excluding extraordinary and
non-recurring income and expenses of such Person and its Subsidiaries for
such period;
PLUS
(b) (to the extent deducted in calculating net income or loss in
CLAUSE (A) above) all Interest Expenses of such Person and its Subsidiaries
accruing during such period.
"EMPLOYEE BENEFIT PLAN" shall mean any employee benefit plan within the
meaning of section 3(3) of ERISA maintained or contributed to by Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
"ENVIRONMENTAL LAWS" shall mean all Requirements of Law relating to the
protection of human health or the environment, including, without limitation,
(a) all Requirements of Law, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining
to the protection of the health and safety of employees or the public.
"EQUITY SECURITIES" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended or supplemented, including any rules
or regulations issued in connection therewith.
"ERISA AFFILIATE" shall mean any Person which is treated as a single
employer with Borrower under Section 414 of the Code.
"EVENT OF DEFAULT" shall have the meaning given to that term in PARAGRAPH
6.01.
1.01-5
<PAGE>
"FEDERAL FUNDS RATE" shall mean, for any day, the Federal funds effective
rate as set forth in the weekly statistical release designated as H.15(519)
published by the Federal Reserve Bank of New York for such day, or in any
successor publication (or, if such rate is not so published for any day, the
average rate quoted to Agent on such day by three (3) Federal funds brokers of
recognized standing selected by Agent).
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the Federal
Reserve System.
"FINANCIAL STATEMENTS" shall mean, with respect to any accounting period
for any Person, statements of income, shareholders' equity and cash flows of
such Person for such period, and a balance sheet of such Person as of the end of
such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"FUNDED DEBT" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments and all other obligations of
such Person for borrowed money;
(b) All obligations of such Person for the deferred purchase
price of property or services (including obligations under letters of
credit to the extent drawn and other credit facilities which secured
or financed such purchase price), other than trade payables incurred
by such Person in the ordinary course of its business on ordinary
terms and not more than ninety (90) days overdue;
(c) All obligations of such Person under conditional sale or
other title retention agreements with respect to property acquired by
such Person (but only if the rights and remedies of the seller or
lender under such agreement in the event of default are NOT limited to
repossession or sale of such property); and
(d) All obligations of such Person as lessee under or with
respect to Capital Leases (including, with respect to Borrower, all
leases referred to in the last sentence of the definition of "Capital
Expenditures" above to the extent Borrower's independent accountants
determine that such leases must be treated as Capital Leases under
GAAP).
1.01-6
<PAGE>
"FUNDED DEBT RATIO" shall mean, with respect to any Person as of the last
day of any calendar quarter, the ratio, determined on a consolidated basis in
accordance with GAAP, of (a) the Net Funded Debt of such Person and its
Subsidiaries at such date to (b) Net Operating Cash Flow of such Person for the
consecutive four-quarter period ending on such day.
"GAAP" shall mean generally accepted accounting principles and practices as
in effect in the United States of America from time to time, consistently
applied.
"GOVERNMENTAL AUTHORITY" shall mean any domestic or foreign national, state
or local government, any political subdivision thereof, any department, agency,
authority or bureau of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, the Comptroller of the
Currency, any central bank or any comparable authority.
"GOVERNMENTAL CHARGES" shall mean, with respect to any Person, all levies,
assessments, fees, claims or other charges imposed by any Governmental Authority
upon or relating to such Person or any of its property or otherwise payable by
such Person.
"GOVERNMENTAL RULE" shall mean any law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guidelines, policy or similar
form of decision of any Governmental Authority.
"GUARANT(Y)(IES)" shall have the meaning given to that term in
SUBPARAGRAPH 2.14(a).
"GUARANTY OBLIGATION" shall mean, with respect to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), including any obligation of that Person,
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof. The amount of any Guaranty
Obligation shall be deemed
1.01-7
<PAGE>
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof.
"INDEBTEDNESS" of any Person shall mean, without duplication:
(a) All Funded Debt of such Person;
(b) All obligations of such Person under conditional sale or other
title retention agreements with respect to property acquired by such Person
where the rights and remedies of the seller or lender under such agreements
in the event of default are limited to repossession or sale of such
property;
(c) All obligations of such Person, contingent or otherwise, under or
with respect to letters of credit, acceptances or other similar facilities;
(d) All obligations of such Person, contingent or otherwise, under or
with respect to interest rate swap, cap or collar agreements, interest rate
future or option contracts, currency swap agreements, currency future or
option contracts or other similar agreements;
(e) All Contingent Obligations of such Person with respect to the
obligations of such Person or other Persons of the types described in
CLAUSES (A) - (D) above; and
(f) All obligations of other Persons of the types described in
CLAUSES (A) - (D) above to the extent secured by (or for which any holder
of such obligations has an existing right, contingent or otherwise, to be
secured by) any Lien in any property (including accounts and contract
rights) of such Person, even though such person has not assumed or become
liable for the payment of such obligations.
"INDEMNITEES" shall have the meaning given to that term in PARAGRAPH 8.03.
"INTEREST ACCOUNT" shall have the meaning given to that term in
SUBPARAGRAPH 2.07(c).
"INTEREST COVERAGE RATIO" shall mean, with respect to any Person for any
period, the ratio, determined on a consolidated basis in accordance with GAAP,
of (a) EBIT of such Person and its Subsidiaries for such period to (b) the
Interest Expenses of such Person and its Subsidiaries for such period.
1.01-8
<PAGE>
"INTEREST EXPENSES" shall mean, with respect to any Person for any period,
the sum, determined on a consolidated basis in accordance with GAAP, of (a) all
interest accruing on the Indebtedness of such Person during such period
(including interest attributable to Capital Leases) and (b) all letter of credit
fees payable by such Person accruing during such period.
"INTEREST PERIOD" shall mean, with respect to any Revolving LIBOR Loan or
Term LIBOR Borrowing Portion, the time periods selected by Borrower pursuant to
SUBPARAGRAPH 2.01(b), SUBPARAGRAPH 2.01(d), SUBPARAGRAPH 2.02(b) or SUBPARAGRAPH
2.02(d) which commences on the first day of such Loan or Portion or the
effective date of any conversion and ends on the last day of such time period,
and thereafter, each subsequent time period selected by Borrower pursuant to
SUBPARAGRAPH 2.01(e) or SUBPARAGRAPH 2.02(e) which commences on the last day of
the immediately preceding time period and ends on the last day of that time
period.
"INVESTMENT" of any Person shall mean any loan or advance of funds by such
Person to any other Person (other than loans or advances to employees of such
Person for moving and travel expense, drawing accounts, relocation expenses,
mortgage loans and similar expenditures in the ordinary course of business), any
purchase or other acquisition of any Equity Securities or Indebtedness of any
other Person, any capital contribution by such Person to or any other investment
by such Person in any other Person (including, without limitation, any Guaranty
Obligations of such Person and any Indebtedness incurred by such Person of the
type described in CLAUSE (f) of the definition of "Indebtedness" on behalf of
any other Person); PROVIDED, HOWEVER, that Investments shall not include
accounts receivable or other indebtedness owed by customers of such Person which
are current assets and arose from sales in the ordinary course of such Person's
business.
"LEVERAGE RATIO" shall mean, with respect to any Person, at any time, the
ratio, determined on a consolidated basis in accordance with GAAP, of:
(a) the Net Funded Debt of such Person and its Subsidiaries at such
time;
TO
(b) the Tangible Net Worth of such Person and its Subsidiaries at
such time.
"LIBO RATE" shall mean, with respect to any Interest Period for the
Revolving LIBOR Loans in any Revolving Loan Borrowing consisting of Revolving
LIBOR Loans or the Term LIBOR Loan Portions in any Term LIBOR Borrowing Portion,
a rate per annum equal to the quotient of (a) the arithmetic mean (rounded
upwards if necessary to the nearest 1/16 of one percent) of the rates per
1.01-9
<PAGE>
annum appearing on Telerate Page 3750 (or any successor publication) on the
second Business Day prior to the commencement of such Interest Period at or
about 11:00 A.M. (London time) (for delivery on the first day of such Interest
Period) for a term comparable to such Interest Period and in an amount
approximately equal to the amount of the Loan or Portion to be made or funded by
Agent as part of such Revolving Loan Borrowing or Term Loan Portion, DIVIDED BY
(b) one minus the Reserve Requirement for such Loans or Portion in effect from
time to time. The LIBO Rate applicable to any Loan or Portion for any Interest
Period shall be automatically adjusted during such Interest Period to reflect
any change in the applicable Reserve Requirement. If for any reason rates are
not available as provided in CLAUSE (a) of the preceding sentence, the rate to
be used in clause (a) shall be the rate per annum at which Dollar deposits are
offered to Agent in the London interbank eurodollar currency market on the
second Business Day prior to the commencement of such Interest Period at or
about 11:00 a.m. (London time) for delivery on the first day of such Interest
Period and in an amount approximately equal to the amount of the Loan or Portion
to be made or funded by Agent as part of such Revolving Loan Borrowing or Term
Loan Portion.
"LIEN" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, Capital Lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"LOAN" shall mean a Revolving Loan or Term Loan.
"MARGIN STOCK" shall have the meaning given to that term in Regulation U
issued by the Federal Reserve Board, as amended from time to time, and any
successor regulation thereto.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of
Borrower or any Subsidiary; (b) the ability of Borrower or any Subsidiary to pay
or perform the Obligations in accordance with the terms of this Agreement and
the other Credit Documents; (c) the rights and remedies of Agent or any Bank
under this Agreement, the other Credit Documents or any related document,
instrument or agreement; or (d) the value of the Guaranties or the Pledge
Agreements, Agent or any Bank's security interests in the Collateral or the
perfection or priority of such security interests.
"MATERIAL FOREIGN SUBSIDIARY" shall mean each foreign Subsidiary of
Borrower for which at any time Borrower's aggregate Investment therein (whether
direct or indirect) exceeds Ten
1.01-10
<PAGE>
Million Dollars ($10,000,000), as determined in accordance with GAAP.
"MATURITY" shall mean, with respect to any Loan, interest, fee or other
amount payable by Borrower under this Agreement or the other Credit Documents,
the date such Loan, interest, fee or other amount becomes due, whether upon the
stated maturity or due date, upon acceleration or otherwise.
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within the meaning
of section 3(37) of ERISA maintained or contributed to by Borrower or any ERISA
Affiliate.
"NET EQUITY PROCEEDS" shall mean, with respect to any sale or issuance of
any Equity Securities by any Person, the aggregate consideration received by
such Person from such sale or issuance LESS the reasonable amount of fees and
commissions payable to persons other than such Person or any Affiliate of such
Person.
"NET FUNDED DEBT" shall mean, with respect to any Person at any date,
determined on a consolidated basis in accordance with GAAP, the sum of all
Funded Debt of such Person and its Subsidiaries at such date LESS cash on hand
of such Person at such date.
"NET INCOME" shall mean, with respect to any Person for any period,
determined on a consolidated basis in accordance with GAAP, the net income or
net loss of such Person and its Subsidiaries for such period after provision for
income taxes.
"NET OPERATING CASH FLOW" shall mean, with respect to any Person for any
period, determined on a consolidated basis in accordance with GAAP, the sum of:
(a) the Net Income of such Person for such period;
PLUS
(b) the sum, to the extent deducted in computing Net Income in clause (a)
above, of all depreciation, amortization and other non-cash charges of such
Person and its Subsidiaries occurring during such Period;
MINUS
(c) the sum of (i) all extraordinary and non-recurring income and expenses
of such Person and its Subsidiaries occurring during such period to the
extent added in calculating Net Income in CLAUSE (a) above and (ii) all
Capital Expenditures of such Person and its Subsidiaries during such
Period.
"NET WORTH" shall mean, with respect to any Person at any time, the
remainder at such time, determined on a consolidated
1.01-11
<PAGE>
basis in accordance with GAAP, of (a) the total assets of such Person and its
Subsidiaries MINUS (b) the sum (without limitation and without duplication of
deductions) of (i) the total liabilities of such Person and its Subsidiaries,
and (ii) all reserves established by such Person and its Subsidiaries for
anticipated losses and expenses (to the extent not deducted in calculating total
assets in CLAUSE (a) above).
"NOTE" shall mean a Revolving Loan Note or a Term Loan Note.
"NOTICE OF BORROWING" shall mean a Notice of Revolving Loan Borrowing or
the Notice of Term Loan Borrowing.
"NOTICE OF CONVERSION" shall mean a Notice of Revolving Loan Conversion or
Notice of Term Loan Conversion.
"NOTICE OF INTEREST PERIOD SELECTION" shall mean a Notice of Revolving Loan
Interest Period Selection or Notice of Term Loan Interest Period Selection.
"NOTICE OF REVOLVING LOAN BORROWING" shall have the meaning given to that
term in SUBPARAGRAPH 2.01(b).
"NOTICE OF REVOLVING LOAN CONVERSION" shall have the meaning given to that
term in SUBPARAGRAPH 2.01(d).
"NOTICE OF REVOLVING LOAN INTEREST PERIOD SELECTION" shall have the meaning
given to that term in SUBPARAGRAPH 2.01(e).
"NOTICE OF TERM LOAN BORROWING" shall have the meaning given to that term
in SUBPARAGRAPH 2.02(b).
"NOTICE OF TERM LOAN CONVERSION" shall have the meaning given to that term
in SUBPARAGRAPH 2.02(d).
"NOTICE OF TERM LOAN INTEREST PERIOD SELECTION" shall have the meaning
given to that term in SUBPARAGRAPH 2.02(e).
"OBLIGATIONS" shall mean and include, with respect to Borrower, all loans,
advances, debts, liabilities, and obligations, howsoever arising, owed by
Borrower to Agent or any Bank of every kind and description (whether or not
evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of this Agreement or any of
the other Credit Documents, including without limitation all interest, fees,
charges, expenses, attorneys' fees and accountants' fees chargeable to Borrower
or payable by Borrower hereunder or thereunder.
"PARTICIPANT" shall have the meaning given to that term in SUBPARAGRAPH
8.05(b).
1.01-12
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERMITTED ACQUISITION" shall mean any acquisition by Borrower or any
Subsidiary of the stock or assets of another Person which (a) is a friendly
acquisition, (b) the acquisition is a Similar Line of Business, (c) both
immediately before and after giving effect to such acquisition, no Default or
Event of Default shall have occurred or be continuing under the Credit
Documents, (d) with respect to any Permitted Acquisition which takes the form of
a merger, (i) Borrower or a wholly-owned Subsidiary of Borrower shall be the
surviving entity of any such acquisition, and (ii) such merger shall not in any
way affect the validity or enforceability of this Agreement or any of the other
Loan Documents or Borrower or such Subsidiary's obligations hereunder or
thereunder, and (e) such acquisition could not reasonably be expected to have a
Material Adverse Effect.
"PERMITTED INDEBTEDNESS" shall have the meaning given to that term in
SUBPARAGRAPH 5.02(a).
"PERMITTED INVESTMENTS" shall have the meaning given to that term in
SUBPARAGRAPH 5.02(e).
"PERMITTED LIENS" shall have the meaning given to that term in SUBPARAGRAPH
5.02(b).
"PERSON" shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, an unincorporated
association, a joint venture, a trust or other entity or a Governmental
Authority.
"PLEDGE AGREEMENTS" shall mean the Borrower Pledge Agreement and the
Subsidiary Pledge Agreements.
"PORTION" shall mean (a) with respect to the Term Loan Borrowing, a Term
Base Rate Borrowing Portion or Term LIBOR Borrowing Portion, and (b) with
respect to any Term Loan, a Term Base Rate Loan Portion or Term LIBOR Loan
Portion.
"PRICING GRID" shall have the meaning given to that term in SUBPARAGRAPH
2.01(c).
"PRIME RATE" shall mean the per annum prime commercial lending rate
publicly announced by Agent from time to time at its Chicago office. The "Prime
Rate" is determined by Agent from time to time as a means of pricing credit
extensions to some customers and is neither directly tied to any external rate
of interest or index nor necessarily the lowest rate of interest charged by
Agent at any given time for any particular class of customers or credit
extensions. Any change in the Base Rate resulting from a change in such Prime
Rate shall become effective on the Business Day on which each change in the
Prime Rate is announced by Agent.
1.01-13
<PAGE>
"PROPORTIONATE SHARE" shall mean, with respect to each Bank, the percentage
set forth under the caption "Proportionate Share" opposite such Bank's name on
SCHEDULE I, or, if different, such percentage as may be set forth for such Bank
in the Register.
"REGISTER" shall have the meaning given to that term in SUBPARAGRAPH
8.05(d).
"REPORTABLE EVENT" shall have the meaning given to that term in ERISA and
applicable regulations thereunder.
"REQUIRED BANKS" shall mean (a) at any time Revolving Loans or Term Loans
are outstanding, Banks holding sixty-five percent (65%) or more of the aggregate
principal amount of such Loans and (b) at any time no Revolving Loans or Term
Loans are outstanding, Banks whose Proportionate Shares equal or exceed sixty-
five percent (65%).
"REQUIREMENT OF LAW" applicable to any Person shall mean (a) the Articles
or Certificate of Incorporation and By-laws, Partnership Agreement or other
organizational or governing documents of such Person, (b) any Governmental Rule
applicable to such Person, (c) any license, permit, approval or other
authorization granted by any Governmental Authority to or for the benefit of
such Person and (d) any judgment, decision or determination of any Governmental
Authority or arbitrator, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"RESERVE REQUIREMENT" shall mean, with respect to any day in an Interest
Period for a Revolving LIBOR Loan or Term LIBOR Portion, the aggregate of the
reserve requirement rates (expressed as a decimal) in effect on such day for
Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Federal Reserve Board) maintained by a member bank of the
Federal Reserve System. As used herein, the term "reserve requirement" shall
include, without limitation, any basic, supplemental or emergency reserve
requirements imposed on Bank by any Governmental Authority.
"REVOLVING BASE RATE LOAN" shall have the meaning given to that term in
SUBPARAGRAPH 2.01(b).
"REVOLVER EXTENSION REQUEST" shall have the meaning given to that term in
SUBPARAGRAPH 2.01(h).
"REVOLVING LIBOR LOAN" shall have the meaning given to that term in
SUBPARAGRAPH 2.01(b).
"REVOLVING LOAN" shall have the meaning given to that term in SUBPARAGRAPH
2.01(a).
1.01-14
<PAGE>
"REVOLVING LOAN BORROWING" shall mean a borrowing by Borrower consisting of
a Revolving Loan made by each Bank on the same date and of the same Type
pursuant to a single Notice of Revolving Loan Borrowing.
"REVOLVING LOAN NOTE" shall have the meaning given to that term in
SUBPARAGRAPH 2.07(a).
"REVOLVING LOAN MATURITY DATE" shall mean November 16, 1996 or, if such
date is extended from time to time pursuant to SUBPARAGRAPH 2.01(h), any later
date to which so extended.
"SIMILAR BUSINESS LINE" shall mean, with respect to Borrower or any
Subsidiary, a line of business that: (a) provides products or services which
complement or enhance Borrower's or such Subsidiary's existing products,
services or markets; (b) assists in the introduction of Borrower's or such
Subsidiary's existing products or services into new markets; or (c) provides for
entry into Borrower's or such Subsidiary's existing and/or new markets of new
products or services involving medical monitoring, medical diagnosis, medical
therapeutics (other than pharmaceuticals) or the gathering, storage or
management of clinical information.
"SOLVENT" shall mean, with respect to any Person on any date, that on such
date (a) the fair value of the property of such Person is greater than the fair
value of the liabilities (including, without limitation, contingent liabilities)
of such Person, (b) the present fair saleable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature and (d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"SUBSIDIARY" of any Person shall mean (a) any corporation of which more
than 50% of the issued and outstanding Equity Securities having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries, (b) any partnership, joint
venture, or other association of which more than 50% of the equity interest
having the power to vote, direct or control the management of such partnership,
joint venture or other association is at the time owned and controlled by such
Person, by such Person and one or more of the other Subsidiaries or by
1.01-15
<PAGE>
one or more of such Person's other subsidiaries and (c) any other Person
included in the Financial Statements of such Person on a consolidated basis.
Unless otherwise indicated, the term "Subsidiary" shall mean a Subsidiary of
Borrower.
"SUBSIDIARY PLEDGE AGREEMENTS" shall have the meaning given to that term in
SUBPARAGRAPH 2.14(a).
"TANGIBLE NET WORTH" shall mean, with respect to any Person at any time,
the remainder at such time, determined on a consolidated basis in accordance
with GAAP, of (a) the total assets of such Person and its Subsidiaries MINUS (b)
the sum (without limitation and without duplication of deductions) of (i) the
total liabilities of such Person and its Subsidiaries, (ii) all reserves
established by such Person and its Subsidiaries for anticipated losses and
expenses (to the extent not deducted in calculating total assets in CLAUSE (A)
above), and (iii) all intangible assets of such Person and its Subsidiaries (to
the extent included in calculating total assets in CLAUSE (A) above), including,
without limitation, goodwill (including any amounts, however designated on the
balance sheet, representing the cost of acquisition of businesses and
investments in excess of underlying tangible assets), trademarks, trademark
rights, trade name rights, copyrights, patents, patent rights, licenses,
unamortized debt discount, marketing expenses, organizational expenses, non-
compete agreements and deferred research and development.
"TAXES" shall have the meaning given to such term in SUBPARAGRAPH 2.11(a).
"TERM BASE RATE BORROWING PORTION" shall have the meaning given to that
term in SUBPARAGRAPH 2.02(b).
"TERM BASE RATE LOAN PORTION" shall mean, at any time, any portion of a
Term Loan which then bears interest at a rate specified in CLAUSE (I) OF
SUBPARAGRAPH 2.02(c).
"TERM LIBOR BORROWING PORTION" shall have the meaning given to that term in
SUBPARAGRAPH 2.02(b).
"TERM LIBOR LOAN PORTION" shall mean, at any time, any portion of a Term
Loan which then bears interest at a rate specified in CLAUSE (II) OF
SUBPARAGRAPH 2.02(c).
"TERM LOAN" shall have the meaning given to that term in SUBPARAGRAPH
2.02(a).
"TERM LOAN BORROWING" shall mean the borrowing by Borrower consisting of
the Term Loan made by each Bank.
"TERM LOAN INSTALLMENT DATE" shall have the meaning given to that term in
SUBPARAGRAPH 2.02(f).
1.01-16
<PAGE>
"TERM LOAN MATURITY DATE" shall mean the date which is four years after the
Revolving Loan Maturity Date.
"TERM LOAN NOTE" shall have the meaning given to that term in SUBPARAGRAPH
2.07(b).
"TOTAL COMMITMENT" shall have the meaning given to that term in
SUBPARAGRAPH 2.03(a).
"TYPE" shall mean, with respect to any Loan, Borrowing or Portion at any
time, the classification of such Loan, Borrowing or Portion by the type of
interest rate it then bears, whether an interest rate based on the Base Rate or
the LIBO Rate.
"UNUSED COMMITMENT" shall mean, at any time, the remainder of (a) the Total
Commitment at such time minus (b) the sum of the aggregate principal amount of
all Revolving Loans then outstanding.
1.01-17
<PAGE>
SCHEDULE 2.01(c)
PRICING GRID
<TABLE>
<CAPTION>
APPLICABLE MARGIN
-----------------
TERM LOAN BORROWING
-------------------
FUNDED DEBT RATIO REVOLVING LOAN PORTION
----------------- -------------- -------
<S> <C> <C>
Funded Debt Ratio is 0.50% 0.625%
< 2.50 to 1.00
Funded Debt Ratio is 0.75% 1.00%
>= 2.50 to 1.00
</TABLE>
1. The Applicable Margin for each Borrowing, Loans and Portion will be
set for each quarter based on the Funded Debt Ratio for the calendar quarter
which was the second quarter prior to such calendar quarter.
2. If, for any quarter, the Funded Debt Ratio is less than 2.50 to 1.00,
calculated as of the end of such quarter, the Applicable Margin for the second
quarter thereafter for a Revolving Loan would be 0.50% and for a Term Loan
Borrowing Portion would be 0.625%.
3. If, for any quarter, the Funded Debt Ratio is greater than or equal to
2.50 to 1.00, calculated as of the end of such quarter, the Applicable Margin
for the second quarter thereafter for a Revolving Loan would be 0.75% and for a
Term Loan Borrowing Portion would be 1.00%.
4. Examples:
(a) For the fourth quarter of 1994, the Funded Debt Ratio is 2.20.
The Applicable Margin for the second quarter of 1995 would be 0.50% for
Revolving Loans.
(b) For the first quarter of 1995, the Funded Debt Ratio is 2.60.
The Applicable Margin for the third quarter of 1995 for Revolving Loans
would be 0.75%.
2.01(c)-1
<PAGE>
SCHEDULE 3.01
INITIAL CONDITIONS PRECEDENT
A. PRINCIPAL CREDIT DOCUMENTS.
(1) The Credit Agreement, duly executed by Borrower, each Bank and Agent;
(2) The Revolving Loan Note payable to each Bank, duly executed by
Borrower; and
(3) The Guaranties duly executed by each domestic Subsidiary of Borrower.
B. CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation of Borrower, certified as of a recent
date prior to the Closing Date by the Secretary of State of Delaware;
(2) A Certificate of Good Standing for Borrower, certified as of a recent
date prior to the Closing Date by the Secretary of State of Delaware (to include
tax good standing) and a Certificate of Good Standing for Borrower certified as
of a recent date prior to the Closing Date by the Secretary of State of
California and of each state in which Borrower is qualified to do business (each
to include tax good standing, if applicable);
(3) A certificate of the Secretary or Assistant Secretary of Borrower,
dated the Closing Date, certifying (a) that the Certificate of Incorporation of
Borrower, in the form certified by the Secretary of State of Delaware and
delivered to Bank pursuant to ITEM B(1) hereof, is in full force and effect and
has not been amended, supplemented, revoked or repealed since the date of such
certification; (b) that attached thereto is a true and correct copy of the
Bylaws of Borrower as in effect on the Closing Date; (c) that attached thereto
are true and correct copies of resolutions duly adopted by the Board of
Directors of Borrower and continuing in effect, which authorize the execution,
delivery and performance by Borrower of this Agreement and the other Credit
Documents executed or to be executed by Borrower and the consummation of the
transactions contemplated hereby and thereby; and (d) that there are no
proceedings for the dissolution or liquidation of Borrower (commenced or
threatened);
(4) A certificate of the Secretary or Assistant Secretary of Borrower,
dated the Closing Date, certifying the incumbency, signatures and authority of
the officers of Borrower authorized to execute, deliver and perform this
Agreement and the other applicable Credit Documents on behalf of Borrower;
(5) The Articles or Certificate of Incorporation of each domestic
Subsidiary, as applicable, certified as of a recent date
3.01-1
<PAGE>
prior to the Closing Date by the Secretary of State of the jurisdiction of
incorporation of such Subsidiary;
(6) A Certificate of Good Standing (or comparable certificate) for each
domestic Subsidiary, certified as of a recent date prior to the Closing Date by
the Secretary of State (or comparable public official) of such domestic
Subsidiary's jurisdiction of incorporation (each to include tax good standing,
if applicable);
(7) A certificate of the Secretary or Assistant Secretary of such domestic
Subsidiary, dated the Closing Date, certifying (a) that the Articles or
Certificate of Incorporation of such domestic Subsidiary, as applicable, in the
form certified by the Secretary of State of the jurisdiction of incorporation of
such Subsidiary and delivered to Bank pursuant to ITEM B(5) hereof, is in full
force and effect and has not been amended, supplemented, revoked or repealed
since the date of such certification; (b) that attached thereto is a true and
correct copy of the Bylaws of such domestic Subsidiary as in effect on the
Closing Date; (c) that attached thereto are true and correct copies of
resolutions duly adopted by the Board of Directors of such domestic Subsidiary
and continuing in effect, which authorize the execution, delivery and
performance by such domestic Subsidiary of the Credit Documents executed or to
be executed by such domestic Subsidiary and the consummation of the transactions
contemplated thereby; and (d) that there are no proceedings for the dissolution
or liquidation of such domestic Subsidiary (commenced or threatened); and
(8) A certificate of the Secretary or Assistant Secretary of such domestic
Subsidiary, dated the Closing Date, certifying the incumbency, signatures and
authority of the officers of such Subsidiary authorized to execute, deliver and
perform this Agreement and the other applicable Credit Documents on behalf of
such domestic Subsidiary.
C. FINANCIAL INFORMATION.
(1) Borrower's annual financial statement for the fiscal year ended
July 3, 1994, accompanied by a certificate, dated the Closing Date, of the
President, Vice President or Treasurer of Borrower as being true, correct and
complete.
D. OPINIONS.
(1) A written opinion of Morrison & Foerster, outside counsel for Borrower
and the Subsidiaries, dated the Closing Date and addressed to Agent and each
Bank, with respect to the matters set forth SUBPARAGRAPHS 4.01 (a)-(g), (k), (m)
and (p) and otherwise in form and substance satisfactory to Agent and the Banks.
3.01-2
<PAGE>
E. OTHER ITEMS.
(1) A certificate of the President, a Vice President or the Treasurer of
Borrower, addressed to Agent and the Banks and dated the Closing Date,
certifying that:
(a) The representations and warranties set forth in PARAGRAPH 4.01
are true and correct as of such date;
(b) No Event of Default or Default has occurred and is continuing as
of such date; and
(c) Each of the Credit Documents is in full force and effect as of
such date;
(2) Payment to Agent of the fees and expenses of Agent and of Agent's
counsel to the Closing Date; and
(3) Such other evidence as Agent and the Banks may reasonably request to
establish the accuracy and completeness of the representations and warranties
and the compliance with the terms and conditions contained in this Agreement and
the other Credit Documents.
(4) A certificate of the President, Vice President or the Treasurer of
Borrower, dated the Closing Date and attaching thereto a true, complete, correct
and current copy of Borrower's Investment Policy, as in effect on the Closing
Date.
(5) The United States Internal Revenue Service Withholding Exemption
Certificates of any Bank as required by SUBPARAGRAPH 2.11(b).
3.01-3
<PAGE>
SCHEDULE 3.02
TERM LOAN CONDITIONS PRECEDENT
(1) The Term Loan Note payable to each Bank, duly executed by Borrower.
(2) A duly completed and timely delivered Notice of Term Loan Borrowing.
(3) A certificate of the President, a Vice President or the Treasurer of
Borrower, addressed to Agent and the Banks and dated the Revolving Loan Maturity
Date, certifying that:
(a) The representations and warranties set forth in
PARAGRAPH 4.01 are true and correct as of such date;
(b) No Event of Default or Default has occurred and is
continuing as of such date; and
(c) Each of the Credit Documents is in full force and effect as
of such date.
(4) Payment to Agent of the fees and expenses (including any accrued
Commitment Fees) on the Revolving Loan Maturity Date.
3.02-1
<PAGE>
EXHIBIT A
NOTICE OF REVOLVING LOAN BORROWING
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994, (the "CREDIT AGREEMENT"), among Nellcor Incorporated, a
Delaware corporation ("BORROWER"), the financial institutions listed in
SCHEDULE I to the Credit Agreement (the "BANKS") and ABN AMRO Bank N.V., San
Francisco International Branch, as agent for the Banks (in such capacity,
"AGENT") Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(b) of the Credit Agreement,
Borrower hereby requests a Revolving Loan Borrowing upon the following terms:
(a) The principal amount of the requested Revolving Loan
Borrowing is to be $__________;
(b) The requested Revolving Loan Borrowing is to consist of
Revolving ["Base Rate" or "LIBOR"] Loans;
(c) If the requested Revolving Loan Borrowing is to consist of
Revolving LIBOR Loans the initial Interest Period for such Loans will
be __________ months; and
(d) The date of the requested Revolving Loan Borrowing is to be
__________, 19__.
3. Borrower hereby certifies to Agent and the Banks that, on the
date of this Notice of Revolving Loan Borrowing and after giving effect to the
requested Borrowing:
A-1
<PAGE>
(a) The representations and warranties set forth in
PARAGRAPH 4.01 of the Credit Agreement are true and correct as if made
on such date;
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents remains in full force and
effect.
4. Please disburse the proceeds of the requested Revolving Loan
Borrowing to _________________________________________________________________
______________________________________________________________________________.
IN WITNESS WHEREOF, Borrower has executed this Notice of Revolving
Loan Borrowing on the date set forth above.
NELLCOR INCORPORATED
By:________________________________
Name:___________________________
Title:__________________________
A-2
<PAGE>
EXHIBIT B
NOTICE OF REVOLVING LOAN CONVERSION
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994, (the "CREDIT AGREEMENT"), among Nellcor Incorporated, a
Delaware corporation ("BORROWER"), the financial institutions listed in
SCHEDULE I to the Credit Agreement (the "BANKS") and ABN AMRO Bank N.V., San
Francisco International Branch, as agent for the Banks (in such capacity,
"AGENT"). Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(d) of the Credit Agreement,
Borrower hereby requests to convert a Revolving Loan Borrowing as follows:
(a) The Revolving Loan Borrowing to be converted consists of
Revolving ["Base Rate", or "LIBOR"] Loans in the aggregate principal
amount of $__________ which were initially advanced to Borrower on
__________, 19__;
(b) The Revolving Loans in the Revolving Loan Borrowing are to
be converted to Revolving ["Base Rate" and/or "LIBOR"] Loans;
(c) The date of the requested conversion is to be __________,
19__; and
(d) If such Revolving Loans are to be converted into Revolving
LIBOR Loans, the initial Interest Period for such Loans commencing
upon conversion will be __________ months.
3. Borrower hereby certifies to Agent and the Banks that, on the
date of this Notice of Revolving Loan Conversion, and after giving effect to the
requested conversion:
B-1
<PAGE>
(a) The representations and warranties set forth in PARAGRAPH
4.10 of the Credit Agreement are true and correct on such date as if
made on such date;
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents remains in full force and
effect.
IN WITNESS WHEREOF, Borrower has executed this Notice of Revolving
Loan Conversion on the date set forth above.
NELLCOR INCORPORATED
By:_______________________________
Name:__________________________
Title:_________________________
B-2
<PAGE>
EXHIBIT C
NOTICE OF REVOLVING LOAN INTEREST PERIOD SELECTION
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994 (as amended from time to time, the "CREDIT AGREEMENT"), among
Nellcor Incorporated, a Delaware corporation ("BORROWER"), the financial
institutions listed in SCHEDULE I to the Credit Agreement (the "BANKS"), and ABN
AMRO Bank N.V., San Francisco International Branch, as agent for the Banks (in
such capacity, "AGENT"). Unless otherwise indicated, all terms defined in the
Credit Agreement have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(e) of the Credit Agreement, Borrower
hereby irrevocably selects a new Interest Period for a Revolving Loan Borrowing
as follows:
(a) The Revolving Loan Borrowing for which a new Interest Period is
to be selected consists of Revolving LIBOR Loans in the aggregate principal
amount of $___________ which were initially advanced to Borrower on
______________,________;
(b) The last day of the current Interest Period for such Revolving
Loans is __________,_____; and
(c) The next Interest Period for such Revolving Loans commencing upon
the last day of the current Interest Period is to be _________ month[s].
3. Borrower hereby certifies to Agent and the Banks that, on the date of
this Notice of Revolving Loan Interest Period Selection, and after giving effect
to the requested selection:
(a) The representations and warranties of Borrower and its
Subsidiaries set forth in PARAGRAPH 4.01 of the Credit Agreement and in the
other Credit Documents are true and correct on such date as if made on such
date; and
C-1
<PAGE>
(b) No Default or Event of Default has occurred and is continuing or
will result from the requested selection.
IN WITNESS WHEREOF, Borrower has executed this Notice of Revolving Loan
Interest Period Selection on the date set forth above.
NELLCOR INCORPORATED
By:______________________________
Name:_________________________
Title:________________________
C-2
<PAGE>
EXHIBIT D
REVOLVER EXTENSION REQUEST
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
Pursuant to SUBPARAGRAPH 2.01(h) of the Credit Agreement dated as of
November 16, 1994 (the "Credit Agreement") among Nellcor Incorporated, a
Delaware corporation ("Borrower"), the financial institutions parties thereto
(collectively, the "Banks") and ABN AMRO Bank N.V. San Francisco International
Branch, as agent for the Banks (in such capacity, "Agent"), Borrower hereby
requests the Banks to extend the Revolving Loan Maturity Date (as defined in the
Credit Agreement) for an additional one-year period. If a Bank, in its sole and
absolute discretion, consents to such request, such Bank shall evidence such
consent by executing and returning to Agent a copy of this letter in the space
provided.
Borrower hereby certifies to Agent and the Banks that, on the date of
this Notice of Revolving Loan Interest Period Selection, and after giving effect
to the requested selection:
(a) The representations and warranties of Borrower and its
Subsidiaries set forth in PARAGRAPH 4.01 of the Credit Agreement and in the
other Credit Documents are true and correct on such date as if made on such
date; and
(b) No Default or Event of Default has occurred and is continuing or
will result from the requested selection.
Upon the execution of a copy of this letter by each Bank, the return
thereof to Agent and the written notification thereof by Agent to Borrower, the
Revolving Loan Maturity Date, as defined in SCHEDULE II of the Credit Agreement,
shall be amended by changing the date "________, 19__" to "________, 19__."
D-1
<PAGE>
Except as specifically amended hereby, all terms, covenants and
conditions of the Credit Agreement shall remain in full force and effect.
Very truly yours,
NELLCOR INCORPORATED
By:___________________________
Name:______________________
Title:_____________________
CONSENTED TO:
[Name of Bank]
By:__________________________
Name:_____________________
Title:____________________
Date: __________, 19__
D-2
<PAGE>
EXHIBIT E
NOTICE OF TERM LOAN BORROWING
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994, (the "CREDIT AGREEMENT"), among Nellcor Incorporated, a
Delaware corporation ("BORROWER"), the financial institutions listed in
SCHEDULE I to the Credit Agreement (the "BANKS") and ABN AMRO Bank N.V., San
Francisco International Branch, as agent for the Banks (in such capacity,
"AGENT") Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.02(b) of the Credit Agreement,
Borrower hereby requests the Term Loan Borrowing upon the following terms:
(a) The principal amount of the Term Loan Borrowing is to be
$__________;
(b) The portion of the Term Loan Borrowing which is initially to
be a Term Base Rate Borrowing Portion is $__________, the portion(s)
of the Term Loan Borrowing which is (are) initially to be [a] Term
LIBOR Borrowing Portion(s) is (are) $__________; and
(c) If any Portion of the Term Loan Borrowing is initially to be
a Term LIBOR Borrowing Portion the initial Interest Period for each
such Portion is as follows:
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<PAGE>
AMOUNT INTEREST PERIOD
____________ _______________
____________ _______________
____________ _______________
____________ _______________
3. Borrower hereby certifies to Agent and the Banks that, on the
date of this Notice of Term Loan Borrowing and after giving effect to the
requested Borrowing:
(a) The representations and warranties set forth in
PARAGRAPH 4.01 of the Credit Agreement are true and correct as if made
on such date;
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents remains in full force and
effect.
IN WITNESS WHEREOF, Borrower has executed this Notice of Term Loan
Borrowing on the date set forth above.
NELLCOR INCORPORATED
By:___________________________
Name:______________________
Title:_____________________
E-2
<PAGE>
EXHIBIT F
NOTICE OF TERM LOAN CONVERSION
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994, (the "CREDIT AGREEMENT"), among Nellcor Incorporated, a
Delaware corporation ("BORROWER"), the financial institutions listed in
SCHEDULE I to the Credit Agreement (the "BANKS") and ABN AMRO Bank N.V., San
Francisco International Branch, as agent for the Banks (in such capacity,
"AGENT"). Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.02(d) of the Credit Agreement,
Borrower hereby requests to convert a Portion of the Term Loan Borrowing as
follows:
(a) The Portion of the Term Loan Borrowing to be converted is
the Term ["Base Rate" or "LIBOR" Rate] Borrowing Portion in the
aggregate principal amount of $__________ [which has a current
Interest Period of ____ months expiring on __________, 19__];
(b) The Portion to be converted is to be converted into a
Portion(s) of a Type(s), in an amount(s), and, if such Portion(s) is
(are) to include a Term LIBOR Borrowing Portion(s), the Interest
Period(s) therefor is as follows:
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<PAGE>
AMOUNT INTEREST PERIOD
____________ _______________
____________ _______________
____________ _______________
____________ _______________
(c) The date of the requested conversion is to be __________,
19__.
3. Borrower hereby certifies to Agent and the Banks that, on the
date of this Notice of Term Loan Conversion and after giving effect to the
requested conversion:
(a) The representations and warranties set forth in PARAGRAPH
4.10 of the Credit Agreement are true and correct on such date as if
made on such date;
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents remains in full force and
effect.
IN WITNESS WHEREOF, Borrower has executed this Notice of Term Loan
Conversion on the date set forth above.
NELLCOR INCORPORATED
By:___________________________
Name:______________________
Title:_____________________
F-2
<PAGE>
EXHIBIT G
NOTICE OF TERM LOAN INTEREST PERIOD SELECTION
[Date]
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Attn: Gina Brusatori
ABN AMRO Bank N.V.
335 Madison Avenue
New York, NY 10017
Attn: Linda Boardman
1. Reference is made to that certain Credit Agreement, dated as of
November 16, 1994 (as amended from time to time, the "CREDIT AGREEMENT"), among
Nellcor Incorporated, a Delaware corporation ("BORROWER"), the financial
institutions listed in SCHEDULE I to the Credit Agreement (the "BANKS"), and ABN
AMRO Bank N.V., San Francisco International Branch, as agent for the Banks
(jointly in such capacity, "AGENT"). Unless otherwise indicated, all terms
defined in the Credit Agreement have the same respective meanings when used
herein.
2. Pursuant to SUBPARAGRAPH 2.02(e) of the Credit Agreement, Borrower
hereby irrevocably selects a new Interest Period for the Portion of the Term
Loan Borrowing as follows:
(a) The Portion of the Term Loan Borrowing for which a new Interest
Period is to be selected consists of Term LIBOR Loans in the aggregate
principal amount of $_________ which were initially [advanced to]
[converted by] Borrower on _________,_____;
(b) The last day of the current Interest Period for such Portion of
the Term Loan Borrowing is , ; and
(c) The next Interest Period for such Portion of the Term Loan
Borrowing commencing upon the last day of the current Interest Period is to
be ___________ month[s].
3. Borrower hereby certifies to Agent and the Banks that, on the date of
this Notice of Term Loan Interest Period Selection, and after giving effect to
the requested selection:
[(a) The representations and warranties of Borrower and its
Subsidiaries set forth in PARAGRAPH 4.01 of the Credit
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<PAGE>
Agreement and in the other Credit Documents are true and correct on such
date as if made on such date;] and
(b) No Default or Event of Default has occurred and is continuing or
will result from the requested selection.
IN WITNESS WHEREOF, Borrower has executed this Notice of Term Loan Interest
Period Selection on the date set forth above.
NELLCOR INCORPORATED
By:____________________________
Name:_______________________
Title:______________________
G-2
<PAGE>
EXHIBIT H
REVOLVING LOAN NOTE
$______________ San Francisco, California
________________, 1994
FOR VALUE RECEIVED, Nellcor Incorporated, a Delaware corporation
("BORROWER"), hereby promises to pay to the order of ____________________, a
____________________ ("BANK"), the principal sum of
______________________________ DOLLARS ($__________) or such lesser amount as
shall equal the aggregate outstanding principal balance of the Revolving Loans
made by Bank to Borrower pursuant to the Credit Agreement referred to below (the
"CREDIT AGREEMENT"), on or before the Revolving Loan Maturity Date specified in
the Credit Agreement; and to pay interest on said sum, or such lesser amount, at
the rates and on the dates provided in the Credit Agreement.
Borrower shall make all payments hereunder, for the account of Bank's
Applicable Lending Office, to Agent as indicated in the Credit Agreement, in
lawful money of the United States and in same day or immediately available
funds.
Borrower hereby authorizes Bank to record on the schedule(s) annexed
to this note the date and amount of each Revolving Loan and of each payment or
prepayment of principal made by Borrower and agrees that all such notations
shall constitute prima facie evidence of the matters noted.
This note is one of the Revolving Loan Notes referred to in the Credit
Agreement, dated as of November 16, 1994, among Borrower, Bank and the other
financial institutions from time to time parties thereto (collectively, the
"BANKS") and ABN AMRO Bank N.V., San Francisco International Branch, as agent
for the Banks. This note is subject to the terms of the Credit Agreement,
including the rights of prepayment and the rights of acceleration of maturity.
Terms used herein have the meanings assigned to those terms in the Credit
Agreement, unless otherwise defined herein.
The transfer, sale or assignment of any rights under or interest in
this note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.
Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Bank in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due.
Borrower hereby waives notice of presentment, demand, protest or notice of any
other kind.
H-1
<PAGE>
This note shall be governed by and construed in accordance with the
laws of the State of California.
NELLCOR INCORPORATED
By:___________________________
Name:______________________
Title:_____________________
H-2
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
Amount of Unpaid
Type of Amount of Interest Principal Paid Principal Notation
Date Loan Loan Period or Prepaid Balance Made By
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
- - - - - -------------------------------------------------------------------------------
H-3
<PAGE>
EXHIBIT I
TERM LOAN NOTE
$____________________ San Francisco, California
____________________, 199_
FOR VALUE RECEIVED, Nellcor Incorporated, a Delaware corporation
("BORROWER"), hereby promises to pay to the order of ____________________, a
____________________ ("BANK"), the principal sum of
______________________________ DOLLARS ($__________) in _____ (__) installments
of $__________ each, payable on the _____ day of each calendar quarter
(commencing _______ __, 199_ and ending _______ __, 199_); and to pay interest
on the outstanding balance of said sum at the rates and on the dates provided in
the Credit Agreement referred to below (the "CREDIT AGREEMENT"); PROVIDED,
HOWEVER, that all principal and accrued interest remaining unpaid shall be
payable in full on _______ __, 199_.
Borrower shall make all payments hereunder, for the account of Bank's
Applicable Lending Office, to Agent as indicated in the Credit Agreement, in
lawful money of the United States and in same day or immediately available
funds.
This note is one of the Term Loan Notes referred to in the Credit
Agreement, dated as of November 16, 1994, among Borrower, Bank and the other
financial institutions from time to time parties thereto (collectively, the
"BANKS") and ABN AMRO Bank N.V., San Francisco International Branch, as agent
for the Banks. This note is subject to the terms of the Credit Agreement,
including the rights of prepayment and the rights of acceleration of maturity.
Terms used herein have the meanings assigned to those terms in the Credit
Agreement, unless otherwise defined herein.
The transfer, sale or assignment of any rights under or interest in
this note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.
Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Bank in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due.
Borrower hereby waives notice of presentment, demand, protest or notice of any
other kind.
I-1
<PAGE>
This note shall be governed by and construed in accordance with the laws of the
State of California.
NELLCOR INCORPORATED
By:___________________________
Name:______________________
Title:_____________________
I-2
<PAGE>
EXHIBIT J
GUARANTY
THIS GUARANTY, dated as of _________, 19__, is executed by
__________, a__________ corporation ("GUARANTOR"), in favor of ABN AMRO Bank,
N.V., San Francisco International Branch, acting as agent (in such capacity
"AGENT") for the financial institutions from time to time parties to the Credit
Agreement referred to in RECITAL A below (collectively, the "BANKS").
RECITALS
A. Pursuant to a Credit Agreement dated as of November 16, 1994 (the
"CREDIT AGREEMENT"), between Agent, the Banks and Nellcor Incorporated, a
Delaware corporation ("BORROWER") (of which Guarantor is a domestic Subsidiary),
the Banks have agreed to extend certain credit facilities to Borrower upon the
terms and subject to the conditions set forth therein.
B. The Banks' obligations to extend the credit facilities to
Borrower under the Credit Agreement are subject, among other conditions, to
receipt by the Banks of this Guaranty, duly executed by Guarantor.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees with Agent and the Banks as follows:
1. DEFINITIONS AND INTERPRETATION. When used in this Guaranty, the
following terms shall have the following respective meanings:
"ADJUSTED NET WORTH" shall mean, with respect to Guarantor at any
time, the remainder of (a) the fair value of the assets of Guarantor as of
such date, MINUS (b) the fair value of the liabilities of Guarantor as of
such date (excluding, however, any liability of Guarantor hereunder), such
assets and liabilities to be determined in accordance with any state or
federal fraudulent conveyance or transfer law which is applicable to this
Guaranty.
"MAXIMUM GUARANTY AMOUNT" shall mean, at any time, the greatest of
(a) ninety-five percent (95%) of the Adjusted Net Worth of Guarantor at
such time, (b) ninety-five percent (95%) of the Adjusted Net Worth of
Guarantor on the date hereof and (c) the value derived by Guarantor from
the Obligations incurred at or prior to such time.
J-1
<PAGE>
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to Agent
or any Bank of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of the Credit Agreement or any of
the other Credit Documents, including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees chargeable
to Borrower or payable by Borrower thereunder.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement. The rules of construction set forth in
SECTION I OF THE CREDIT AGREEMENT shall, to the extent not inconsistent with
the terms of this Guaranty, apply to this Guaranty and are hereby incorporated
by reference. Guarantor acknowledges receipt of copies of the Credit Agreement
and the other Credit Documents.
2. CONTINUING GUARANTY. Guarantor unconditionally guarantees and
promises to pay to Agent and the Banks, or order, at Agent's office located at
the address set forth in PARAGRAPH 9 hereof, on demand after the occurrence and
during the continuance of an Event of Default, in lawful money of the United
States, any and all Obligations, and to perform on demand after the occurrence
and during the continuance of an Event of Default any and all Obligations;
PROVIDED, HOWEVER, that (a) the liability of Guarantor under this Guaranty shall
not at any time exceed the Maximum Guaranty Amount; and (b) Agent and the Banks
may permit the Obligations to exceed the foregoing limitation without affecting
Guarantor's liability hereunder. Guarantor's undertaking to guarantee shall not
apply to any Obligations created after actual receipt by Bank of written notice
of Guarantor's revocation as to future transactions; PROVIDED, HOWEVER, that
(i) it shall continue to be applicable to any Obligations created thereafter
which result because payments of Obligations as to past transactions are
rescinded or otherwise required to be surrendered by Agent or the Banks after
receipt; and, (ii) it shall continue to be applicable to any Obligations created
thereafter which are created pursuant to any binding commitments of Agent or the
Banks, including commitments under irrevocable letters of credit made or issued
prior to receipt by Bank of such notice. The liability of Guarantor hereunder
is independent of the Obligations, and a separate action or actions may be
brought and prosecuted against Guarantor irrespective of whether action is
brought against Borrower or any other guarantor of the Obligations or whether
Borrower or any other guarantor of the Obligations is joined in any such action
or actions. This Guaranty is a guaranty of payment and not of collection.
J-2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Agent and the Banks that (a) Guarantor is a corporation duly
organized, validly, existing and in good standing under the laws of its state of
incorporation and is duly qualified and in good standing in each jurisdiction
where the nature of its business or properties requires such qualification,
except where the failure to qualify could not have a Material Adverse Effect;
(b) the execution, delivery and performance by Guarantor of this Guaranty are
within the power of Guarantor and have been duly authorized by all necessary
actions on the part of Guarantor; (c) this Guaranty has been duly executed and
delivered by Guarantor and constitutes a legal, valid and binding obligation of
Guarantor, enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally; (d) the
execution, delivery and performance of this Guaranty do not (i) violate any
Requirement of Law, (ii) contravene any material Contractual Obligation, or
(iii) result in the creation or imposition of any Lien upon any property, asset
or revenue of Guarantor except Permitted Liens; (e) no consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the execution,
delivery and performance of this Guaranty, except such consents, approvals,
orders, authorizations, registrations, declarations and filings that are so
required and which have been obtained and are in full force and effect;
(f) Guarantor has paid all taxes and other charges imposed by any Governmental
Authority due and payable by Guarantor other than those which are being
challenged in good faith by appropriate proceedings and for which adequate
reserves have been established; (g) Guarantor is not in violation of any
Requirement of Law or Contractual Obligation other than those the consequences
of which could not have a Material Adverse Effect; (h) Guarantor is neither an
investment company (as defined in the Investment Company Act of 1940) nor
controlled by an investment company; and (i) no litigation, investigation or
proceeding of any Governmental Authority is pending or, to the knowledge of
Guarantor, threatened against Guarantor which, if adversely determined, could
have a Material Adverse Effect.
4. COVENANTS. Guarantor hereby agrees (a) to deliver to Agent and
the Banks (i) notice of any Default or Event of Default or of any other event or
condition which could have a Material Adverse Effect, and (ii) such other
information regarding business, operations or financial or other condition of
Guarantor as Bank may reasonably request; (b) to the extent failure to do so
could have a Material Adverse Effect, to comply with all Requirements of Law and
Contractual Obligations; and (c) to maintain its corporate existence and all
rights, privileges and franchises necessary for the conduct of its business.
J-3
<PAGE>
5. AUTHORIZED ACTIONS. Guarantor authorizes each of Agent and each
Bank, in its discretion, without notice to Guarantor, irrespective of any change
in the financial condition of Borrower, Guarantor or any other guarantor of the
Obligations since the date hereof, and without affecting or impairing in any way
the liability of Guarantor hereunder, from time to time to (a) create new
Obligations, and, either before or after receipt of notice of revocation, renew,
compromise, extend, accelerate or otherwise change the time for payment or
performance of, or otherwise change the terms of the Obligations or any part
thereof, including increase or decrease of the rate of interest thereon;
(b) take and hold security for the payment or performance of the Obligations and
exchange, enforce, waive or release any such security; (c) apply such security
and direct the order or manner of sale thereof; (d) purchase such security at
public or private sale; (e) otherwise exercise any right or remedy it may have
against Borrower, Guarantor, any other guarantor of the Obligations or any
security, including, without limitation, the right to foreclose upon any such
security by judicial or nonjudicial sale; (f) settle, compromise with, release
or substitute any one or more makers, endorsers or guarantors of the
Obligations; and (g) assign the Obligations, this Guaranty, or the other Credit
Documents in whole or in part.
6. WAIVERS. Guarantor waives (a) any right to require Agent and the
Banks to (i) proceed against Borrower or any other guarantor of the Obligations,
(ii) proceed against or exhaust any security received from Borrower or any other
guarantor of the Obligations, or (iii) pursue any other remedy in Agent's or any
Bank's power whatsoever; (b) any defense arising by reason of the application
by Borrower of the proceeds of any borrowing; (c) any defense resulting from the
absence, impairment or loss of any right of reimbursement, subrogation,
contribution or other right or remedy of Guarantor against Borrower, any other
guarantor of the Obligations or any security, whether resulting from an election
by Agent or any Bank to foreclose upon security by nonjudicial sale, or
otherwise; (d) any setoff or counterclaim of Borrower or any defense which
results from any disability or other defense of Borrower or the cessation or
stay of enforcement from any cause whatsoever of the liability of Borrower
(including, without limitation, the lack of validity or enforceability of any
Credit Document); (e) any right to exoneration of sureties which would otherwise
be applicable; (f) until the Obligations have been fully satisfied, any right of
subrogation or reimbursement and, if there are any other guarantors of the
Obligations, any right of contribution, and right to enforce any remedy which
Agent or any Bank now has or may hereafter have against Borrower, and any
benefit of, and any right to participate in, any security now or hereafter
received by Agent or any Bank; (g) all presentments, demands for performance,
notices of non-performance, notices delivered under the Credit Agreement or any
Credit Document, protests, notice of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation or incurring of new or additional
Obligations
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<PAGE>
and notices of any public or private foreclosure sale; (h) the benefit of any
statute of limitations to the extent permitted by law; (i) any appraisement,
valuation, stay, extension, moratorium redemption or similar law or similar
rights for marshalling; and (j) any right to be informed by Agent or
any Bank of the financial condition of Borrower or any other guarantor of the
Obligations or any change therein or any other circumstances bearing upon the
risk of nonpayment or nonperformance of the Obligations. Guarantor has the
ability and assumes the responsibility for keeping informed of the financial
condition of Borrower and any other guarantors of the Obligations and of other
circumstances affecting such nonpayment and nonperformance risks.
7. SUBORDINATION. Guarantor hereby subordinates any Indebtedness of
Borrower to Guarantor to the Obligations. Guarantor agrees that Agent and the
Banks shall be entitled to receive payment of all Obligations before Guarantor
receives payment of any Indebtedness of Borrower to Guarantor. Any payments on
such Indebtedness of Borrower to Guarantor, if Agent or any Bank so requests,
shall be collected, enforced and received by Guarantor as trustee for Agent and
the Banks and be paid over to Agent on account of the Obligations, but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty. Agent is authorized and empowered (but without any
obligation to so do), in its discretion, (a) in the name of Guarantor, to
collect and enforce, and to submit claims in respect of, indebtedness of
Borrower to Guarantor and to apply any amounts received thereon to the
Obligations, and (b) to require Guarantor (i) to collect and enforce,and to
submit claims in respect of, indebtedness of Borrower to Guarantor, and (ii) to
pay any amounts received on such indebtedness to Agent for application to the
Obligations.
8. GENERAL PLEDGE; SETOFF.
(a) PLEDGE. In addition to all liens upon and rights of setoff
against the property of Guarantor given to Agent and the Banks by law or
separate agreement to secure the liabilities of Guarantor hereunder, to the
extent permitted by law, Guarantor hereby grants to each Bank a security
interest in all monies, deposit accounts, securities and other property of
Guarantor now or hereafter in the possession of or on deposit with such Bank,
whether held in a general or special account or deposit, or for safekeeping or
otherwise; and Banks shall have all rights and remedies of a secured party with
respect to such property.
(b) SETOFF. In addition to any rights and remedies of Agent and the
Banks provided by law, each Bank shall have the right, with the prior consent of
Agent but without prior notice to Guarantor, any such notice being expressly
waived by Guarantor to the extent permitted by applicable law, upon the
occurrence and during the continuance of a Default or an Event of Default, to
set-off and apply against the Obligations, whether matured or unmatured, any
amount owing from such Bank to Guarantor,
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<PAGE>
including all deposits, accounts and moneys of Guarantor then or thereafter
maintained with such Bank, at or at any time after, the happening of any of the
above mentioned events.
(c) NONWAIVER. No security interest or right of setoff shall be
deemed to have been waived by any act or conduct on the part of any Bank or by
any failure to exercise such right of setoff or to enforce such security
interest, or by any delay in so doing; and every right of setoff and security
interest shall continue in full force and effect until such right of setoff or
security interest is specifically waived or released by an instrument in writing
executed by such Bank.
9. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon Agent, Guarantor or any Bank under this Guaranty shall be by facsimile
or in writing and faxed, mailed or delivered to each party at the facsimile
number or its address set forth below and if to any Bank to the address set
forth in SCHEDULE I to the Credit Agreement. All such notices and
communications: when sent by federal express or other overnight service,
shall be effective on the Business Day following the deposit with such
service; when mailed, first class postage prepaid and addressed as
aforesaid in the mails, shall be effective upon receipt; when delivered by
hand, shall be effective upon delivery; and when faxed, shall be effective
upon confirmation of receipt.
AGENT: ABN AMRO Bank N.V.
101 California Street
Suite 4550
San Francisco, California 94111-5812
Attn: Gina Brusatori
Telephone: (415) 984-3700
Facsimile: (415) 362-3524
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<PAGE>
ABN AMRO Bank N.V.
335 Madison Avenue
New York, New York 10017
Attn: Linda Boardman
Telephone: (212) 370-8509
Facsimile: (212) 682-0364
BORROWER: Nellcor Incorporated
4280 Hacienda Drive
Pleasanton, California 94588
Attn: Richard Powell
Telephone: (510) 463-4196
Facsimile: (510) 463-4220
GUARANTOR: ______________________________
______________________________
______________________________
Attn: _______________________
Telephone: ___________________
Facsimile: ___________________
(b) NONWAIVER. No failure or delay on Agent's or any Bank's
part in exercising any right hereunder shall operate as a waiver
thereof or of any other right nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of
any other right.
(c) AMENDMENTS AND WAIVERS. This Guaranty may not be amended
or modified, nor may any of its terms be waived, except by written
instruments signed by Guarantor, Agent and the Banks required by the
Credit Agreement. Each waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for
which given.
(d) ASSIGNMENTS. This Guaranty shall be binding upon and inure
to the benefit of Agent, the Banks and Guarantor and their respective
successors and assigns; PROVIDED, HOWEVER, that Agent and the Banks
may sell, assign and delegate their respective rights and obligations
hereunder only as permitted by the Credit Agreement; and PROVIDED,
FURTHER, that Guarantor may not sell, assign or delegate its rights
and obligations without the prior written consent of Agent and the
Banks.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Agent and the Banks under this Guaranty shall be in addition to all
rights, powers and remedies given to Agent or any Bank by virtue of
any applicable law, rule or regulation of any Governmental Authority,
the Credit Agreement, any other Credit Document or any other
agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or
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concurrently without impairing Agent's or any Bank's rights hereunder.
(f) PAYMENTS FREE OF TAXES, ETC. All payments made by
Guarantor under this Guaranty shall be made by Guarantor free and
clear of and without deduction for any and all present and future
taxes, levies, charges, deductions and withholdings. In addition,
Guarantor shall pay upon demand any stamp or other taxes, levies or
charges of any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Guaranty. Upon
request by Agent or any Bank, Guarantor shall furnish evidence
satisfactory to Agent or such Bank that all requisite authorizations
and approvals by, and notices to and filings with, governmental
authorities and regulatory bodies have been obtained and made and that
all requisite taxes, levies and charges have been paid.
(g) PARTIAL INVALIDITY. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this
Guaranty nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(h) GOVERNING LAW. This Guaranty shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
(i) JURY TRIAL. EACH OF GUARANTOR, AGENT AND THE BANKS, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY.
(j) SUBMISSION TO JURISDICTION. Guarantor hereby irrevocably
and unconditionally:
(i) Submits for itself and its property in any legal
action or proceeding relating to this Security Agreement, or for
recognition and enforcement of any judgment in respect thereof,
to the non-exclusive jurisdiction of the courts of the State of
California and the courts of the United States of America for
the Northern District of California, and consents and agrees to
suit being brought in such courts as Agent may elect;
(ii) Waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court
or that such proceeding
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was brought in an inconvenient court and agrees not to plead or
claim the same; and
(iii) Agrees that nothing herein shall affect Agent's right
to effect service of process in any manner permitted by law, and
that Agent shall have the right to bring any legal proceedings
(including a proceeding for enforcement of a judgment entered by
any of the aforementioned courts) against Borrower in such
courts or in any other court or jurisdiction in accordance with
applicable law.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
executed as of the day and year first above written.
[SUBSIDIARY]
By:_______________________________
Name:
Title:
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<PAGE>
EXHIBIT K
BORROWER PLEDGE AGREEMENT
THIS BORROWER PLEDGE AGREEMENT ("PLEDGE AGREEMENT"), dated as of [DATE],
1994 is executed by and between:
(1) NELLCOR INCORPORATED, a Delaware corporation ("Borrower"); and
(2) ABN AMRO Bank, N.V., San Francisco International Bank acting as
agent (in such capacity "AGENT,") for the financial institutions which are
from time to time parties to the Credit Agreement referred to in RECITAL A
below (collectively, the "BANKS").
RECITALS
A. Pursuant to a Credit Agreement, dated as of November 16, 1994 (as
amended from time to time, the "CREDIT AGREEMENT"), among Borrower, the Banks
and Agent, the Banks have agreed to extend certain credit facilities to Borrower
upon the terms and subject to the conditions set forth therein.
B. The Banks' obligations to extend the credit facilities to Borrower
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of this Pledge Agreement, duly executed by Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Agent, for the ratable benefit of the
Banks and Agent, as follows:
1. DEFINITIONS AND INTERPRETATION. When used in this Pledge Agreement,
the following terms shall have the following respective meanings:
"AGENT" shall have the meaning given to that term in the introductory
paragraph hereof.
"BANKS" shall have the meaning given to that term in the introductory
paragraph hereof.
"BORROWER" shall have the meaning given to that term in the
introductory paragraph hereof.
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"COLLATERAL" shall have the meaning given to that term in PARAGRAPH 2
hereof.
"CREDIT AGREEMENT" shall have the meaning given to that term in
RECITAL A hereof.
"EQUITY SECURITIES" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other
equity interests in such Person (regardless of how designated and whether
or not voting or non-voting) and (b) all warrants, options and other rights
to acquire any of the foregoing.
"FOREIGN SUBSIDIARY NONVOTING SHARES" shall mean all Subsidiary Shares
of Material Foreign Subsidiaries having no voting power, including without
limitation as of the date hereof, the Subsidiary Shares listed in PART B OF
ATTACHMENT 2 hereto.
"FOREIGN SUBSIDIARY VOTING SHARES" shall mean all Subsidiary Shares of
Material Foreign Subsidiaries having voting power, including without
limitation as of the date hereof, the Subsidiary Shares listed in PART B OF
ATTACHMENT 2 hereto.
"MATERIAL FOREIGN SUBSIDIARY" shall mean each foreign Subsidiary of
Borrower for which Borrower's aggregate investment therein (whether direct
or indirect) at any time exceeds Ten Million Dollars ($10,000,000), as
determined in accordance with GAAP, including without limitation as of the
date hereof, each of the foreign Subsidiaries listed in PART B OF
ATTACHMENT 1 hereto.
"MAXIMUM PERCENTAGE" shall mean, with respect to the Foreign
Subsidiary Voting Shares of any Material Foreign Subsidiary, the maximum
percentage of such shares that can be pledged to Agent without increasing
the gross income of Borrower pursuant to Sections 951 and 956(c) (or any
successor provisions) of the Internal Revenue Code of 1986, as amended,
which percentage as of the [Closing Date] shall be sixty-six percent (66%).
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to Agent
or any Bank of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of the Credit Agreement or any of
the other Credit Documents, including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees chargeable
to Borrower or payable by Borrower thereunder.
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"PLEDGED SHARES" shall mean the Subsidiary Shares described in
SUBPARAGRAPHS 2(A) AND 2(B) hereof.
"SUBSIDIARY" of any Person shall mean (a) any corporation of which
more than 50% of the issued and outstanding Equity Securities having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its
other Subsidiaries or by one or more of such Person's other Subsidiaries,
(b) any partnership, joint venture, or other association of which more than
50% of the equity interest having the power to vote, direct or control the
management of such partnership, joint venture or other association is at
the time owned and controlled by such Person, by such Person and one or
more of the other Subsidiaries or by one or more of such Person's other
Subsidiaries or (c) any other Person included in the Financial Statements
of such Person on a consolidated basis.
"SUBSIDIARY SHARES" shall mean, with respect to any Material Foreign
Subsidiary of Borrower, all Equity Securities issued by such Subsidiary.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in SECTION I OF THE CREDIT AGREEMENT shall, to the extent
not inconsistent with the terms of this Pledge Agreement, apply to this Pledge
Agreement and are hereby incorporated by reference.
2. PLEDGE. As security for the Obligations, Borrower hereby pledges and
assigns to Agent (for the ratable benefit of the Banks and Agent) and grants to
Agent (for the ratable benefit of the Banks and Agent) a security interest in
all right, title and interest of Borrower in and to the property described in
SUBPARAGRAPHS (A) - (D) below, whether now owned or hereafter acquired
(collectively and severally, the "COLLATERAL"):
(a) All Foreign Subsidiary Voting Shares of each Material Foreign
Subsidiary equal to the Maximum Percentage therefor;
(b) All Foreign Subsidiary Nonvoting Shares;
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(c) All dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed or distributable in
respect of or in exchange for any of the Pledged Shares; and
(d) All proceeds of the foregoing.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
the Banks and Agent as follows:
(a) Borrower is the record legal and beneficial owner of the
Collateral (or, in the case of after-acquired Collateral, at the time
Borrower acquires rights in the Collateral, will be the record legal
and beneficial owner thereof). Except as set forth in ATTACHMENT 3
hereto, no other Person has (or, in the case of after-acquired
Collateral, at the time Borrower acquires rights therein, will have)
any right, title, claim or interest (by way of Lien, purchase option
or otherwise) in, against or to the Pledged Shares or the other
Collateral (except, with respect to the Collateral other than the
Pledged Shares, Permitted Liens).
(b) Agent has (or in the case of after-acquired Collateral, at
the time Borrower acquires rights therein, will have) a first priority
perfected security interest in the Pledged Shares and the other
Collateral (except, with respect to the Collateral other than the
Pledged Shares, Permitted Liens).
(c) All Pledged Shares have been (or in the case of
after-acquired Pledged Shares, at the time Borrower acquires rights
therein, will have been) duly authorized, validly issued and fully
paid and are (or in the case of after-acquired Pledged Shares, at the
time Borrower acquires rights therein, will be) non-assessable.
(d) Borrower has delivered to Agent, the originals of all
Pledged Shares, other Collateral and all certificates, instruments and
other writings evidencing the same, together with all necessary stock
powers, endorsements, assignments and other necessary instruments of
transfer.
(e) Set forth in ATTACHMENT 1 hereto is a true, complete and
accurate list of all Subsidiary Shares. All information set forth in
ATTACHMENT 1 is true, complete and accurate.
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<PAGE>
4. COVENANTS. Borrower hereby agrees as follows:
(a) Borrower, at Borrower's expense, shall promptly procure,
execute and deliver to Agent all documents, instruments and agreements
and perform all acts which are necessary or which Agent may reasonably
request, to establish, maintain, preserve, protect and perfect the
Collateral, the Lien granted to Agent therein and the first priority
of such Lien or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting
the generality of the preceding sentence, Borrower shall (i) procure,
execute and deliver to Agent all stock powers, endorsements,
assignments, financing statements and other instruments of transfer
reasonably requested by Agent, (ii) deliver to Agent promptly upon
receipt the originals of all Pledged Shares and all certificates,
instruments and other writings evidencing the Collateral and (iii)
cause the Lien of Agent to be recorded or registered in the books of
any financial intermediary or clearing corporation requested by Agent.
(b) Borrower shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(c) Upon demand by Agent after the occurrence and during the
continuance of any Event of Default, Borrower shall deposit, or cause
to be deposited, all remittances, checks and other funds (in whatever
form) received with respect to Collateral with Agent.
(d) Borrower shall appear in and defend any action or proceeding
which may affect its title to or Agent's security interest in the
Collateral if an adverse decision is reasonably likely to have a
Material Adverse Effect.
(e) Borrower shall not surrender or lose possession of (other
than to Agent), sell, encumber, lease, rent, option, or otherwise
dispose of or transfer any Collateral or right or interest therein
except as permitted in the Credit Agreement, and Borrower shall keep
the Pledged Shares free of all Liens (except, with respect to the
Collateral other than the Pledged Shares, Permitted Liens).
5. VOTING RIGHTS AND DIVIDENDS PRIOR TO DEFAULT. Until Agent shall
otherwise notify Borrower after an Event of Default has occurred and is
continuing:
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<PAGE>
(a) Borrower may exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Pledged Shares or
any part thereof; PROVIDED, HOWEVER, that Borrower shall not exercise
or refrain from exercising any such rights where the consequence of
such action or inaction would be (i) to impair any Collateral, the
Lien granted to Agent therein, the first priority of such Lien or
Agent's rights and remedies hereunder with respect to any Collateral,
(ii) to breach or violate any representation, warranty or covenant
under the Credit Agreement or any other Credit Document, or
(iii) otherwise inconsistent with the terms of this Pledge Agreement
and the other Credit Documents.
(b) Borrower may receive and retain all dividends permitted by
the Credit Agreement to be paid in cash in respect of the Pledged
Shares, except for any such dividends and interest paid in connection
with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-surplus.
Borrower shall promptly deliver to Agent to hold as Collateral all
dividends which Borrower is not entitled to receive and retain
pursuant to the preceding sentence, in the same form as so received
(with any necessary endorsement), and, until so delivered, shall hold
such dividends and interest in trust for the benefit of Agent,
segregated from the other property or funds of Borrower.
6. AUTHORIZED ACTION BY AGENT. Borrower hereby irrevocably appoints
Agent as its attorney-in-fact and agrees that Agent may perform (but Agent shall
not be obligated to and shall incur no liability to Borrower or any third party
for failure so to do) any act which Borrower is obligated by this Pledge
Agreement to perform, and to exercise such rights and powers as Borrower might
exercise with respect to the Collateral, including, without limitation, the
right to (a) collect by legal proceedings or otherwise and endorse, receive and
receipt for all dividends, interest, payments, proceeds and other sums and
property now or hereafter payable on or on account of the Collateral; (b) enter
into any extension, reorganization, deposit, merger, consolidation or other
agreement pertaining to, or deposit, surrender, accept, hold or apply other
property in exchange for the Collateral; (c) insure, process, preserve and
enforce the Collateral; (d) make any compromise or settlement, and take any
action it deems advisable, with respect to the Collateral; (e) pay any
indebtedness of Borrower relating to the Collateral; and (f) execute UCC
financing statements and other documents, instruments and agreements required
hereunder. Borrower agrees to reimburse Agent upon demand for all reasonable
costs and expenses, including attorneys' fees, Agent may incur while acting as
Borrower's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations.
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<PAGE>
Borrower agrees that such care as Agent gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Collateral when in
Agent's possession; PROVIDED, HOWEVER, that Agent shall not be required to make
any presentment, demand or protest, or give any notice and need not take any
action to preserve any rights against any prior party or any other Person in
connection with the Obligations or with respect to the Collateral.
7. EVENTS OF DEFAULT.
(a) EVENT OF DEFAULT. Borrower shall be deemed in default under
this Pledge Agreement upon the occurrence and during the continuance
of an Event of Default, as that term is defined in the Credit
Agreement.
(b) VOTING RIGHTS AND DIVIDENDS. Upon the occurrence and during
the continuance of an Event of Default:
(i) All rights of Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to SUBPARAGRAPH 5(A) hereof and to receive the
dividends and other payments which it would otherwise be
authorized to receive and retain pursuant to SUBPARAGRAPH 5(B)
hereof shall cease upon notice from Agent and all such rights
shall thereupon become vested in Agent which shall thereupon have
the sole right, but not the obligation, to exercise such voting
and other consensual rights and to receive and hold as Collateral
such dividends and interest payments.
(ii) Upon notice from Agent, Borrower shall promptly deliver
to Agent to hold as Collateral all dividends and interest
thereafter received by Borrower after the occurrence and during
the continuance of any Event of Default, in the same form as so
received (with any necessary endorsement), and, until so
delivered, shall hold such dividends and interest in trust for
the benefit of Agent, segregated from the other property or funds
of Borrower.
(c) OTHER RIGHTS AND REMEDIES. In addition to all other rights
and remedies granted to Agent by this Pledge Agreement, the Credit
Agreement, the other Credit Documents, the UCC and other applicable
Governmental Rules, Agent may, upon the occurrence and during the
continuance of any Event of Default, exercise any one or more of the
following rights and remedies: (i) collect, receive, appropriate or
realize
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<PAGE>
upon the Collateral or otherwise foreclose or enforce Agent's
security interests in any or all Collateral in any manner permitted by
applicable Governmental Rules or in this Pledge Agreement; (ii) notify
any or all issuers of or transfer or paying agents for the Collateral
or any applicable clearing corporation, financial intermediary or
other Person to register the Collateral in the name of Agent or its
nominee and/or to pay all dividends, interest and other amounts
payable in respect of the Collateral directly to Agent; (iii) sell or
otherwise dispose of any or all Collateral at one or more public or
private sales, whether or not such Collateral is present at the place
of sale, for cash or credit or future delivery, on such terms and in
such manner as Agent may determine; and (iv) require Borrower to
assemble all records and information relating to the Collateral and
make it available to Agent at a place to be designated by Agent which
is reasonably convenient to both parties. In any case where notice of
any sale or disposition of any Collateral is required, Borrower hereby
agrees that five (5) days notice of such sale or disposition is
reasonable.
(d) SECURITIES LAWS.
(i) Borrower acknowledges and recognizes that Agent may be
unable to effect a public sale of all or a part of the Pledged
Shares and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire the Pledged Shares for
their own account, for investment and not with a view to the
distribution or resale thereof. Borrower acknowledges that any
such private sales may be at prices and on terms less favorable
to Agent than those of public sales. Borrower agrees that the
conduct of such private sales so as to avoid the violation of any
applicable law shall not result in such sale being deemed not to
have been made in a commercially reasonable manner and that Agent
has no obligation to delay sale of any Pledged Shares to permit
the issuer thereof to register it for public sale under the
Securities Act of 1933, as amended, or under any state securities
law.
(ii) Upon the occurrence of an Event of Default and at
Agent's request, Borrower shall, and shall cause all issuers of
Collateral and all officers and directors thereof and all other
necessary Persons to, execute and deliver all documents,
instruments and agreements and perform all other acts necessary
or, in the opinion of
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Agent, advisable to sell the Collateral in any public or private
sale, including any acts requested by Agent to (A) register any
Collateral under the Securities Act of 1933, (B) qualify any
Collateral under any state securities or "Blue Sky" laws or (C)
otherwise permit any such sale to be made in full compliance with
all applicable Governmental Rules.
8. MISCELLANEOUS.
(a) NOTICES. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to
or upon Borrower or Agent under this Pledge Agreement shall be given
as provided in PARAGRAPH 8.01 OF THE CREDIT AGREEMENT.
(b) WAIVERS; AMENDMENTS. Any term, covenant, agreement or
condition of this Pledge Agreement may be amended or waived only as
provided in the Credit Agreement. No failure or delay by Agent in
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right. Unless otherwise specified in any such waiver or consent, a
waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
(c) SUCCESSORS AND ASSIGNS. This Pledge Agreement shall be
binding upon and inure to the benefit of Agent, Borrower and the Banks
and their respective successors and assigns; PROVIDED, HOWEVER, that
Agent, Borrower, and the Banks may sell, assign and delegate their
respective rights and obligations hereunder only as permitted by the
Credit Agreement. The Banks and the Agent may disclose this Pledge
Agreement as provided in the Credit Agreement.
(d) PARTIAL INVALIDITY. If at any time any provision of this
Pledge Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this Pledge
Agreement nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Agent and the Banks under this Pledge Agreement shall be in addition
to all rights, powers
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and remedies given to Agent and the Banks by virtue of any applicable
Governmental Rule, the Credit Agreement or any other Credit Document,
all of which rights, powers, and remedies shall be cumulative and may
be exercised successively or concurrently without impairing Agent's
rights hereunder. Borrower waives any right to require Agent or any
Bank to proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or any Bank's power.
(f) PAYMENTS FREE OF TAXES, ETC. All payments made by Borrower
under this Pledge Agreement shall be made by Borrower free and clear
of and without deduction for any and all present and future taxes,
levies, charges, deductions and withholdings. In addition, Borrower
shall pay upon demand any stamp or other taxes, levies or charges of
any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Pledge Agreement.
Upon request by Agent, Borrower shall furnish evidence satisfactory to
Agent that all requisite authorizations and approvals by, and notices
to and filings with, governmental authorities and regulatory bodies
have been obtained and made and that all requisite taxes, levies and
charges have been paid.
(g) BORROWER'S CONTINUING LIABILITY. Notwithstanding any
provision of this Pledge Agreement or any other Credit Document or any
exercise by Agent or any Bank of any of its rights hereunder or
thereunder (including, without limitation, any right to collect or
enforce any Collateral), (i) Borrower shall remain liable to perform
its obligations and duties in connection with the Collateral and
(ii) neither Agent nor any Bank shall assume or be considered to have
assumed any liability to perform such obligations and duties or to
enforce any of Borrower's rights in connection with the Collateral.
(h) ATTORNEYS' FEES. In the event of any legal action,
including any judicial proceeding, arbitration or other proceeding, to
enforce or interpret any provision of this Pledge Agreement, the
prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs incurred from the losing party.
(i) GOVERNING LAW. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
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(j) COUNTERPARTS. This Pledge Agreement may be executed in any
number of identical counterparts, any set of which signed by all the
parties hereto shall be deemed to constitute a complete, executed
original for all purposes.
IN WITNESS WHEREOF, Borrower and Agent have caused this Pledge Agreement to
be executed as of the day and year first above written.
NELLCOR INCORPORATED
By: _________________________________
Name:____________________________
Title:___________________________
ABN AMRO BANK N.V., SAN FRANCISCO
INTERNATIONAL BRANCH
By: ________________________________
Name:___________________________
Title: _________________________
By: ________________________________
Name: __________________________
Title: _________________________
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EXHIBIT L
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top
of ATTACHMENT 1 hereto, by and among:
(1) The bank designated under item A of ATTACHMENT I hereto as
the Assignor Bank ("ASSIGNOR BANK"); and
(2) Each bank designated under item B of ATTACHMENT I hereto as
an Assignee Bank (individually, an "ASSIGNEE BANK").
RECITALS
A. Assignor Bank is one of the banks which is a party to the Credit
Agreement dated as of November 16, 1994, by and among Borrower, Assignor Bank
and the other financial institutions parties thereto (collectively, the "Banks")
and ABN AMRO Bank N.V., San Francisco International Branch, as agent for the
banks. (Such credit agreement, as amended, supplemented or otherwise modified
in accordance with its terms from time to time to be referred to herein as the
"CREDIT AGREEMENT").
B. Assignor Bank wishes to sell, and Assignee Bank wishes to purchase, a
portion of Assignor Bank's rights under the Credit Agreement pursuant to
SUBPARAGRAPH 8.05(C) of the Credit Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. DEFINITIONS. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit Agreement
have the respective meanings given to those terms in the Credit Agreement.
2. SALE AND ASSIGNMENT. Subject to the terms and conditions of this
Assignment Agreement, Assignor Bank hereby agrees to sell, assign and delegate
to each Assignee Bank and each Assignee Bank hereby agrees to purchase, accept
and assume an undivided interest in and share of Assignor Bank's rights,
obligations and duties under the Credit Agreement and the other Credit Documents
equal to the Proportionate Share set forth under the caption "Proportionate
Share" opposite such Assignee Bank's name on ATTACHMENT I hereto.
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3. ASSIGNMENT EFFECTIVE UPON NOTICE. Upon (a) receipt by Agent of
five (5) counterparts of this Assignment Agreement (to each of which is attached
a fully completed ATTACHMENT I), each of which has been executed by Assignor
Bank and each Assignee Bank (and, if any Assignee Bank is not then a Bank, by
Borrower and Agent) and (b) payment to Agent of the registration and processing
fee specified in SUBPARAGRAPH 8.05(E) by Assignor Bank, Agent will transmit to
Borrower, Assignor Bank and each Assignee Bank an Assignment Effective Notice
substantially in the form of ATTACHMENT II hereto (an "ASSIGNMENT EFFECTIVE
NOTICE"). Such Assignment Effective Notice shall set forth the date on which
the assignment affected by this Assignment Agreement shall become effective (the
"ASSIGNMENT EFFECTIVE DATE"), which date shall be the fifth Business Day
following the date of such Assignment Effective Notice.
4. ASSIGNMENT EFFECTIVE DATE. At or before 12:00 noon (local time
of Assignor Bank) on the Assignment Effective Date, each Assignee Bank shall pay
to Assignor Bank, in immediately available or same day funds, an amount equal to
the purchase price, as agreed between Assignor Bank and such Assignee Bank (the
"PURCHASE PRICE"), for the Proportionate Share purchased by such Assignee Bank
hereunder. Effective upon receipt by Assignor Bank of the Purchase Price
payable by each Assignee Bank, the sale, assignment and delegation to such
Assignee Bank of such Proportionate Share as described in PARAGRAPH 2 hereof
shall become effective.
5. PAYMENTS AFTER THE ASSIGNMENT EFFECTIVE DATE. Assignor Bank and
each Assignee Bank hereby agree that Agent shall, and hereby authorize and
direct Agent to, allocate amounts payable under the Credit Agreement and the
other Credit Documents as follows:
(a) All principal payments on outstanding Loans that would
otherwise be payable from and after the Assignment Effective Date to
or for the account of Assignor Bank pursuant to the Credit Agreement
and the other Credit Documents shall, instead, be payable to or for
the account of Assignor Bank and the Assignee Bank, as the case may
be, in accordance with the respective Proportionate Share of each as
reflected in ATTACHMENT I to this Assignment Agreement.
(b) All interest, fees and other amounts accrued (including
amounts accrued prior to the Assignment Effective Date) or payable
pursuant to the Credit Agreement and the other Credit Documents with
respect to each Proportionate Share assigned to an Assignee Bank
pursuant to this Assignment Agreement, shall from and after the
Assignment Effective Date be payable to such Assignee Bank.
L-2
<PAGE>
Assignor Bank and each Assignee Bank have made separate arrangements for (i) the
payment by Assignor Bank to such Assignee Bank of any principal, interest, fees
or other amounts previously received or otherwise payable to Assignor Bank
hereunder if Assignor Bank and such Assignee Bank have otherwise agreed that
such Assignee Bank is entitled to receive any such amounts and (ii) the payment
by such Assignee Bank to Assignor Bank of any principal, interest, fees or other
amounts payable to such Assignee Bank hereunder if Assignor Bank and such
Assignee Bank have otherwise agreed that Assignor Bank is entitled to receive
any such amounts.
6. DELIVERY OF NOTES. On or prior to the Assignment Effective Date,
Assignor Bank will deliver to Agent the Notes payable to Assignor Bank. On or
prior to the Assignment Effective Date, Borrower will deliver to Agent Notes for
each Assignee Bank and Assignor Bank, in each case in principal amounts
reflecting, in accordance with the Credit Agreement, their respective
Commitments (as adjusted pursuant to this Assignment Agreement). As provided in
SUBPARAGRAPH 8.05(C) of the Credit Agreement, each such new Revolving Loan Note
shall be dated the Closing Date and each such new Term Loan Note shall be dated
the Revolving Loan Maturity Date. Promptly after the Assignment Effective Date,
Agent will send to each of Assignor Bank and the Assignee Banks its new Notes
and will send to Borrower the superseded Notes of Assignor Bank, marked
"Cancelled."
7. DELIVERY OF COPIES OF CREDIT DOCUMENTS. Concurrently with the
execution and delivery hereof, Assignor Bank will provide to each Assignee Bank
(if it is not already a Bank party to the Credit Agreement) conformed copies of
all documents delivered to Assignor Bank on or prior to the Closing Date in
satisfaction of the conditions precedent set forth in the Credit Agreement.
8. FURTHER ASSURANCES. Each of the parties to this Assignment
Agreement agrees that at any time and from time to time upon the written request
of any other party, it will execute and deliver such further documents and do
such further acts and things as such other party may reasonably request in order
to effect the purposes of this Assignment Agreement.
9. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS. Assignor Bank
and each Assignee Bank further represent and warrant to and covenant with each
other, Agent and the Banks as follows:
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free
and clear of any adverse claim, Assignor Bank makes no representation
or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in
L-3
<PAGE>
or in connection with the Credit Agreement or the other Credit
Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or the other
Credit Documents furnished.
(b) Assignor Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
Borrower or any of its obligations under the Credit Agreement or any
other Credit Documents.
(c) Each Assignee Bank confirms that it has received a copy of
the Credit Agreement and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment Agreement.
(d) Each Assignee Bank will, independently and without reliance
upon Agent, Assignor Bank or any other Bank and based upon such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Credit Agreement and the other Credit Documents.
(e) Each Assignee Bank appoints and authorizes Agent to take
such action as Agent on its behalf and to exercise such powers under
the Credit Agreement and the other Credit Documents as are delegated
to Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, all in accordance with SECTION VII of
the Credit Agreement.
(f) Each Assignee Bank agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the
Credit Agreement and the other Credit Documents are required to be
performed by it as a Bank.
(g) ATTACHMENT I hereto sets forth the revised Proportionate
Shares of Assignor Bank and each Assignee Bank as well as
administrative information with respect to each Assignee Bank.
10. EFFECT OF THIS ASSIGNMENT AGREEMENT. On and after the Assignment
Effective Date, (a) each Assignee Bank shall be a Bank with a Proportionate
Share as set forth on ATTACHMENT I hereto and shall have the rights, duties and
obligations of such a Bank under the Credit Agreement and the other Credit
Documents and (b) Assignor Bank shall be a Bank with a Proportionate Share as
set forth on ATTACHMENT I hereto, or, if the Proportionate Share of Assignor
Bank has been reduced to 0%, Assignor Bank shall cease to be a Bank.
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<PAGE>
11. MISCELLANEOUS. This Assignment Agreement shall be governed by,
and construed in accordance with, the laws of the State of California.
Paragraph headings in this Assignment Agreement are for convenience of reference
only and are not part of the substance hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in ATTACHMENT I hereto.
______________________________, as
Assignor Bank
By:___________________________
Name:______________________
Title:_____________________
______________________________, as an
Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
______________________________, as an
Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
______________________________, as an
Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
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<PAGE>
CONSENTED TO AND ACKNOWLEDGED BY:
______________________________
By:___________________________
Name:______________________
Title:_____________________
______________________________,
As Agent
By:___________________________
Name:______________________
Title:_____________________
ACCEPTED FOR RECORDATION
IN REGISTER:
______________________________,
As Agent
By:___________________________
Name:______________________
Title:_____________________
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<PAGE>
ATTACHMENT I
TO ASSIGNMENT AGREEMENT
NAMES, ADDRESSES AND PROPORTIONATE SHARES
OF ASSIGNOR BANK AND ASSIGNEE BANKS AFTER ASSIGNMENT
______________, 19__
A. ASSIGNOR BANK PROPORTIONATE SHARE*
______________________________ ____%
Applicable Lending Office:
______________________________
______________________________
______________________________
______________________________
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No: __________
Facsimile No: __________
Wiring Instructions:
______________________________
______________________________
B. ASSIGNEE BANKS
______________________________ ____%
Applicable Lending Office:
______________________________
______________________________
______________________________
______________________________
* To be expressed by a percentage rounded to the seventh-digit to the right
of the decimal point.
L(I)-1
<PAGE>
B. ASSIGNEE BANKS (cont'd) PROPORTIONATE SHARE
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No: __________
Facsimile No: __________
SF3-49858.7 L(I)-1
Wiring Instructions:
______________________________
______________________________
______________________________ ____%
Applicable Lending Office:
______________________________
______________________________
______________________________
______________________________
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No: __________
Facsimile No: __________
Wiring Instructions:
______________________________
______________________________
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<PAGE>
ATTACHMENT II
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
The undersigned, as agent for the banks under the Credit Agreement,
dated as of November 16, 1994 among Nellcor Incorporated, a Delaware corporation
("BORROWER"), the financial institutions parties thereto (the "BANKS") and ABN
AMRO Bank N.V., San Francisco International Branch, as agent for the Banks (in
such capacity, "AGENT"), acknowledges receipt of five executed counterparts of a
completed Assignment Agreement, a copy of which is attached hereto. [NOTE:
Attach copy of Assignment Agreement.] Terms defined in such Assignment
Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________ [Insert fifth business day
following date of Assignment Effective Notice].
2. Pursuant to such Assignment Agreement, Assignor Bank is required
to deliver to Agent on or before the Assignment Effective Date the Notes payable
to Assignor Bank.
3. Pursuant to such Assignment Agreement, Borrower is required to
deliver to Agent on or before the Assignment Effective Date the following Notes,
each dated _________________ [Insert appropriate date]:
[Describe each new Note for Assignor Bank and each Assignee Bank as to
principal amount.]
4. Pursuant to such Assignment Agreement, each Assignee Bank is
required to pay its Purchase Price to Assignor Bank at or before 12:00 Noon on
the Assignment Effective Date in immediately available funds.
Very truly yours,
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL
BRANCH, as Agent
By:___________________________
Name:_________________________
Title:________________________
L(II)-1
<PAGE>
SEVERANCE AGREEMENT
This Agreement, dated as of December 1, 1994, is entered into between
Nellcor Incorporated, a corporation organized under the laws of the State of
Delaware ("Nellcor"), and C. Raymond Larkin, Jr. (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of December 1,
1994 and shall continue in effect until December 1, 1996; PROVIDED, HOWEVER,
that commencing on December 1, 1996 and on each December 1 thereafter, the term
of this Agreement shall automatically be extended for one (1) year unless the
Company or the Executive shall have given written notice to the other at least
ninety (90) days prior thereto that the term of this Agreement shall not be so
extended; and PROVIDED, FURTHER, HOWEVER, that notwithstanding any such notice
by the Company not to extend, the term of this Agreement shall not expire prior
to the expiration of twenty-four (24) months after the occurrence of a Change in
Control.
2. DEFINITIONS.
2.1. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date, including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii)
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<PAGE>
vacation pay and (iv) bonuses and incentive compensation (other than the "Pro
Rata Bonus" (as hereinafter defined)).
2.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall
mean the greater of the Executive's annual base salary (a) at the rate in effect
on the Termination Date or (b) at the highest rate in effect at any time during
the ninety (90) day period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the employee benefit plans of the
Company or any other agreement or arrangement.
2.3. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's cash bonus incentive plan for the fiscal year in
which the Termination Date occurs; (b) the annual bonus paid or payable to the
Executive under the Company's cash bonus incentive plan for the full fiscal year
ended prior to the fiscal year during which the Termination Date occurred; (c)
the annual bonus paid or payable to the Executive under the Company's cash bonus
incentive plan for the full fiscal year ended prior to the fiscal year during
which a Change in Control occurred; (d) the average of the annual bonuses paid
or payable to the Executive under the Company's cash bonus incentive plan during
the three full fiscal years ended prior to the fiscal year during which the
Termination Date occurred; or (e) the average of the annual bonuses paid or
payable to the Executive under the Company's cash bonus incentive plan during
the three full fiscal years ended prior to the fiscal year during which the
Change in Control occurred.
2.4. CAUSE. For purposes of this Agreement, a termination of
employment is for "Cause" if the basis of the termination is fraud,
misappropriation, embezzlement or willful engagement by the Executive in
misconduct which is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole (no act, or failure to act, on the part of the
Executive shall be considered "willful" unless done, or omitted to be done, by
the Executive not in good faith and without a reasonable belief that the action
or omission was in the best interests of the Company and its subsidiaries);
PROVIDED, HOWEVER, that the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a Notice of Termination (as hereinafter defined) and copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of those members of the Company's Board of Directors who are not then employees
of the Company at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive was guilty of the
conduct set forth in the first sentence of this Section 2.4 and specifying the
particulars thereof in detail.
2.5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term is used for
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<PAGE>
purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty five percent (25%) or more of the combined voting power of the Company's
then outstanding Voting Securities; PROVIDED, HOWEVER, that in determining
whether a Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the Company (a "Subsidiary"),
(2) the Company or any Subsidiary, or (3) any Person in connection with a "Non-
Control Transaction (as hereinafter defined);
(b) The individuals who are members of the Board as of the date this
Agreement is approved by the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; PROVIDED, HOWEVER, that if the
appointment, election or nomination for election by the Company's stockholders,
of any new director is approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered a member of the Incumbent Board; PROVIDED, FURTHER, HOWEVER, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization satisfies the
conditions set forth in (A) or (B) below:
(A) (i) the stockholders of the Company immediately before such
merger, consolidation or reorganization, own immediately following such merger,
consolidation or reorganization, directly or indirectly, at least fifty-one
percent (51%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization;
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least a majority of the members of
the board of directors of the Surviving Corporation; and
3
<PAGE>
(iii) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or reorganization, had
Beneficial Ownership of twenty five percent (25%) or more of the then
outstanding voting Securities) has Beneficial Ownership of twenty five percent
(25%) or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities; or
(B) the entering into of any such transaction shall have been
approved by the Incumbent Board prior to or on the date that is 270 calendar
days from the effective date of this Agreement and shall have been intended by
the Incumbent Board to be accounted for using the "pooling of interests" method
of accounting, such intent to be evidenced in the resolutions of the Incumbent
Board approving the transaction;
A transaction described in subsections (A) and (B) above shall herein
be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, PROVIDED, HOWEVER, that, if
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial Owner
of any additional voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
2.6. COMPANY. For purposes of this Agreement, the "Company" shall
mean Nellcor Incorporated and its Subsidiaries and shall include Nellcor's
"Successors and Assigns" (as hereinafter defined).
2.7. DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a period of
one hundred eighty (180) consecutive days and the Executive has not returned to
full time employment prior to the Termination Date as stated in the "Notice of
Termination".
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<PAGE>
2.8. GOOD REASON.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(1) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from the
Executive's status, title, position or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with the
Executive's status, title, position or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; or any removal of the Executive from or failure to reappoint or
reelect the Executive to any of such offices or positions, except in connection
with the termination of the Executive's employment for Disability, Cause, as a
result of the Executive's death or by the Executive other than for Good Reason;
(2) A reduction in the Executive's base salary or any failure to pay
the Executive any compensation or benefits to which the Executive is entitled
within five (5) days of the date due;
(3) the Company's requiring the Executive to be based at any place
outside a 60-mile radius from Pleasanton, California, except for reasonably
required travel on the Company's business which is not materially greater than
such travel requirements prior to the Change in Control;
(4) the failure by the Company to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
at any time within ninety (90) days preceding the date of a Change in Control or
at any time thereafter, including, but not limited to, the plans listed on
Appendix A, unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Executive, or (B) provide the
Executive with compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which the Executive
was participating at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter;
(5) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition is not
dismissed within sixty (60) days;
(6) any material breach by the Company of any provision of this
Agreement;
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(7) any purported termination of the Executive's employment for Cause
by the Company which does not comply with the terms of Section 2.4; or
(8) the failure of the Company to obtain an agreement, satisfactory
to the Executive, from any Successors and Assigns to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof.
(b) The Executive's right to terminate the Executive's employment
pursuant to this Section 2.8 shall not be affected by the Executive's incapacity
due to physical or mental illness.
2.9. NOTICE OF TERMINATION. For purposes of this Agreement, following
a Change in Control, "Notice of Termination" shall mean a written notice of
termination of the Executive's employment from the Company, which notice
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
2.10. PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean in, the case of the Executive's death, the
Executive's date of death, in the case of Good Reason, the last day of the
Executive's employment and, in all other cases, the date specified in the Notice
of Termination; PROVIDED, HOWEVER, that if the Executive's employment is
terminated by the Company for Cause or due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least 30 days.
3. TERMINATION OF EMPLOYMENT.
3.1. If, during the term of this Agreement, the Executive's employment
with the Company shall be terminated within twenty-four (24) months following a
Change in Control, the Executive shall be entitled to the following compensation
and benefits:
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(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation and, if such
termination is other than by the Company for Cause, the Company shall also pay
the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued Compensation
and a Pro Rata Bonus;
(ii)the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal to
three times the sum of (A) the Base Amount and (B) the Bonus
Amount;
(iii) for a number of months equal to thirty six (36) (the
"Continuation Period"), the Company shall, at its expense,
continue on behalf of the Executive and the Executive's
dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits provided (A) to the
Executive at any time during the 90-day period prior to the
Change in Control or at any time thereafter or (B) to other
similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and
benefits (including deductibles and costs) provided in this
Section 3.1(b)(iii) during the Continuation Period shall be no
less favorable to the Executive and the Executive's dependents
and beneficiaries, than the most favorable of such coverages and
benefits during any of the periods referred to in clauses (A) and
(B) above. The Company's obligation hereunder with respect to
the foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce
the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and
benefits of the combined benefit plans are no less favorable to
the Executive than the coverages and benefits required to be
provided hereunder. This subsection (iii) shall not be
interpreted so as to limit any benefits to which the Executive or
the Executive's dependents or beneficiaries may be entitled under
any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits;
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(iv) the restrictions on any outstanding equity incentive awards,
including stock options and restricted stock, granted to the
Executive under the Company's 1991 Equity Incentive Plan (or any
predecessor plans thereto), the Company's 1994 Equity Incentive
Plan or under any other incentive plan or arrangement shall lapse
and such incentive award shall become 100% vested and, in the
case of stock options, immediately exercisable;
(v) for the duration of the Continuation Period, the Company
shall, at its expense, provide the Executive with outplacement
and career counseling services of the Executive's choice,
PROVIDED, HOWEVER, that the Company's obligation to pay for such
services shall in no event exceed an aggregate amount equal to
25% of the Base Amount.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and
(ii) shall be paid in a single lump sum cash payment within forty five (45) days
after the Executive's Termination Date (or earlier, if required by applicable
law).
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 3.1(b)(iii).
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans
(including, the plans listed on Appendix A) and other applicable programs,
policies and practices then in effect,
4. NOTICE OF TERMINATION. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. EXCISE TAX LIMITATION.
(a) Notwithstanding anything contained in this Agreement, in the
event that any payment or benefit (within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code")), to the Executive or
for the Executive's benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, the Executive's employment with the Company or a Change in
Control (a
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"Payment" or "Payments") would be subject to the excise tax imposed by Section
4999 of the Code ("the 'Excise Tax), the Payments shall be reduced (but not
below zero) if and to the extent necessary so that no Payment to be made or
benefit to be provided to the Executive shall be subject to the Excise Tax (such
reduced Payments being hereinafter referred to as the "Limited Payment Amount").
Unless the Executive shall have given prior written notice specifying a
different order to the Company to effectuate the Limited Payment Amount, the
Company shall reduce or eliminate the Payments by first reducing or eliminating
cash payments and then by reducing those payments or benefits which are not
payable in cash, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Determination (as
hereinafter defined). Any notice given by the Executive pursuant to the
preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive's rights and entitlements to
any benefits or compensation.
(b) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination,), together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days
of the delivery of the Determination to the Executive, the Executive shall have
the right to dispute the Determination (the "Dispute"). If there is no Dispute,
the Determination shall be binding, final and conclusive upon the Company and
the Executive subject to the application of Section 5(c) below.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made to, or
provided for the benefit of, the Executive either will be greater (an "Excess
Payment") or less (an "Underpayment") than the amounts provided for by the
limitations contained in Section 5(a). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the "IRS") proceeding
which has been finally and conclusively resolved that an Excess Payment has been
made, such Excess Payment shall be deemed for all purposes to be a loan to the
Executive made on the date the Executive received the Excess Payment and the
Executive shall repay the Excess Payment to the Company on demand (but not less
than ten (10) days after written notice is received by the Executive) together
with interest on the Excess Payment at the "Applicable Federal Rate" (as defined
in Section 1274(d) of the Code) from the date of the Executive's receipt of such
Excess Payment until the date of such repayment. In the event that it is
determined by (i) the Accounting Firm, the Company (which shall include the
position taken by the Company, or together with its
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consolidated group, on its federal income tax return) or the IRS, (ii) pursuant
to a determination by a court, or (iii) upon the resolution to the Executive's
satisfaction of the Dispute that an Underpayment has occurred, the Company shall
pay an amount equal to the Underpayment to the Executive within ten (10) days of
such determination or resolution, together with interest on such amount at the
Applicable Federal Rate from the date such amount would have been paid to the
Executive until the date of payment.
6. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's beneficiaries
or legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal personal representative.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with the
Dispute whether as a result of any applicable government taxing authority
proceeding, audit or otherwise) or by any other plan or arrangement maintained
by the Company under which the Executive is or may be entitled to receive
benefits, and (c) the Executive's hearing before the Board as contemplated in
Section 2.4 of this Agreement; PROVIDED, HOWEVER, that the circumstances set
forth in clauses (a) and (b) occurred on or after a Change in Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be denied to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or
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program provided by the Company (except for any severance or termination
policies, plans, programs or practices) and for which the Executive may qualify,
nor shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company (except for any severance or
termination agreement). Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
10. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Alameda County in the State of California.
13. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
NELLCOR INCORPORATED EXECUTIVE
By:
Its:
ATTEST:
By:
Its:
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SEVERANCE AGREEMENT
This Agreement, dated as of December 1, 1994, is entered into between
Nellcor Incorporated, a corporation organized under the laws of the State of
Delaware ("Nellcor"), and _______________________ (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of December 1,
1994 and shall continue in effect until December 1, 1996; PROVIDED, HOWEVER,
that commencing on December 1, 1996 and on each December 1 thereafter, the term
of this Agreement shall automatically be extended for one (1) year unless the
Company or the Executive shall have given written notice to the other at least
ninety (90) days prior thereto that the term of this Agreement shall not be so
extended; and PROVIDED, FURTHER, HOWEVER, that notwithstanding any such notice
by the Company not to extend, the term of this Agreement shall not expire prior
to the expiration of twenty-four (24) months after the occurrence of a Change in
Control.
2. DEFINITIONS.
2.1. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date, including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii)
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vacation pay and (iv) bonuses and incentive compensation (other than the "Pro
Rata Bonus" (as hereinafter defined)).
2.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall
mean the greater of the Executive's annual base salary (a) at the rate in effect
on the Termination Date or (b) at the highest rate in effect at any time during
the ninety (90) day period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the employee benefit plans of the
Company or any other agreement or arrangement.
2.3. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's cash bonus incentive plan for the fiscal year in
which the Termination Date occurs; (b) the annual bonus paid or payable to the
Executive under the Company's cash bonus incentive plan for the full fiscal year
ended prior to the fiscal year during which the Termination Date occurred; (c)
the annual bonus paid or payable to the Executive under the Company's cash bonus
incentive plan for the full fiscal year ended prior to the fiscal year during
which a Change in Control occurred; (d) the average of the annual bonuses paid
or payable to the Executive under the Company's cash bonus incentive plan during
the three full fiscal years ended prior to the fiscal year during which the
Termination Date occurred; or (e) the average of the annual bonuses paid or
payable to the Executive under the Company's cash bonus incentive plan during
the three full fiscal years ended prior to the fiscal year during which the
Change in Control occurred.
2.4. CAUSE. For purposes of this Agreement, a termination of
employment is for "Cause" if the basis of the termination is fraud,
misappropriation, embezzlement or willful engagement by the Executive in
misconduct which is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole (no act, or failure to act, on the part of the
Executive shall be considered "willful" unless done, or omitted to be done, by
the Executive not in good faith and without a reasonable belief that the action
or omission was in the best interests of the Company and its subsidiaries);
PROVIDED, HOWEVER, that the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a Notice of Termination (as hereinafter defined) and copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of those members of the Company's Board of Directors who are not then employees
of the Company at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive was guilty of the
conduct set forth in the first sentence of this Section 2.4 and specifying the
particulars thereof in detail.
2.5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term is used for
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purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty five percent (25%) or more of the combined voting power of the Company's
then outstanding Voting Securities; PROVIDED, HOWEVER, that in determining
whether a Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the Company (a "Subsidiary"),
(2) the Company or any Subsidiary, or (3) any Person in connection with a "Non-
Control Transaction (as hereinafter defined);
(b) The individuals who are members of the Board as of the date this
Agreement is approved by the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; PROVIDED, HOWEVER, that if the
appointment, election or nomination for election by the Company's stockholders,
of any new director is approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered a member of the Incumbent Board; PROVIDED, FURTHER, HOWEVER, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving the Company,
unless such merger, consolidation or reorganization satisfies the conditions set
forth in (A) or (B) below:
(A) (i) the stockholders of the Company immediately before such
merger, consolidation or reorganization, own immediately following such merger,
consolidation or reorganization, directly or indirectly, at least fifty-one
percent (51%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization;
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least a majority of the members of
the board of directors of the Surviving Corporation; and
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(iii) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or reorganization, had
Beneficial Ownership of twenty five percent (25%) or more of the then
outstanding voting Securities) has Beneficial Ownership of twenty five percent
(25%) or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities; or
(B) the entering into of any such transaction shall have been
approved by the Incumbent Board prior to or on the date that is 270 calendar
days from the effective date of this Agreement and shall have been intended by
the Incumbent Board to be accounted for using the "pooling of interests" method
of accounting, such intent to be evidenced in the resolutions of the Incumbent
Board approving the transaction;
A transaction described in subsections (A) and (B) above shall herein
be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, PROVIDED, HOWEVER, that, if
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial Owner
of any additional voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
2.6. COMPANY. For purposes of this Agreement, the "Company" shall
mean Nellcor Incorporated and its Subsidiaries and shall include Nellcor's
"Successors and Assigns" (as hereinafter defined).
2.7. DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a period of
one hundred eighty (180) consecutive days and the Executive has not returned to
full time employment prior to the Termination Date as stated in the "Notice of
Termination".
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2.8. GOOD REASON.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(1) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from the
Executive's status, title, position or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with the
Executive's status, title, position or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; or any removal of the Executive from or failure to reappoint or
reelect the Executive to any of such offices or positions, except in connection
with the termination of the Executive's employment for Disability, Cause, as a
result of the Executive's death or by the Executive other than for Good Reason;
(2) A reduction in the Executive's base salary or any failure to pay
the Executive any compensation or benefits to which the Executive is entitled
within five (5) days of the date due;
(3) the Company's requiring the Executive to be based at any place
outside a 60-mile radius from Pleasanton, California, except for reasonably
required travel on the Company's business which is not materially greater than
such travel requirements prior to the Change in Control;
(4) the failure by the Company to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
at any time within ninety (90) days preceding the date of a Change in Control or
at any time thereafter, including, but not limited to, the plans listed on
Appendix A, unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Executive, or (B) provide the
Executive with compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which the Executive
was participating at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter;
(5) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition is not
dismissed within sixty (60) days;
(6) any material breach by the Company of any provision of this
Agreement;
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(7) any purported termination of the Executive's employment for Cause
by the Company which does not comply with the terms of Section 2.4; or
(8) the failure of the Company to obtain an agreement, satisfactory
to the Executive, from any Successors and Assigns to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof.
(b) The Executive's right to terminate the Executive's employment
pursuant to this Section 2.8 shall not be affected by the Executive's incapacity
due to physical or mental illness.
2.9. NOTICE OF TERMINATION. For purposes of this Agreement, following
a Change in Control, "Notice of Termination" shall mean a written notice of
termination of the Executive's employment from the Company, which notice
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
2.10. PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean in, the case of the Executive's death, the
Executive's date of death, in the case of Good Reason, the last day of the
Executive's employment and, in all other cases, the date specified in the Notice
of Termination; PROVIDED, HOWEVER, that if the Executive's employment is
terminated by the Company for Cause or due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least 30 days.
3. TERMINATION OF EMPLOYMENT.
3.1. If, during the term of this Agreement, the Executive's employment
with the Company shall be terminated within twenty-four (24) months following a
Change in Control, the Executive shall be entitled to the following compensation
and benefits:
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(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation and, if such
termination is other than by the Company for Cause, the Company shall also pay
the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued Compensation
and a Pro Rata Bonus;
(ii)the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal
to two times the sum of (A) the Base Amount and (B) the Bonus
Amount;
(iii) for a number of months equal to twenty four (24) (the
"Continuation Period"), the Company shall, at its expense,
continue on behalf of the Executive and the Executive's
dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits provided (A) to the
Executive at any time during the 90-day period prior to the
Change in Control or at any time thereafter or (B) to other
similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and
benefits (including deductibles and costs) provided in this
Section 3.1(b)(iii) during the Continuation Period shall be no
less favorable to the Executive and the Executive's dependents
and beneficiaries, than the most favorable of such coverages and
benefits during any of the periods referred to in clauses (A) and
(B) above. The Company's obligation hereunder with respect to
the foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce
the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and
benefits of the combined benefit plans are no less favorable to
the Executive than the coverages and benefits required to be
provided hereunder. This subsection (iii) shall not be
interpreted so as to limit any benefits to which the Executive or
the Executive's dependents or beneficiaries may be entitled under
any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits;
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(iv) the restrictions on any outstanding equity incentive awards,
including stock options and restricted stock, granted to the
Executive under the Company's 1991 Equity Incentive Plan (or any
predecessor plans thereto), the Company's 1994 Equity Incentive
Plan or under any other incentive plan or arrangement shall lapse
and such incentive award shall become 100% vested and, in the
case of stock options, immediately exercisable;
(v) for the duration of the Continuation Period, the Company
shall, at its expense, provide the Executive with outplacement
and career counseling services of the Executive's choice,
PROVIDED, HOWEVER, that the Company's obligation to pay for such
services shall in no event exceed an aggregate amount equal to
25% of the Base Amount.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and
(ii) shall be paid in a single lump sum cash payment within forty five (45) days
after the Executive's Termination Date (or earlier, if required by applicable
law).
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 3.1(b)(iii).
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans
(including, the plans listed on Appendix A) and other applicable programs,
policies and practices then in effect,
4. NOTICE OF TERMINATION. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. EXCISE TAX LIMITATION.
(a) Notwithstanding anything contained in this Agreement, in the
event that any payment or benefit (within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code")), to the Executive or
for the Executive's benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, the Executive's employment with the Company or a Change in
Control (a
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"Payment" or "Payments") would be subject to the excise tax imposed by Section
4999 of the Code ("the 'Excise Tax), the Payments shall be reduced (but not
below zero) if and to the extent necessary so that no Payment to be made or
benefit to be provided to the Executive shall be subject to the Excise Tax (such
reduced Payments being hereinafter referred to as the "Limited Payment Amount").
Unless the Executive shall have given prior written notice specifying a
different order to the Company to effectuate the Limited Payment Amount, the
Company shall reduce or eliminate the Payments by first reducing or eliminating
cash payments and then by reducing those payments or benefits which are not
payable in cash, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Determination (as
hereinafter defined). Any notice given by the Executive pursuant to the
preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive's rights and entitlements to
any benefits or compensation.
(b) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination,), together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days
of the delivery of the Determination to the Executive, the Executive shall have
the right to dispute the Determination (the "Dispute"). If there is no Dispute,
the Determination shall be binding, final and conclusive upon the Company and
the Executive subject to the application of Section 5(c) below.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made to, or
provided for the benefit of, the Executive either will be greater (an "Excess
Payment") or less (an "Underpayment") than the amounts provided for by the
limitations contained in Section 5(a). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the "IRS") proceeding
which has been finally and conclusively resolved that an Excess Payment has been
made, such Excess Payment shall be deemed for all purposes to be a loan to the
Executive made on the date the Executive received the Excess Payment and the
Executive shall repay the Excess Payment to the Company on demand (but not less
than ten (10) days after written notice is received by the Executive) together
with interest on the Excess Payment at the "Applicable Federal Rate" (as defined
in Section 1274(d) of the Code) from the date of the Executive's receipt of such
Excess Payment until the date of such repayment. In the event that it is
determined by (i) the Accounting Firm, the Company (which shall include the
position taken by the Company, or together with its
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consolidated group, on its federal income tax return) or the IRS, (ii) pursuant
to a determination by a court, or (iii) upon the resolution to the Executive's
satisfaction of the Dispute that an Underpayment has occurred, the Company shall
pay an amount equal to the Underpayment to the Executive within ten (10) days of
such determination or resolution, together with interest on such amount at the
Applicable Federal Rate from the date such amount would have been paid to the
Executive until the date of payment.
6. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's beneficiaries
or legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal personal representative.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with the
Dispute whether as a result of any applicable government taxing authority
proceeding, audit or otherwise) or by any other plan or arrangement maintained
by the Company under which the Executive is or may be entitled to receive
benefits, and (c) the Executive's hearing before the Board as contemplated in
Section 2.4 of this Agreement; PROVIDED, HOWEVER, that the circumstances set
forth in clauses (a) and (b) occurred on or after a Change in Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be denied to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or
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program provided by the Company (except for any severance or termination
policies, plans, programs or practices) and for which the Executive may qualify,
nor shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company (except for any severance or
termination agreement). Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
10. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Alameda County in the State of California.
13. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
NELLCOR INCORPORATED EXECUTIVE
By:
Its:
ATTEST:
By:
Its:
<PAGE>
SEVERANCE AGREEMENT
This Agreement, dated as of December 1, 1994, is entered into between
Nellcor Incorporated, a corporation organized under the laws of the State of
Delaware ("Nellcor"), and ____________________ (the "Employee").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Employee in the event of a threat or occurrence of a Change in Control and to
ensure the Employee's continued dedication and efforts in such event without
undue concern for the Employee's personal, financial and employment security;
and
WHEREAS, in order to induce the Employee to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Employee to
provide the Employee with certain benefits in the event that the Employee's
employment is terminated as a result of, or in connection with, a Change in
Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of December 1,
1994 and shall continue in effect until December 1, 1996; PROVIDED, HOWEVER,
that commencing on December 1, 1996 and on each December 1 thereafter, the term
of this Agreement shall automatically be extended for one (1) year unless the
Company or the Employee shall have given written notice to the other at least
ninety (90) days prior thereto that the term of this Agreement shall not be so
extended; and PROVIDED, FURTHER, HOWEVER, that notwithstanding any such notice
by the Company not to extend, the term of this Agreement shall not expire prior
to the expiration of twenty-four (24) months after the occurrence of a Change in
Control.
2. DEFINITIONS.
2.1. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date, including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Employee on behalf of the
Company during the period ending on the Termination Date, (iii)
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vacation pay and (iv) bonuses and incentive compensation (other than the "Pro
Rata Bonus" (as hereinafter defined)).
2.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall
mean the greater of the Employee's annual base salary (a) at the rate in effect
on the Termination Date or (b) at the highest rate in effect at any time during
the ninety (90) day period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the employee benefit plans of the
Company or any other agreement or arrangement.
2.3. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Employee under the Company's cash bonus incentive plan for the fiscal year in
which the Termination Date occurs; (b) the annual bonus paid or payable to the
Employee under the Company's cash bonus incentive plan for the full fiscal year
ended prior to the fiscal year during which the Termination Date occurred; (c)
the annual bonus paid or payable to the Employee under the Company's cash bonus
incentive plan for the full fiscal year ended prior to the fiscal year during
which a Change in Control occurred; (d) the average of the annual bonuses paid
or payable to the Employee under the Company's cash bonus incentive plan during
the three full fiscal years ended prior to the fiscal year during which the
Termination Date occurred; or (e) the average of the annual bonuses paid or
payable to the Employee under the Company's cash bonus incentive plan during the
three full fiscal years ended prior to the fiscal year during which the Change
in Control occurred.
2.4. CAUSE. For purposes of this Agreement, a termination of
employment is for "Cause" if the basis of the termination is fraud,
misappropriation, embezzlement or willful engagement by the Employee in
misconduct which is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole (no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to be done, by
the Employee not in good faith and without a reasonable belief that the action
or omission was in the best interests of the Company and its subsidiaries);
PROVIDED, HOWEVER, that the Employee shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the Employee a
Notice of Termination (as hereinafter defined) and copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of those members
of the Company's Board of Directors who are not then employees of the Company at
a meeting of the Board called and held for the purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Employee was guilty of the conduct set forth in
the first sentence of this Section 2.4 and specifying the particulars thereof in
detail.
2.5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term is used for
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purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty five percent (25%) or more of the combined voting power of the Company's
then outstanding Voting Securities; PROVIDED, HOWEVER, that in determining
whether a Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the Company (a "Subsidiary"),
(2) the Company or any Subsidiary, or (3) any Person in connection with a "Non-
Control Transaction (as hereinafter defined);
(b) The individuals who are members of the Board as of the date this
Agreement is approved by the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; PROVIDED, HOWEVER, that if the
appointment, election or nomination for election by the Company's stockholders,
of any new director is approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered a member of the Incumbent Board; PROVIDED, FURTHER, HOWEVER, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving the Company,
unless such merger, consolidation or reorganization satisfies the conditions set
forth in (A) or (B) below:
(A) (i) the stockholders of the Company immediately before such
merger, consolidation or reorganization, own immediately following such merger,
consolidation or reorganization, directly or indirectly, at least fifty-one
percent (51%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization;
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least a majority of the members of
the board of directors of the Surviving Corporation; and
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(iii) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or reorganization, had
Beneficial Ownership of twenty five percent (25%) or more of the then
outstanding voting Securities) has Beneficial Ownership of twenty five percent
(25%) or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities; or
(B) the entering into of any such transaction shall have been
approved by the Incumbent Board prior to or on the date that is 270 calendar
days from the effective date of this Agreement and shall have been intended by
the Incumbent Board to be accounted for using the "pooling of interests" method
of accounting, such intent to be evidenced in the resolutions of the Incumbent
Board approving the transaction;
A transaction described in subsections (A) and (B) above shall herein
be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, PROVIDED, HOWEVER, that, if
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial Owner
of any additional voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
2.6. COMPANY. For purposes of this Agreement, the "Company" shall
mean Nellcor Incorporated and its Subsidiaries and shall include Nellcor's
"Successors and Assigns" (as hereinafter defined).
2.7. DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Employee's ability to
substantially perform the Employee's duties with the Company for a period of one
hundred eighty (180) consecutive days and the Employee has not returned to full
time employment prior to the Termination Date as stated in the "Notice of
Termination".
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2.8. GOOD REASON.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(1) a change in the Employee's status, title, position or
responsibilities (including reporting responsibilities) which, in the Employee's
reasonable judgment, represents an adverse change from the Employee's status,
title, position or responsibilities as in effect at any time within ninety (90)
days preceding the date of a Change in Control or at any time thereafter; the
assignment to the Employee of any duties or responsibilities which, in the
Employee's reasonable judgment, are inconsistent with the Employee's status,
title, position or responsibilities as in effect at any time within ninety (90)
days preceding the date of a Change in Control or at any time thereafter; or any
removal of the Employee from or failure to reappoint or reelect the Employee to
any of such offices or positions, except in connection with the termination of
the Employee's employment for Disability, Cause, as a result of the Employee's
death or by the Employee other than for Good Reason;
(2) A reduction in the Employee's base salary or any failure to pay
the Employee any compensation or benefits to which the Employee is entitled
within five (5) days of the date due;
(3) the Company's requiring the Employee to be based at any place
outside a 60-mile radius from Pleasanton, California, except for reasonably
required travel on the Company's business which is not materially greater than
such travel requirements prior to the Change in Control;
(4) the failure by the Company to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Employee was participating at
any time within ninety (90) days preceding the date of a Change in Control or at
any time thereafter, including, but not limited to, the plans listed on Appendix
A, unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Employee, or (B) provide the Employee
with compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under each
other employee benefit plan, program and practice in which the Employee was
participating at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter;
(5) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition is not
dismissed within sixty (60) days;
(6) any material breach by the Company of any provision of this
Agreement;
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(7) any purported termination of the Employee's employment for Cause
by the Company which does not comply with the terms of Section 2.4; or
(8) the failure of the Company to obtain an agreement, satisfactory
to the Employee, from any Successors and Assigns to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof.
(b) The Employee's right to terminate the Employee's employment
pursuant to this Section 2.8 shall not be affected by the Employee's incapacity
due to physical or mental illness.
2.9. NOTICE OF TERMINATION. For purposes of this Agreement, following
a Change in Control, "Notice of Termination" shall mean a written notice of
termination of the Employee's employment from the Company, which notice
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment under the provision
so indicated.
2.10. PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean in, the case of the Employee's death, the
Employee's date of death, in the case of Good Reason, the last day of the
Employee's employment and, in all other cases, the date specified in the Notice
of Termination; PROVIDED, HOWEVER, that if the Employee's employment is
terminated by the Company for Cause or due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Employee, provided that, in the case of Disability,
the Employee shall not have returned to the full-time performance of the
Employee's duties during such period of at least 30 days.
3. TERMINATION OF EMPLOYMENT.
3.1. If, during the term of this Agreement, the Employee's employment
with the Company shall be terminated within twenty-four (24) months following a
Change in Control, the Employee shall be entitled to the following compensation
and benefits:
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(a) If the Employee's employment with the Company shall be terminated
(1) by the Company for Cause or Disability, (2) by reason of the Employee's
death or (3) by the Employee other than for Good Reason, the Company shall pay
to the Employee the Accrued Compensation and, if such termination is other than
by the Company for Cause, the Company shall also pay the Employee a Pro Rata
Bonus.
(b) If the Employee's employment with the Company shall be terminated
for any reason other than as specified in Section 3.1(a), the Employee shall be
entitled to the following:
(i) the Company shall pay the Employee all Accrued Compensation
and a Pro Rata Bonus;
(ii) the Company shall pay the Employee as severance pay and in
lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal
to the sum of (A) the Base Amount and (B) the Bonus Amount;
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense,
continue on behalf of the Employee and the Employee's dependents
and beneficiaries the life insurance, disability, medical, dental
and hospitalization benefits provided (A) to the Employee at any
time during the 90-day period prior to the Change in Control or
at any time thereafter or (B) to other similarly situated
employees who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including
deductibles and costs) provided in this Section 3.1(b)(iii)
during the Continuation Period shall be no less favorable to the
Employee and the Employee's dependents and beneficiaries, than
the most favorable of such coverages and benefits during any of
the periods referred to in clauses (A) and (B) above. The
Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Employee obtains
any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Employee hereunder as long
as the aggregate coverages and benefits of the combined benefit
plans are no less favorable to the Employee than the coverages
and benefits required to be provided hereunder. This subsection
(iii) shall not be interpreted so as to limit any benefits to
which the Employee or the Employee's dependents or beneficiaries
may be entitled under any of the Company's employee benefit
plans, programs or practices following the Employee's termination
of employment, including without limitation, retiree medical and
life insurance benefits;
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(iv) the restrictions on any outstanding equity incentive awards,
including stock options and restricted stock, granted to the
Employee under the Company's 1991 Equity Incentive Plan (or any
predecessor plans thereto), the Company's 1994 Equity Incentive
Plan or under any other incentive plan or arrangement shall lapse
and such incentive award shall become 100% vested and, in the
case of stock options, immediately exercisable;
(v) for the duration of the Continuation Period, the Company
shall, at its expense, provide the Employee with outplacement and
career counseling services of the Employee's choice, PROVIDED,
HOWEVER, that the Company's obligation to pay for such services
shall in no event exceed an aggregate amount equal to 25% of the
Base Amount.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and
(ii) shall be paid in a single lump sum cash payment within forty five (45) days
after the Employee's Termination Date (or earlier, if required by applicable
law).
(d) The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Employee in any subsequent employment except as
provided in Section 3.1(b)(iii).
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Employee may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Employee's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans
(including, the plans listed on Appendix A) and other applicable programs,
policies and practices then in effect,
4. NOTICE OF TERMINATION. Following a Change in Control, any purported
termination of the Employee's employment shall be communicated by Notice of
Termination to the Employee. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. EXCISE TAX LIMITATION.
(a) Notwithstanding anything contained in this Agreement, in the
event that any payment or benefit (within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code")), to the Employee or
for the Employee's benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, the Employee's employment with the Company or a Change in
Control (a
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"Payment" or "Payments") would be subject to the excise tax imposed by Section
4999 of the Code ("the Excise Tax), the Payments shall be reduced (but not
below zero) if and to the extent necessary so that no Payment to be made or
benefit to be provided to the Employee shall be subject to the Excise Tax (such
reduced Payments being hereinafter referred to as the "Limited Payment Amount").
Unless the Employee shall have given prior written notice specifying a different
order to the Company to effectuate the Limited Payment Amount, the Company shall
reduce or eliminate the Payments by first reducing or eliminating cash payments
and then by reducing those payments or benefits which are not payable in cash,
in each case in reverse order beginning with payments or benefits which are to
be paid the farthest in time from the Determination (as hereinafter defined).
Any notice given by the Employee pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Employee's rights and entitlements to any benefits or
compensation.
(b) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination,), together with detailed supporting
calculations and documentation, to the Company and the Employee within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Employee (provided the Employee reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Employee with respect to a Payment or Payments, it shall furnish the Employee
with an opinion reasonably acceptable to the Employee that no Excise Tax will be
imposed with respect to any such Payment or Payments. Within ten (10) days of
the delivery of the Determination to the Employee, the Employee shall have the
right to dispute the Determination (the "Dispute"). If there is no Dispute, the
Determination shall be binding, final and conclusive upon the Company and the
Employee subject to the application of Section 5(c) below.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made to, or
provided for the benefit of, the Employee either will be greater (an "Excess
Payment") or less (an "Underpayment") than the amounts provided for by the
limitations contained in Section 5(a). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the "IRS") proceeding
which has been finally and conclusively resolved that an Excess Payment has been
made, such Excess Payment shall be deemed for all purposes to be a loan to the
Employee made on the date the Employee received the Excess Payment and the
Employee shall repay the Excess Payment to the Company on demand (but not less
than ten (10) days after written notice is received by the Employee) together
with interest on the Excess Payment at the "Applicable Federal Rate" (as defined
in Section 1274(d) of the Code) from the date of the Employee's receipt of such
Excess Payment until the date of such repayment. In the event that it is
determined by (i) the Accounting Firm, the Company (which shall include the
position taken by the Company, or together with its
9
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consolidated group, on its federal income tax return) or the IRS, (ii) pursuant
to a determination by a court, or (iii) upon the resolution to the Employee's
satisfaction of the Dispute that an Underpayment has occurred, the Company shall
pay an amount equal to the Underpayment to the Employee within ten (10) days of
such determination or resolution, together with interest on such amount at the
Applicable Federal Rate from the date such amount would have been paid to the
Employee until the date of payment.
6. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Employee or the Employee's beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal personal representative.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Employee as they become due as a result of (a) the Employee's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with the
Dispute whether as a result of any applicable government taxing authority
proceeding, audit or otherwise) or by any other plan or arrangement maintained
by the Company under which the Employee is or may be entitled to receive
benefits, and (c) the Employee's hearing before the Board as contemplated in
Section 2.4 of this Agreement; PROVIDED, HOWEVER, that the circumstances set
forth in clauses (a) and (b) occurred on or after a Change in Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be denied to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or
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program provided by the Company (except for any severance or termination
policies, plans, programs or practices) and for which the Employee may qualify,
nor shall anything herein limit or reduce such rights as the Employee may have
under any other agreements with the Company (except for any severance or
termination agreement). Amounts which are vested benefits or which the Employee
is otherwise entitled to receive under any plan or program of the Company shall
be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Employee or others.
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Alameda County in the State of California.
13. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Employee has executed this Agreement as of
the day and year first above written.
NELLCOR INCORPORATED EMPLOYEE
By:
Its:
ATTEST:
By:
Its:
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EXHIBIT 11.1
NELLCOR INCORPORATED STATEMENT OF COMPUTATION OF NET INCOME
PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
------------------------------------ ----------------------------------
January 1, 1995 January 2, 1994 January 1, 1995 January 2, 1994
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Computation of common
and common equivalent
shares outstanding:
Common stock 16,686 16,654 16,655 16,678
Common stock equivalents 325 199 240 194
------------- ----------- -------------- ----------
Common and common
equivalent shares used in the
calculation of income per share 17,011 16,853 16,895 16,872
------------- ----------- -------------- ----------
------------- ----------- -------------- ----------
Net income $ 8,483 $6,856 $14,342 $11,715
------------- ----------- -------------- ----------
------------- ----------- -------------- ----------
Net income per common and
common equivalent share $0.50 $0.41 $0.85 $0.69
------------- ----------- -------------- ----------
------------- ----------- -------------- ----------
</TABLE>
