CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 14, 1999, is by and between
Rehabilicare Inc., a Minnesota corporation (the "Borrower"), and U.S. Bank
National Association, a national banking association (the "Bank").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. In addition to terms defined elsewhere
in this Agreement, the following terms shall have the following respective
meanings (and such meanings shall be equally applicable to both the singular
and plural form of the terms defined, as the context may require):
"ACQUISITION INDEBTEDNESS": The balance sheet amount of any
Indebtedness incurred by the Borrower or any of its Subsidiary in connection
with the Transaction or any other Permitted Acquisition transaction including
obligations or Indebtedness that do not constitute interest-bearing
Indebtedness such as, but not limited to, any obligation or Indebtedness
arising from a covenant- not-to -compete, consulting agreement, employment
agreement or other consideration payable to the seller of any business or any
of its officers, shareholders, directors or affiliates.
"ADJUSTED EBITDA": For any period, the sum of: (a) the Adjusted Net
Income for such period; PLUS (b) the sum of the following amounts deducted in
arriving at the Net Income included in such Adjusted Net Income (but without
duplication for any item): (i) Interest Expense; (ii) depreciation and
amortization; and (iii) income taxes.
"ADJUSTED EURODOLLAR RATE": Applicable to a Eurodollar Rate Loan
Unit during its Interest Period, the rate (rounded upward, if necessary, to
the next higher one-hundredth of one percent) determined by dividing the
Eurodollar Rate for the relevant Interest Period by 1.00 MINUS the Eurodollar
Reserve Percentage.
"ADJUSTED NET INCOME": For any period, the Borrower's Net Income for
such period but excluding therefrom non-operating gains and losses (including
extraordinary gains and losses, gains and losses from discontinuance of
operations and gains and losses arising from the sale of assets other than
Inventory) during such period.
"ADVERSE EVENT": The occurrence of any event that would have a
material adverse effect on the business, operations, property, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries
(taken as a whole on a consolidated basis) or on the ability of any Loan
Party to perform its obligations under the Loan Documents to which such Loan
Party is a party.
"AGREEMENT": This Credit Agreement, as it may be amended, modified,
supplemented, restated or replaced from time to time.
"APPLICABLE MARGIN": At any date of determination, the percentage
indicated below in accordance with the Cash Flow Leverage Ratio at such date:
WHEN THE CASH FLOW THE FOR THE TERM FOR REVOLVING CREDIT
LEVERAGE RATIO APPLICABLE LOAN LOANS
IS MARGIN IS IS
------------------ ---------- ------------ --------------------
Greater than 2.5 to 1.0 Reference Rate Loan Units 0.50% per annum 0.25% per annum
Eurodollar Rate Loan Units 2.75% per annum 2.50% per annum
Greater than 2.0 to 1.0 Reference Rate Loan Units 0.25% per annum 0.00% per annum
but less than or equal to
2.5 to 1.0
Eurodollar Rate Loan Units 2.50% per annum 2.25% per annum
Greater than 1.5 to 1.0 Reference Rate Loan Units 0.00% per annum 0.00% per annum
but less than or equal to
2.0 to 1.0
Eurodollar Rate Loan Units 2.25% per annum 2.00% per annum
Less than or equal to Reference Rate Loan Units 0.00% per annum 0.00% per annum
1.5 to 1.0
Eurodollar Rate Loan Units 2.00% per annum 1.75% per annum
The Applicable Margin on the Closing Date for: (a) the Term Loan is 0.50% per
annum with respect to Reference Rate Loan Units and 2.75 % per annum with
respect to Eurodollar Rate Loan Units; and (b) the Revolving Loans is 0.25%
per annum with respect to Reference Rate Loan Units and 2.50 % per annum with
respect to Eurodollar Rate Loan Units and the Applicable Margin shall
continue at those percentages until changed in accordance with the terms of
this definition. The Cash Flow Leverage Ratio and the Applicable Margin will
be determined at each Quarterly Measurement Date, commencing with Quarterly
Measurement Date occurring on September 30, 1999, as calculated from the
financial statements and Compliance Certificate delivered by the Borrower
pursuant to Sections 8.1(b) and 8.1(c). Any increase or decrease in the
Applicable Margin shall apply to all then existing or thereafter arising Loan
Units and shall become effective as of the first day of the third month of
each fiscal quarter of the Borrower, commencing December 1, 1999, and shall
continue to be effective until subsequently changed in accordance with this
definition; PROVIDED, HOWEVER, if the financial statements required by
SECTION 8.1(b) and Compliance Certificate required by SECTION 8.1(c), are not
delivered in the time periods provided therein, the Cash Flow Leverage Ratio
for any Quarterly Measurement Date will be deemed to be greater than 2.5 to
1.0.
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"BANK": As defined in the preamble hereto.
"BORROWER": As defined in the preamble hereto.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to
be open in Minneapolis, Minnesota.
"CAPITAL EXPENDITURE": Any amount debited to the fixed asset account
on the Borrower's consolidated balance sheet in accordance with GAAP in
respect of the acquisition (including, without limitation, acquisition by
entry into a Capitalized Lease), construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other fixed
assets or capitalized leaseholds.
"CAPITALIZED LEASE": Any lease which, in accordance with GAAP, is
capitalized on the books of the lessee.
"CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement Date, the
ratio of: (a) the Total Debt at such date; to (b) Pro Forma Adjusted EBITDA
for the Measurement Period ending at such date.
"CHANGE OF CONTROL": The occurrence after the date of this Agreement
of any single event (or related series of events) where a majority of the
members of the Borrower's board of directors as of the date of such single
event (or the date of the first of a related series of events) cease to be
members of the Borrower's board of directors.
"CLOSING DATE": The date on which the initial Revolving Loans and
the Term Loan are made after the satisfaction of all conditions precedent
specified in ARTICLE VI.
"CODE": The Internal Revenue Code of 1986, as amended, or any
successor statute, together with regulations thereunder.
"COLLATERAL": Any property in which the Bank has been granted a Lien
pursuant to any Loan Document.
"COMMITMENT": The agreement of the Bank to make the Loans.
"COMPEX": Compex SA, a Swiss corporation.
"COMPLIANCE CERTIFICATE": As defined in SECTION 8.1(c).
"CONTINGENT OBLIGATIONS:" With respect to any Person at the time of
any determination, without duplication, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary
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obligor") in any manner, whether directly or otherwise; (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any direct or indirect security therefor, (b) to purchase property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (c) to maintain working
capital, equity capital or other financial statement condition of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or
(d) entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner
against loss in respect thereof; provided, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit, in each
case in the ordinary course of business.
"DEFAULT": Any event which, with the giving of notice to the
Borrower or lapse of time, or both, would constitute an Event of Default.
"DEFAULT RATE": The rate applicable to Reference Rate Loan Units
determined in accordance with SECTION 3.1(a)(ii).
"DOMESTIC ADJUSTED EBITDA": For any Measurement Period, the Adjusted
EBITDA for such Measurement Period adjusted to exclude therefrom any income
or expense item attributable to any Foreign Subsidiary.
"DOMESTIC CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement
Date occurring on or after June 30, 2000, the ratio of: (a) the difference
between: (i) Total Debt; MINUS (ii) the Capitalized Leases included therein
that constitute only the Indebtedness of the Foreign Subsidiaries; to (b) the
Domestic Pro Forma Adjusted EBITDA for the Measurement Period ending at such
Quarterly Measurement Date.
"DOMESTIC FIXED CHARGE COVERAGE RATIO": At any Quarterly Measurement
Date occurring on or after June 30, 2000, the ratio of: (a) the sum of: (i)
the Borrower's Domestic Adjusted EBITDA for the Measurement Period ending at
such date; PLUS (ii) the Operating Lease Payments made by the Borrower and
its Domestic Subsidiaries, but not by any Foreign Subsidiary, during such
Measurement Period and deducted from the Net Income used in calculating such
Domestic Adjusted EBITDA; MINUS (iii) the Capital Expenditures made by the
Borrower or its Domestic Subsidiaries, but not by any Foreign Subsidiary,
during such Measurement Period; MINUS (v) the Permitted Distributions made by
the Borrower, but not by any Foreign Subsidiary, pursuant to SECTION 9.15
during such Measurement Period; to (b) the sum of: (i) the Interest Expense
for such Measurement Period; PLUS (ii) the Mandatory Principal Payments for
such Measurement Period; PLUS (iii) the Operating Lease Payments scheduled to
have been paid by the Borrower or its Domestic Subsidiaries, but not by any
Foreign Subsidiary, during such Measurement Period.
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"DOMESTIC PRO FORMA ADJUSTED EBITDA": For any Measurement Period,
the Pro Forma Adjusted EBITDA for such Measurement Period adjusted to exclude
therefrom any income, pro forma income, expense or pro forma expense item
attributable to any Foreign Subsidiary.
"DOMESTIC SUBSIDIARY": Any Subsidiary of the Borrower which is not a
"controlled foreign corporation" as defined in Code Section 957(a).
"EBITDA": For any period, the sum of: (a) the Net Income for such
period; PLUS (b) the sum of the following amounts deducted from such Net
Income: (i) Interest Expense; (ii) depreciation and amortization; and (iii)
income taxes.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, or any successor statute, together with regulations thereunder.
"ERISA AFFILIATE": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower or any of its
Subsidiaries is a member and which is treated as a single employer under
Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"EURODOLLAR RATE": Applicable to determining the Adjusted Eurodollar
Rate for a Eurodollar Rate Loan Unit during its Interest Period, the average
offered rate for deposits in United States dollars (rounded upward, if
necessary, to the nearest 1/16 of 1%) for delivery of such deposits on the
first day of such Interest Period, for the number of days in such Interest
Period, which appears on the Reuters Screen LIBO Page as of 11:00 a.m.,
London time (or such other time as of which such rate appears) two Eurodollar
Business Days prior to the first day of such Interest Period, or, if lower,
the Bank may substitute the per annum Eurodollar interest rate (LIBOR) for
United States Dollars displayed on the Telerate Page at such time, or, if
neither the Reuters Screen LIBO Page or the Telerate Page are published at
the time, the rate for such deposits determined by the Bank at such time
based on such other published service of general application as shall be
selected by the Bank for such purpose or, if no such published service is
available, based on rates at which United States dollar deposits are offered
to the Bank in the interbank Eurodollar market at such time for delivery in
immediately available funds on the first day of such Interest Period in an
amount approximately equal to the principal balance to be outstanding on such
Eurodollar Rate Loan Unit (rounded upward, if necessary, to the nearest 1/16
of 1 %). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO Page on that service) for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits.
"Telerate Page" means the display designated as Telerate page 3750 on the
Telerate, Inc. Telerate Service (or such other page as may replace such
Telerate Page 3750 on that service) for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits.
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"EURODOLLAR RATE LOAN UNIT": Each portion of any Loan designated as
such in a notice of borrowing under SECTION 2.3 or a notice of continuation
or conversion under SECTION 2.4.
"EURODOLLAR RESERVE PERCENTAGE": Applicable in determining the
Adjusted Eurodollar Rate for a Eurodollar Rate Loan Unit during its Interest
Period, as of any day, that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement for the Bank with deposits
comparable in amount to those held by the Bank, in respect of "Eurocurrency
Liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate of Eurodollar Rate
Loan Units is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of the Bank to
United States residents). Any rate of interest based on the Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any change
in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in SECTION 10.1 which has
not been cured to the satisfaction of, or waived by, the Bank in accordance
with SECTION 11.1.
"EXCESS CASH FLOW": For any of the Borrower's fiscal years, an
amount equal to the sum of: (a) the Borrower's EBITDA for such fiscal year;
MINUS (b) the sum of the following amounts included in such EBITDA: (i) the
Interest Expense that was actually paid in cash by the Borrower during such
fiscal year; and (ii) income taxes that were actually paid in cash by the
Borrower during such fiscal year; MINUS (c) the Mandatory Principal Payments
scheduled to have been paid during such fiscal year; MINUS (d) the lesser of:
(i) Capital Expenditures made by the Borrower or its Subsidiaries during such
fiscal year; or (ii) $750,000.00; MINUS (e) the sum of the following
Permitted Distributions made pursuant to SECTION 9.15 during such fiscal
year: (i) the Permitted Distributions made by the Borrower; PLUS (ii) the
portion of any Permitted Distribution made by any of the Borrower's
Subsidiaries to the holders of minority-interests in such Subsidiary.
"FEDERAL RESERVE BOARD": The Board of Governors of the Federal
Reserve System or any successor thereto.
"FIXED CHARGE COVERAGE RATIO": At any Quarterly Measurement Date,
the ratio of: (a) the sum of: (i) the Borrower's Adjusted EBITDA for the
Measurement Period ending at such date; PLUS (ii) the Operating Lease
Payments made by the Borrower during such Measurement Period and deducted
from the Net Income used in calculating such Adjusted EBITDA; MINUS (iii) the
Capital Expenditures made by the Borrower or its Subsidiaries during such
Measurement Period; MINUS (v) the sum of the following Permitted
Distributions made pursuant to SECTION 9.15 during such fiscal year: (A) the
Permitted Distributions made by the Borrower; PLUS (B) the portion of any
Permitted Distribution made by any of the Borrower's Subsidiaries to the
holders of minority-interests in such Subsidiary; to (b) the sum of: (i) the
Interest Expense for such Measurement Period; PLUS (ii) the Mandatory
Principal Payments for such Measurement Period;
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PLUS (iii) the Operating Lease Payments scheduled to have been paid during
such Measurement Period.
"FOREIGN SUBSIDIARY": Any Subsidiary of the Borrower which is a
"controlled foreign corporation" as defined in Code Section 957(a).
"GAAP": Generally accepted accounting principles as in effect from
time to time including, without limitation, applicable statements, bulletins
and interpretations of the Financial Accounting Standards Board and
applicable bulletins, opinions and interpretations issued by the American
Institute of Certified Public Accountants or its committees.
"INDEBTEDNESS": Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the
obligor's balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet): (a) obligations secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the obligation secured thereby shall
have been assumed and whether or not the obligation secured is the obligation
of the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase price of any property
or services, except for any Trade Account Payable provided that any Trade
Account Payable which accrues interest or any portion of which is allocable
to interest in accordance with GAAP shall be deemed to constitute
Indebtedness; (d) any obligation as lessee under any Capitalized Lease; (e)
all guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others; (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit; and (g) all Rate Protection
Obligations. For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer unless such
Indebtedness is non-recourse to such Person.
"INTEREST EXPENSE": For any period, the aggregate interest expense
(including capitalized interest) of the Borrower for such period including,
without limitation, the interest portion of any Capitalized Lease; PROVIDED,
HOWEVER, that the foregoing shall be adjusted to reflect only the net effect
of any interest rate swap, interest hedging transaction, or other similar
arrangement entered into by the Borrower in order to reduce or eliminate
variations in its interest expenses.
"INTEREST PERIOD": For any Eurodollar Rate Loan Unit, the period
which shall begin on (and include) the date of the initial borrowing date of
such Eurodollar Rate Loan Unit or the date of the conversion of any Reference
Rate Loan Unit into a Eurodollar Rate Loan Unit or the date of the
continuation of a Eurodollar Rate Loan Unit as a Eurodollar Rate Loan Unit
upon the termination of the Interest Period then applicable thereto and,
unless the final maturity of such Eurodollar Rate Loan Unit is accelerated,
shall end on (but exclude) the date which is one, two, or three or six months
thereafter selected by the Borrower; PROVIDED, HOWEVER, that:
(a) any such Interest Period which would otherwise end on a
day not a Eurodollar Business Day shall end on the next succeeding
Eurodollar Business Day unless such extension would cause the last
day of such Interest Period to fall in the next
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following calendar month, in which event the last day of such Interest
Period for such Eurodollar Rate Loan Unit shall occur on the next
preceding Eurodollar Business Day;
(b) no Interest Period relating to any Loan shall extend
beyond the stated Maturity of such Loan;
(c) Interest Periods shall not be chosen for any Eurodollar
Rate Loan Units which would require payment of any amount of such
Eurodollar Rate Loan Unit prior to the last day of the Interest
Period in order to pay a scheduled installment of the Term Loan when
due; and
(d) any Interest Period which begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day in such
Interest Period.
"INVENTORY": Any goods held for sale or lease by the Borrower or any
of its Subsidiaries.
"INVESTMENT": The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
Inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real
or personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of, or any interest in,
another Person or any integral part of any business or the assets comprising
such business or part thereof.
"LIABILITIES": At any date of determination, the aggregate amount of
liabilities appearing on the Borrower's balance sheet at such date prepared
in accordance with GAAP.
"LIEN": Any security interest, mortgage, pledge, lien,
hypothecation, judgment lien or similar legal process, charge, encumbrance,
title retention agreement or analogous instrument or device (including,
without limitation, the interest of the lessors under Capitalized Leases and
the interest of a vendor under any conditional sale or other title retention
agreement).
"LOAN DOCUMENTS": This Agreement, the Notes, the Security Agreement,
the Pledge Agreement, the Subsidiary Guaranties, the Subsidiary Security
Agreements, the Subsidiary Pledge Agreements and each other instrument,
document, guaranty, security agreement, mortgage, or other agreement executed
and delivered by any Loan Party pursuant to which such Party incurs any
liability to the Bank with respect to the Obligations, agrees to perform any
covenant or agreement with respect to the Obligations or grants any security
interest to secure the Obligations.
"LOAN PARTY": The Borrower and the Subsidiary Guarantors.
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"LOANS": The Revolving Loans and the Term Loan.
"LOAN UNITS": A Reference Rate Loan Unit and a Eurodollar Rate Loan
Unit (each a "Type" of Loan Unit).
"MANDATORY PRINCIPAL PAYMENTS": For any period, the regularly
scheduled principal payments (including the portion of any payment on any
Indebtedness comprising part of Total Debt.
"MATURITY": The earlier of: (a) the date on which the Loans become
due and payable under SECTION 10.2 upon the occurrence of an Event of
Default; or (b) (i) the Revolving Credit Termination Date for the Revolving
Loans; or (ii) July 1, 2004 for the Term Loan.
"MEASUREMENT PERIOD": At any Quarterly Measurement Date, the four
fiscal quarters ending on such date.
"NET INCOME": For any period, the Borrower's after-tax net income
for such period determined in accordance with GAAP.
"NET PROCEEDS": With respect to any sale, transfer or other
disposition of any of the Borrower's or any of its Subsidiaries' assets
(other than sales of Inventory in the ordinary course of business) or from
the issuance of any equity interest in the Borrower or any of its
Subsidiaries or of any option, warrant or other right to acquire the same,
the cash proceeds received by the Borrower or any of its Subsidiaries from
such transaction less the sum of: (a) the reasonable costs associated with
such transaction; (b) the amount of any Indebtedness (other than the
Obligations) which is required to be paid in connection with such
transaction; and (c) any cash proceeds used to acquire replacement assets of
substantially similar type, nature or function within 90 days of the receipt
of such cash proceeds.
"NET WORTH": At any date, the total of all assets appearing on the
Borrower's balance sheet at such date prepared in accordance with GAAP minus
all Liabilities.
"NOTES": The Revolving Note and the Term Note.
"OBLIGATIONS": All Loans, advances, debts, liabilities, obligations,
covenants and duties owing by any Loan Party to the Bank of any kind or
nature, present or future, which arise under this Agreement or any other Loan
Document or by operation of law, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guarantying or
confirming of a letter of credit, guaranty, indemnification or in any other
manner, whether joint, several, or joint and several, direct or indirect
(including those acquired by assignment or purchases), absolute or
contingent, due or to become due, and however acquired. The term includes,
without limitation, all
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principal, interest, fees, charges, expenses, attorneys' fees, and any other
sum chargeable to any Loan Party under this Agreement or any other Loan
Document.
"OPERATING LEASE PAYMENTS": Rent and other payments made pursuant to
any lease of (or other agreement conveying the right to use) real and/or
personal property other than a Capitalized Lease (an "Operating Lease")
"ORIGINATION FEE": As provided in SECTION 3.3.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to
the functions thereof.
"PERMITTED ACQUISITIONS": Acquisitions permitted by SECTION 9.9(k)
or otherwise approved in writing by the Bank.
"PERMITTED LIENS": Liens permitted by the provisions of SECTION 9.11.
"PERMITTED DISTRIBUTIONS": The distributions and payments described
in SECTION 9.15(a) or (b).
"PERSON": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision, or any other entity, whether
acting in an individual, fiduciary or other capacity.
"PLAN": An employee benefit plan or other plan, maintained for
employees of the Borrower or of any ERISA Affiliate, and subject to Title IV
of ERISA or Section 412 of the Code.
"PLEDGE AGREEMENT: The Pledge Agreement dated as of a date
substantially contemporaneously herewith made by the Borrower in favor of the
Bank (the "UK Pledge Agreement") and the Pledge Agreement dated as of the
date of the consummation of the Transaction (the "Swiss Pledge Agreement");
in each case, as originally executed and as it may be amended, modified,
supplemented, restated or replaced from time to time.
"PRO FORMA CASH FLOW LEVERAGE RATIO": At any Quarterly Measurement
Date for purposes of calculating whether an acquisition is permitted by
SECTION 9.9(k), the ratio of: (a) the Total Debt at such date adjusted to
include any Indebtedness to be incurred in connection with acquisition; to
(b) the sum of: (i) the Pro Forma Adjusted EBITDA for the Measurement Period
ending at such Quarterly Measurement Date; PLUS (ii) an additional pro forma
amount attributable to the proposed acquisition equal to the Adjusted EBITDA
generated by the business to be acquired in such acquisition during such
Measurement Period as if such proposed acquisition had been consummated on
the first day of such Measurement Period.
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"PRO FORMA ADJUSTED EBITDA": For any Measurement Period, the sum of:
(a) the Adjusted EBITDA for such Measurement Period; PLUS (b) a pro forma
amount attributable to all Permitted Acquisitions closed by the Borrower or
any of its Subsidiaries during such Measurement Period where such pro forma
amount is equal to the Adjusted EBITDA generated by the businesses acquired
in such Permitted Acquisitions during such Measurement Period prior to the
date on which such Permitted Acquisition was consummated; PROVIDED, HOWEVER,
that: (x) such additional pro forma amount for any Permitted Acquisition,
other than the Transaction, shall not exceed the amount approved by the Bank,
in its reasonable business judgment; and (y) the amount of Pro Forma Adjusted
EBITDA contributed by Compex and its Subsidiaries shall be limited to 33.33%
of the total Pro Forma Adjusted EBITDA.
"PURCHASE MONEY INDEBTEDNESS": Any Indebtedness incurred for the
purchase of personal property where the repayment thereof is secured solely
by an interest in the personal property so purchased.
"QUARTERLY MEASUREMENT DATE": The last day of each quarter of the
Borrower's fiscal year, commencing with the fiscal quarter ending September
30, 1999.
"QUARTERLY PAYMENT DATE": The last day of March, June, September,
and December of each year.
"RATE PROTECTION AGREEMENT": Any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate options contract or similar agreement or
arrangement between the Borrower and the counterparty thereto (the "Rate
Protection Provider") designed to protect the Borrower against fluctuations
in interest.
"RATE PROTECTION OBLIGATIONS": The liabilities, indebtedness, and
obligations of the Borrower, if any, to the Rate Protection Provider under
the Rate Protection Agreement.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate which is based on the Reference
Rate, such interest rate shall change on the effective date of any change in
the Reference Rate.
"REFERENCE RATE LOAN UNIT": Each portion of any Revolving Loan
designated as such in a notice of borrowing under SECTION 2.3 or a notice of
continuation or conversion under SECTION 2.4.
"REGULATORY CHANGE": As to the Bank, any change (including any
scheduled change) applicable to a class of banks which includes the Bank in
any:
(a) federal or state law or foreign law; or
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(b) regulation, interpretation, directive or request
(whether or not having the force of law) of any court or governmental
authority charged with the interpretation or administration of any
law referred to in clause (a) of this definition or of any fiscal,
monetary or other authority having jurisdiction over such class of
banks;
or the adoption after the date hereof of any new or final law, regulation,
interpretation, directive or request applicable to a class of banks which
includes the Bank.
"RELATED PARTY": Any Person (other than a Subsidiary, the Bank or
any other subsidiary or affiliate of U.S. Bancorp): (a) which directly or
indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Borrower; (b) which beneficially
owns or holds 5% or more of the equity interest of the Borrower; or (c) 5% or
more of the equity interest of which is beneficially owned or held by the
Borrower or a Subsidiary. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or by contract.
"REPORTABLE EVENT": A reportable event, as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC, by regulation,
has waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event, provided that a failure to
meet the minimum funding standard of Section 412 of the Code and Section 302
of ERISA shall be a reportable event regardless of the issuance of any such
waivers in accordance with Section 412(d) of the Code.
"REVOLVING CREDIT COMMITMENT": $5,000,000.00, as the same may be
reduced from time to time pursuant to SECTION 4.3 and, as the context may
require, the agreement of the Bank to make Revolving Loans to the Borrower up
to the Revolving Credit Commitment subject to the terms and conditions of
this Agreement.
"REVOLVING CREDIT COMMITMENT FEE": As provided in SECTION 3.2.
"REVOLVING CREDIT TERMINATION DATE": The date which is the earlier
of: (a) July 1, 2001; or (b) the date upon which the obligation of the Bank
to make Revolving Loans is terminated pursuant to SECTION 4.3 or SECTION 10.2.
"REVOLVING LOAN(S)": The Loans described in SECTION 2.1(a).
"REVOLVING NOTE": The promissory note of the Borrower described in
SECTION 2.5(a), substantially in the form of EXHIBIT A, as such promissory
note may be amended, modified or supplemented from time to time, and such
term shall include any substitutions for, or renewals of, such promissory
note.
"SEC": The Securities and Exchange Commission or any successor
thereto.
12
"SECURITY AGREEMENT": The Security Agreement dated as of even date
herewith made by the Borrower in favor of the Bank, as originally executed
and as it may be amended, modified, supplemented, restated or replaced from
time to time.
"SOLVENT": With respect to any Person on any date of determination,
that on such date:
(a) the fair value of such Person's tangible and
intangible assets is in excess of the total amount of such Person's
liabilities including, without limitation, Contingent Obligations;
and
(b) such Person is then able to pay its debts as they
mature; and
(c) such Person has capital sufficient to carry on its
business.
"SUBSIDIARY": Any Person of which or in which the Borrower and its
other Subsidiaries own directly or indirectly 50% or more of: (a) the
combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such Person, if it is a corporation, (b) the capital interest or profit
interest of such Person, if it is a partnership, joint venture or similar
entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"SUBSIDIARY DOCUMENTS": Each Subsidiary Guaranty, Subsidiary
Security Agreement, Subsidiary Pledge Agreement, Subsidiary UCC Financing
Statements, Subsidiary Secretary's Certificate and such other approvals,
opinions or documents as the Bank may request.
"SUBSIDIARY GUARANTOR": Compex and each now existing or hereafter
acquired Subsidiary of the Borrower which may execute a Subsidiary Guaranty,
Subsidiary Security Agreement and/or Subsidiary Pledge Agreement after the
date of this Agreement.
"SUBSIDIARY GUARANTY": The Guaranty dated as of the date of the
consummation of the Transaction made by Compex in favor of the Bank and each
Guaranty hereafter made by a Subsidiary Guarantor in favor of the Bank; in
each case, as originally executed and as it may be amended, modified,
supplemented, restated or replaced from time to time.
"SUBSIDIARY GUARANTY RELEASE CONDITIONS": The Subsidiary Guaranty
Release Conditions defined in SECTION 11.13.
"SUBSIDIARY GUARANTY RELEASE DATE": The Subsidiary Guaranty Release
Date defined in SECTION 11.13.
"SUBSIDIARY PLEDGE AGREEMENT": Each pledge agreement hereafter made
by a Subsidiary Guarantor in favor of the Bank; in each case, as originally
executed and as it may be amended, modified, supplemented, restated or
replaced from time to time.
13
"SUBSIDIARY SECURITY AGREEMENT": Each Security Agreement hereafter
made by a Subsidiary Guarantor in favor of the Bank; in each case, as
originally executed and as it may be amended, modified, supplemented,
restated or replaced from time to time.
"TERM LOAN COMMITMENT": $15,000,000.00, and as the context may
require, the agreement of the Bank to make the Term Loan to the Borrower up
to the amount of the Term Loan Commitment subject to the terms and conditions
of this Agreement.
"TERM LOAN": The Loan described in SECTION 2.1(b).
"TERM NOTE": The promissory note of the Borrower described in
SECTION 2.5(b), substantially in the form of EXHIBIT B, as such promissory
note may be amended, modified or supplemented from time to time, and such
term shall include any substitutions for, or renewals of, such promissory
note.
"TOTAL DEBT": At any date, the outstanding principal balance of the
Loans, the Borrower's and its Subsidiaries' Capitalized Leases, other
interest-bearing Indebtedness (other than Trade Accounts Payable not
constituting Indebtedness) and the Acquisition Indebtedness.
"TRADE ACCOUNTS PAYABLE": The trade accounts payable of the
described Person with a maturity of not greater than 90 days after their
respective original due dates and that are incurred in the ordinary course of
such Person's business and which do not remain unpaid for more than such
period of time.
"TRANSACTIONS": The following series of transactions as more fully
set forth in the Transaction Documents: (a) the Borrower's purchase of all
600 shares of Compex pursuant to the Share Purchase Agreement from the
"Sellers" as that term is defined therein; (b) the Borrower's incurrence of
the Obligations pursuant to this Agreement; and (c) the consummation of the
other transactions contemplated by the Transaction Documents.
"TRANSACTION DOCUMENTS": The documents listed on SCHEDULE A attached
hereto.
"TRANSACTION FEES": The fees, costs and expenses described on
SCHEDULE B attached hereto and incorporated herein by reference.
SECTION 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder (including,
without limitation, determination of compliance with financial ratios and
restrictions in ARTICLES VIII and IX hereof) shall be made in accordance with
GAAP consistently applied on a consolidated basis for the Borrower and its
consolidated Subsidiaries as used in the preparations of the Borrower's
audited financial statements described in SECTION 7.5(a).
14
SECTION 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, unless otherwise stated, the word "from" means "from and including" and
the words "to" or "until" each means "to but excluding."
SECTION 1.4 OTHER DEFINITIONAL PROVISIONS. The words "hereof,"
"herein," and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and
like references are to this Agreement unless otherwise expressly provided.
ARTICLE II
TERMS OF LENDING
SECTION 2.1 THE LOANS. Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, the Bank agrees:
(a) REVOLVING LOANS. To make loans (each a "Revolving Loan"
and collectively the "Revolving Loans") to the Borrower from time to
time from the date hereof until the Revolving Credit Termination
Date up to an aggregate undrawn amount of the Revolving Credit
Commitment, during which period the Borrower may repay and reborrow
in accordance with the provisions hereof, PROVIDED that: (i) the
Bank shall not be obligated to make any Revolving Loan if, after
giving effect to such Revolving Loan, the aggregate outstanding
principal amount of all Revolving Loans would exceed the Revolving
Credit Commitment; and (ii) the aggregate amount of Revolving Loans
available on the Closing Date shall not exceed $2,000,000.00.
(b) TERM LOAN. To make a loan (the "Term Loan") in the
amount of $15,000,000.00 to the Borrower at the Bank's principal
office in Minneapolis, Minnesota in immediately available funds on
the Closing Date.
SECTION 2.2 LOAN UNITS FOR LOANS. Except as otherwise provided
herein, the Revolving Loans and the Term Loan shall be comprised of
Eurodollar Rate Loan Units and Reference Rate Loan Units as shall be selected
by the Borrower in accordance with SECTION 2.3 and SECTION 2.4. Any
combination of Types of Loan Units for the Loans may be outstanding at the
same time; PROVIDED, HOWEVER, that the Loans may not consist of more than
four (4) different Eurodollar Rate Loan Units. Each Eurodollar Rate Loan Unit
shall be in a minimum amount of $100,000.00 or in an integral multiple of
$100,000.00 above such amount. Each Reference Rate Loan Unit shall be in an
amount of not less than $50,000.00.
SECTION 2.3 BORROWING PROCEDURES.
(a) REVOLVING LOANS. Any request by the Borrower for
Revolving Loans shall be in writing, or by telephone promptly confirmed
in writing if so requested by the Bank, and must be given so as to be
received by the Bank not later than 11:00 a.m.,
15
Minneapolis time, on: (i) the date of the requested Revolving Loans,
if such Revolving Loans will not include Eurodollar Rate Loan Units;
or (ii) on the second Eurodollar Business Day prior to the date of
the requested Revolving Loans, if such Revolving Loans will include
Eurodollar Rate Loan Units. Each request for Revolving Loans shall
specify the borrowing date (which shall be a Business Day and, in the
case of any request for Eurodollar Rate Loan Units, a Eurodollar
Business Day) and the amount of such Revolving Loans. Each request
for Revolving Loans shall be in a minimum amount of $50,000.00. Each
request for Revolving Loans shall be deemed a representation and
warranty by the Borrower that all conditions precedent specified in
SECTION 6.2 to such Revolving Loans are satisfied on the date of such
request and on the date the requested Revolving Loans are made.
Unless the Bank determines that any applicable condition specified in
ARTICLE VI has not been satisfied (in which case the Bank will
promptly notify the Borrower in writing of such determination), the
Bank will make the amount of the requested Revolving Loan available
to the Borrower at the Bank's principal office in Minneapolis,
Minnesota in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the date requested. Each written request or
confirmation shall be in the form of EXHIBIT C attached hereto.
(b) TERM LOAN. On the Closing Date, the Term Loan shall be
made as a single Reference Rate Loan Unit. Unless the Bank
determines that any applicable condition specified in ARTICLE VI has
not been satisfied (in which case the Bank will promptly notify the
Borrower in writing of such determination), the Bank will make the
amount of the Term Loan available to the Borrower at the Bank's
principal office in Minneapolis, Minnesota in immediately available
funds on the Closing Date.
SECTION 2.4 CONTINUATION OR CONVERSION OF LOAN UNITS FOR LOANS. The
Borrower may elect to: (i) continue any outstanding Eurodollar Rate Loan Unit
from one Interest Period into a subsequent Interest Period to begin on the
last day of the earlier Interest Period; or (ii) convert any outstanding Loan
Unit into another Type or Types of Loan Unit (on the last day of an Interest
Period only, in the instance of a Eurodollar Rate Loan Unit), by giving the
Bank notice in writing, or by telephone promptly confirmed in writing if so
requested by the Bank, given so as to be received by the Bank not later than:
(a) 11:00 a.m., Minneapolis time, on the date of the
requested continuation or conversion, if all or part of the
continuing or converted Loan Unit shall be a Reference Rate Loan
Unit; or
(b) 11:00 a.m., Minneapolis time, two (2) Eurodollar
Business Days prior to the date of the requested continuation or
conversion, if all or part of the continuing or converted Loan Unit
shall be a Eurodollar Rate Loan Unit.
Each notice of continuation or conversion of a Loan Unit shall specify: (i)
the effective date of the continuation or conversion (which shall be a
Business Day and, if the resulting Loan Unit is a Eurodollar Rate Loan Unit,
a Eurodollar Business Day); (ii) the amount and the Type or Types
16
of Loan Units following such continuation or conversion; and (iii) for
continuation as, or conversion into, Eurodollar Rate Loan Units, the Interest
Periods for such Loan Units. Absent timely notice of continuation or
conversion, each Eurodollar Rate Loan Unit shall automatically convert into a
Reference Rate Loan Unit on the last day of an applicable Interest Period,
unless paid in full on such last day. No Loan Unit shall be continued as, or
converted into, a Eurodollar Rate Loan Unit if the shortest Interest Period
for such Loan Unit may not transpire prior to the Maturity of the relevant
Loan or if a Default or Event of Default shall exist. Each written notice of
continuation or conversion shall be in the form of EXHIBIT D attached hereto.
SECTION 2.5 THE NOTES AND MATURITIES. The Loans shall be evidenced
by the following Notes:
(a) REVOLVING NOTE. The Revolving Loans made by the Bank
shall be evidenced by a Revolving Note in the initial amount of the
Revolving Credit Commitment. The Revolving Loans and the Revolving
Note shall mature and be payable at Maturity of the Revolving Loans.
The Bank shall enter in its records the amount of each of its
Revolving Loans, the rate of interest borne on such Revolving Loans
by each Loan Unit, and the payments of the Revolving Loans received
by the Bank, and such records shall be conclusive evidence of the
subject matter thereof, absent manifest error.
(b) TERM NOTE. The Term Loan made by the Bank shall be
evidenced by the Term Note in the amount of the Term Loan when made.
The Term Loan shall mature and be payable in accordance with the
provisions of SECTION 4.2. The Bank shall enter in its records the
amount of the Term Loan, the rate of interest borne on the Term Loan
by each Loan Unit and the payments of the Term Loan received by the
Bank, and such records shall be conclusive evidence of the subject
matter thereof, absent manifest error.
SECTION 2.6 FUNDING LOSSES. Upon demand, the Borrower will
indemnify and hold the Bank free and harmless from all reasonable losses,
costs and expenses which such Bank may sustain or incur (including, without
limitation, any loss or expense sustained or incurred in obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan Unit) as a result of: (a) a default by the Borrower in
payment when due of the principal of or interest on any Eurodollar Rate Loan
Unit; (b) the Borrower's failure (other than a failure attributable to a
default by the Bank) to make a borrowing, conversion or refunding with
respect to a Eurodollar Rate Loan Unit after making a request therefor in
accordance with the terms of this Agreement; (c) a prepayment (whether
mandatory or otherwise) of a Eurodollar Rate Loan Unit before the expiration
of the related Interest Period; and (d) any Event of Default by the Borrower
under the Loan Documents and a demand for payment of a Eurodollar Rate Loan
Unit by the Bank before the expiration of the related Interest Period. A
certificate as to any such loss, cost or expense shall be submitted by the
Bank to the Borrower together with such Bank's request for indemnification
(which requests shall set forth the basis for requesting such amounts in
reasonable detail) and shall, in the absence of manifest error or error
proven by the Borrower, be conclusive and binding as to the amount thereof.
17
ARTICLE III
INTEREST AND FEES
SECTION 3.1 INTEREST.
(a) REVOLVING LOANS.
(i) Subject to the provisions of SECTION
3.1(a)(ii), the Borrower agrees to pay interest on the
outstanding principal amount of each Revolving Loan from the
date of such Revolving Loan until the Maturity thereof:
(A) With respect to each Reference Rate Loan
Unit comprising a portion of such Revolving Loan,
at a fluctuating rate per annum equal at all times
to the sum of the Reference Rate PLUS the
Applicable Margin; and
(B) With respect to each Eurodollar Rate
Loan Unit comprising a portion of such Revolving
Loan, at a rate per annum equal at all times
during the Interest Period relating to such
Eurodollar Rate Loan Unit to the sum of the
Adjusted Eurodollar Rate in effect for such Interest
Period PLUS the Applicable Margin.
(ii) Notwithstanding the provisions of SECTION
3.1(a)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal amount of each
Revolving Loan from the date on which the Bank notifies the
Borrower of such Event of Default at a rate per annum at
all times equal to the sum of the rate otherwise in effect
on such Revolving Loan plus two percent (2.0%) per annum.
(b) TERM LOANS.
(i) Subject to the provisions of SECTION
3.1(b)(ii), the Borrower agrees to pay interest on the
outstanding principal amount of the Term Loan from the date
of the Term Loan until the Maturity thereof:
(A) With respect to each Reference Rate Loan
Unit comprising a portion of the Term Loan, at a
fluctuating rate per annum equal at all times to
the sum of the Reference Rate PLUS the Applicable
Margin; and
(B) With respect to each Eurodollar Rate Loan
Unit comprising a portion of the Term Loan, at a
rate per annum equal at all times during the
Interest Period relating to such Eurodollar Rate
Loan Unit to the sum of the Adjusted Eurodollar
Rate in effect for such Interest Period PLUS the
Applicable Margin.
18
(ii) Notwithstanding the provisions of SECTION
3.1(b)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal balance of the
Term Loan from the date on which the Bank notifies the
Borrower of such Event of Default at a rate per annum at all
times equal to the sum of the rate otherwise in effect on
the Term Loan plus two percent (2.0%) per annum.
(c) ALL LOANS.
(i) Until Maturity of a Loan, interest accrued on
each Loan Unit through the end of a month shall be payable
on the last day of such month, commencing on July 31, 1999.
Interest shall also be payable at the Maturity of a Loan
and interest accrued after Maturity shall be payable on
demand.
(ii) No provision of this Agreement or any Note
shall require the payment of interest in excess of the rate
permitted by applicable law.
SECTION 3.2 REVOLVING CREDIT COMMITMENT FEE. The Borrower shall pay
to the Bank a fee (the "Revolving Credit Commitment Fee") in an amount
determined by applying a rate of three-eighths of one percent (0.375%) per
annum to the average daily excess of the Revolving Credit Commitment over the
sum of the outstanding principal amount of the Revolving Loans. Such
Revolving Credit Commitment Fee shall be payable to the Bank in arrears on
each Quarterly Payment Date after the date of this Agreement and on the
Revolving Credit Termination Date.
SECTION 3.3 ORIGINATION FEE. The Borrower shall pay to the Bank a
non-refundable origination fee (the "Origination Fee") in an aggregate amount
equal to $275,000.00, of which $50,000.00 has been deposited with the Bank
and will be applied to the Origination Fee. No termination or reduction of
any Loan or any Commitment and no failure of the Borrower to satisfy the
conditions set forth in ARTICLE VI shall entitle the Borrower to a refund of
any portion of the Origination Fee.
SECTION 3.4 COMPUTATION. Interest, the Revolving Credit Commitment
Fee and any other fee calculated on a per annum basis shall be computed on
the basis of actual days elapsed and a year of 360 days.
ARTICLE IV
PAYMENTS, PREPAYMENTS, REDUCTION OR
TERMINATION OF THE CREDIT AND SETOFF
SECTION 4.1 REPAYMENT. Principal of the Loans shall be due and
payable in accordance with the provisions of SECTION 2.5 and this ARTICLE IV.
19
SECTION 4.2 VOLUNTARY AND MANDATORY PREPAYMENTS; SCHEDULED
INSTALLMENT PAYMENTS.
(a) OPTIONAL PREPAYMENTS. The Borrower, by giving written
or telephonic notice to the Bank by no later than 2:00 p.m. on the
Business Day of a prepayment, may prepay the Loans, in whole or in
part, at any time, without premium or penalty except as provided by
SECTION 3.4; PROVIDED, HOWEVER, that: (i) any prepayment shall be
subject to the provisions of SECTION 2.6; and (ii) each partial
prepayment of any Term Loan shall be in an amount of $500,000.00 or
an integral multiple of $100,000.00 above such amount. Any such
prepayment must be accompanied by accrued and unpaid interest on the
amount prepaid and any amount payable pursuant to SECTION 2.6.
(b) MANDATORY PREPAYMENT OF REVOLVING LOANS. If, at any
time, the aggregate outstanding principal amount of all Revolving
Loans exceeds the Revolving Credit Commitment, then the Borrower
shall immediately prepay the Revolving Loans by the amount of such
excess together with interest on the amount prepaid.
(c) MANDATORY PREPAYMENT OF TERM LOAN. The Borrower shall
prepay the Term Loan as follows:
(i) By no later than later than September 30 of
each fiscal year, commencing September 30, 2000, the
Borrower agrees to make a prepayment (an "Excess Cash Flow
Prepayment") of the principal of the Term Loan in an amount
equal to 50% of the positive Excess Cash Flow for the then
most recently ended fiscal year (rounded up to the nearest
$1,000.00).
(ii) Contemporaneously with the Borrower's receipt
of any Net Proceeds, the Borrower shall prepay the Term
Loan by an amount equal to such Net Proceeds except that no
such prepayment shall be required during any fiscal year
until after the aggregate amount of Net Proceeds received
by the Borrower and/or any of its Subsidiaries during such
fiscal year is greater than $100,000.00 and the Borrower and
its Subsidiaries may retain aggregate Net Proceeds up to
such amount.
(d) SCHEDULED TERM LOAN PAYMENTS. Principal installments
of the Term Loan shall be due and payable in 20 consecutive
quarterly installments of principal, such installments shall be due
and payable on each Quarterly Payment Date, commencing September 30,
1999 and continuing through, to and including June 30, 2004 and each
such installment shall be in the amount set forth in the table below
for the relevant installment:
20
Number of Amount of
Consecutive Quarterly Each Such Quarterly
Installments Installment
------------ -----------
FIRST THROUGH FOURTH $400,000.00
FIFTH THROUGH EIGHTH $450,000.00
NINTH THROUGH TWELFTH $500,000.00
THIRTEEN THROUGH SIXTEENTH $550,000.00
SEVENTEENTH THROUGH NINETEEN $600,000.00
TWENTIETH REMAINING PRINCIPAL.
In any event, the Term Loan, together with accrued interest, shall
be due and payable in full at its Maturity.
(e) APPLICATION OF PREPAYMENTS. Each optional or
mandatory prepayment of the Term Loan shall be applied to reduce the
unpaid installments thereon in the inverse order of maturities.
Subject to the immediately preceding sentence, the Bank shall apply
prepayments first to Reference Rate Loan Units, then to Eurodollar
Rate Loan Units having an Interest Period ending on such day of
prepayment and then to other Eurodollar Rate Loan Units.
SECTION 4.3 OPTIONAL REDUCTION OR TERMINATION OF REVOLVING CREDIT
COMMITMENT. The Borrower may, at any time, upon no less than two (2) Business
Days' prior written notice received by the Bank, permanently reduce the
Revolving Credit Commitment, with any such reduction in a minimum amount of
$1,000,000.00 or an integral multiple thereof; PROVIDED, HOWEVER, the
Borrower may not reduce the Revolving Credit Commitment below the aggregate
outstanding principal amount of all Revolving Loans. The Borrower may, at any
time when no Revolving Loans are outstanding, upon not less than two (2)
Business Days' prior written notice to the Bank, terminate the Revolving
Credit Commitment in its entirety. Upon termination of the Revolving Credit
Commitment pursuant to this Section, the Borrower shall pay to the Bank all
accrued and unpaid interest on the Revolving Loans, all unpaid Revolving
Credit Commitment Fees accrued to the date of such termination and all other
unpaid Obligations of the Borrower to the Bank hereunder with respect to the
Revolving Loans and the Revolving Credit Commitment.
SECTION 4.4 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other Obligations under the
Loan Documents payable to the Bank shall be made without deduction, set-off,
or counterclaim in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the dates due at the main office of the Bank in
Minneapolis, Minnesota. Funds received on any day after such time shall be
deemed to have been received on the next Business Day. Subject to the
definition of the term "Interest Period", whenever any payment to be made
hereunder or on the Notes shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of any
interest or fees. The Borrower authorizes the Bank to charge any of the
Borrower's accounts maintained at the Bank
21
for the amount of any payment or prepayment on the Notes or other amount
owing pursuant to any of the other Loan Documents.
ARTICLE V
ADDITIONAL PROVISIONS RELATING TO THE LOANS
SECTION 5.1 INCREASED COSTS. If, as a result of any Regulatory Change:
(a) any tax, duty or other charge with respect to any
Loan, the Notes or the Commitment is imposed, modified or deemed
applicable, or the basis of taxation of payments to the Bank of
interest or principal of the Loans or of the Revolving Credit
Commitment Fee (other than taxes imposed on the overall net income
of the Bank by the jurisdiction in which the Bank has its principal
office) is changed;
(b) any reserve, special deposit, special assessment
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Bank is imposed, modified or
deemed applicable;
(c) any increase in the amount of capital required or
expected to be maintained by the Bank or any Person controlling the
Bank is imposed, modified or deemed applicable;
(d) any other condition affecting this Agreement or
the Commitment is imposed on the Bank or the relevant funding markets;
and the Bank determines that, by reason thereof, the cost to the Bank of
making or maintaining the Loans or the Commitment is increased, or the amount
of any sum receivable by the Bank hereunder or under the Notes is reduced,
then, the Borrower shall pay to the Bank upon demand such additional amount
or amounts as will compensate the Bank (or the controlling Person in the
instance of (c) above) on an after-tax basis for such additional costs or
reduction (provided that the Bank has not been compensated for such
additional cost or reduction in the calculation of the Eurodollar Reserve
Percentage). Determinations by the Bank for purposes of this SECTION 5.1 of
the additional amounts required to compensate the Bank shall be conclusive in
the absence of manifest error. The Bank's demand for payment of any amount
pursuant to this SECTION 5.1 shall show the calculation of the amount
demanded in reasonable detail. In determining such amounts, the Bank may use
any reasonable averaging, attribution and allocation methods.
SECTION 5.2 DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE OR
INADEQUATE; IMPRACTICABILITY. If the Bank determines (which determination
shall be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant
Interest Period for any Eurodollar Rate Loan Unit are not available
to the Bank in the relevant market or that, by
22
reason of circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period;
(b) the Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Bank of making or funding the
Eurodollar Rate Loan Units for its relevant Interest Period; or
(c) the making or funding of any Eurodollar Rate Loan
Unit has become impracticable as a result of any event occurring
after the date of this Agreement which, in the opinion of the Bank,
materially and adversely affects such Loan Unit or the Bank's
Commitment to make such Loan Unit or the relevant market;
the Bank shall promptly give notice of such determination to the Borrower and
the Bank, and (A) all Loans made by the Bank shall accrue interest as a
Reference Rate Loan Unit during the period on and after the date of the
Bank's notice through the date on which the Bank determines that the
circumstances giving rise to the Bank's determination under subsection (a),
(b) or (c) no longer exist; (B) (1) any notice of a new Eurodollar Rate Loan
Unit previously given by the Borrower and not yet borrowed or converted shall
be deemed, as to the Bank, to be a notice to make a Reference Rate Loan Unit
and (2) the Borrower shall be obligated to either prepay in full any
outstanding Eurodollar Rate Loan Units without premium or penalty other than
any amount required by SECTION 2.6 on the last day of the current Interest
Period with respect thereto or convert any such Eurodollar Rate Loan Unit to
a Reference Rate Loan Unit or, in either case, on such earlier date as may be
required by applicable law. Any prepayment of any Eurodollar Rate Loan Unit
prior to the end of its Interest Period shall be accompanied by any payment
required by SECTION 2.6.
SECTION 5.3 CHANGES IN LAW RENDERING EURODOLLAR RATE LOAN UNITS
UNLAWFUL. If at any time due to the adoption of any law, rule, regulation,
treaty or directive, or any change therein, or in the interpretation or
administration thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with the
interpretation or administration thereof, or for any other reason arising
subsequent to the date of this Agreement, it shall become unlawful or
impossible for the Bank to make or fund any Eurodollar Rate Loan Unit, the
obligation of the Bank to provide such Loan Unit shall, upon the happening of
such event, forthwith be suspended for the duration of such illegality or
impossibility. If any such event shall make it unlawful or impossible for the
Bank to continue any Eurodollar Rate Loan Unit previously made by it
hereunder, the Bank shall, upon the happening of such event, notify the
Borrower and the Bank thereof in writing, and the Borrower shall, at the time
notified by the Bank, either convert each such unlawful Loan Unit to a
Reference Rate Loan Unit or repay such Loan Unit in full, together with
accrued interest thereon and any payment required pursuant to SECTION 2.6.
SECTION 5.4 DISCRETION OF THE BANK AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, the Bank
shall be entitled to fund and maintain its funding of all or any part of the
Loans in any manner it elects; it being understood, however, that
23
for purposes of this Agreement, all determinations hereunder shall be made as
if the Bank had actually funded and maintained each Eurodollar Rate Loan Unit
during the Interest Period for such Loan Unit through the purchase of
deposits having a term corresponding to such Interest Period and bearing an
interest rate equal to the Eurodollar Rate (whether or not the Bank shall
have granted any participation in such Loan Units).
SECTION 5.5 FUNDING THROUGH THE SALE OF PARTICIPATION. The Borrower
acknowledges that the Bank may fund all or any part of the Loans by sales of
participation to various participants and agrees that the Bank may, in
invoking its rights under this ARTICLE V or under SECTION 2.6, demand and
receive payment for costs and other amounts incurred by, or allocable to, any
such participant, or take other action arising from circumstances applicable
to any such participant, to the same extent that such participant could
demand and receive payments, or take other action, under this ARTICLE V or
under SECTION 2.6 if such participant were the Bank under this Agreement
except that no participant's claims for payment of costs and other amounts
under this Article V or SECTION 2.6 shall exceed the amount which the Bank
would have received had the Bank not sold a participation to such participant.
SECTION 5.6 FUNDING THROUGH BRANCH OR AFFILIATE. At the Bank's sole
option, it may fulfill its commitment to make Eurodollar Rate Loan Units by
causing a foreign branch or an affiliate to make or continue such Eurodollar
Rate Loan Units; PROVIDED, that in such instance such Eurodollar Rate Loan
Unit shall be deemed for purposes of this Agreement to have been made by the
Bank and the obligation of the Borrower to repay such Eurodollar Rate Loan
Units shall be to the Bank and shall be deemed held by the Bank for the
account of such branch or affiliate.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS OF INITIAL LOANS, ETC. The obligation of the
Bank to make the initial Revolving Loans and the Term Loan hereunder shall be
subject to the satisfaction of the conditions precedent, in addition to the
applicable conditions precedent set forth in SECTION 6.2 below, that the Bank
shall have received all of the following, in form and substance satisfactory
to the Bank, each duly executed and certified or dated the date of the
initial Loans or such other date as is satisfactory to the Bank:
(a) The Notes appropriately completed and duly
executed by the Borrower;
(b) The Security Agreement, the UK Pledge Agreement
and the Swiss Pledge Agreement appropriately completed and duly
executed by the Borrower and the Subsidiary Guaranty appropriately
completed and duly executed by Compex;
(c) UCC-1 Financing Statements in a form acceptable to
the Banks appropriately completed and duly executed by the Borrower;
24
(d) Recent UCC searches from the filing offices in all
states required by the Banks which reflect that no Person holds a
Lien in any Loan Party's assets other than Permitted Liens;
(e) A certificate of the Secretary of each Loan Party
having attached: (i) a copy of the corporate resolution of such Loan
Party authorizing the execution, delivery and performance of the
Loan Documents to which such Loan Party is a party, certified by the
Secretary or an Assistant Secretary of such Loan Party; (ii) an
incumbency certificate showing the names and titles, and bearing the
signatures of, the officers of such Loan Party authorized to execute
the Loan Documents to which such Loan Party is a party; and (iii) a
copy of the bylaws of such Loan Party with all amendments thereto;
(f) A copy of the articles or certificate of
incorporation of each Loan Party with all amendments thereto,
certified by the appropriate governmental official of the
jurisdiction of its incorporation as of a date acceptable to the
Banks;
(g) Certificates of good standing for each Loan Party
in the jurisdiction of its incorporation and such other states as,
in accordance with the standards set forth in SECTION 7.1, such Loan
Party is required to qualify to do business, certified by the
appropriate governmental officials as of a date acceptable to the
Banks;
(h) An opinion of counsel to the Loan Parties,
addressed to the Bank, in form and substance satisfactory to the
Bank;
(i) A No Default Certificate in a form provided by the
Bank executed by the chief financial officer or treasurer of the
Borrower;
(j) Evidence of insurance for all insurance required
by the Loan Documents;
(k) A copy of the Transaction Documents, each in form
and substance satisfactory to the Bank and certified as a true and
correct copy by the Secretary of the Borrower;
(l) Evidence satisfactory to the Bank that: (i) all
conditions precedent to the consummation of the Transactions have
been satisfied or waived; (ii) all necessary regulatory approvals to
the consummation of the Transactions have been obtained; (iii) no
litigation exists relating to the Transactions; and (iv)
contemporaneously with the Borrower's receipt of the proceeds of the
initial Revolving Loans and the Term Loan, the Transactions will be
consummated in full in accordance with the terms of the Transaction
Documents;
(m) A pro forma balance sheet for the Borrower
prepared by the Borrower based on the Borrower's internally prepared
balance sheet satisfactory to the Bank, taking
25
into account the consummation of the Transactions and the receipt of
the proceeds of the Loans, which pro forma balance sheet has been
delivered to the Bank;
(n) A letter signed by the Borrower instructing the
Bank as to payment of the proceeds of the Loans;
(o) Receipt in immediately available funds of the
Origination Fee;
(p) Projections of the Borrower's financial
performance on an annual basis for each fiscal year through the
Borrower's 2004 fiscal year prepared by management of the Borrower in
form and substance satisfactory to the Bank, which projects have been
previously delivered to the Bank;
(q) Evidence that all consideration payable by the
Borrower in connection with the Transactions to the "Sellers" or any
other Person pursuant to the Share Purchase Agreement and that the
Transaction Fees and other costs of consummating the Transactions
does not exceed the amount set forth on SCHEDULE B attached hereto
and incorporated herein by reference;
(r) A pay-off letter from Norwest Bank Minnesota, N.A.
("Norwest") in a form acceptable to the Bank appropriately completed
and duly executed by Norwest;
(s) A Mortgagee Consent in a form acceptable to the
Bank appropriately completed and duly executed by Norwest;
(t) Evidence satisfactory to the Bank that all credit
facilities to Compex or any of its Subsidiaries shall be terminated
upon the consummation of the Borrower's purchase of the shares of
Compex pursuant to the Share Purchase Agreement and that all
Indebtedness thereunder will be paid in full and all Liens on
Compex's or any of its Subsidiaries' property securing such credit
facilities shall be released upon such termination and payment; and
(u) Such other approvals, opinions or documents as the
Bank may reasonably request.
SECTION 6.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
the Bank to make any Loan hereunder (including the initial Revolving Loans
and the Term Loan) shall be subject to the satisfaction of the following
conditions precedent:
(a) Before and after giving effect to such Loan, the
representations and warranties contained in ARTICLE VII shall be
true and correct, as though made on the date of such Loan except
that, after the delivery of any financial statements to the Bank in
accordance with SECTION 8.1(A) or (B), the representations and
warranties set forth in
26
SECTION 7.5 shall be deemed a reference to the audited or unaudited
financial statements then most recently delivered to the Bank;
(b) Before and after giving effect to such Loan, no
Default or Event of Default shall have occurred and be continuing;
and
(c) The Bank shall have received the Borrower's
request for such Loan as required by SECTION 2.3.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the
Commitment and to make Loans, the Borrower represents and warrants to the
Bank:
SECTION 7.1 ORGANIZATION, STANDING, ETC. The Borrower and each of
its Subsidiaries are corporations duly incorporated and validly existing and
in good standing under the laws of the State of their respective
incorporation and have all requisite corporate power and authority to carry
on their respective businesses as now conducted, to enter into the Loan
Documents and the Transaction Documents to which they are a party and to
perform their obligations under such Loan Documents and Transaction
Documents. The Borrower and each of its Subsidiaries are duly qualified and
in good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary and where the failure to
qualify could constitute an Adverse Event.
SECTION 7.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by each Loan Party of the Loan Documents and the Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate action by such Loan Party. The Loan Documents and the Transaction
Documents constitute the legal, valid and binding obligations of each Loan
Party which is a party thereto and are enforceable against such Loan Party in
accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
SECTION 7.3 NO CONFLICT, NO DEFAULT. The execution, delivery and
performance by each Loan Party of the Loan Documents and the Transaction
Documents to which it is a party will not: (a) violate any provision of any
law, statute, rule or regulation or any order, writ, judgment, injunction,
decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to such Loan Party; (b)
violate or contravene any provisions of the articles (or certificate) of
incorporation or bylaws of such Loan Party; or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any
other agreement, lease or instrument to which such Loan Party is a party or
by which it or any of its properties may be bound or result in the creation
of any Lien on any asset of such Loan Party except for Liens created by the
Loan Documents. No Loan Party is in default under or in
27
violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
loan or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation constitute an Adverse
Event. No Default or Event of Default has occurred and is continuing.
SECTION 7.4 GOVERNMENT CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is
required on the part of any Loan Party to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents or the
Transaction Documents to which such Loan Party is a party.
SECTION 7.5 FINANCIAL STATEMENTS AND CONDITION.
(a) The Borrower's audited consolidated financial
statements as at June 30, 1998 and unaudited consolidated financial
statements as at March 31, 1999, as heretofore furnished to the
Bank, have been prepared in accordance with GAAP on a consistent
basis (except for the omission of footnotes and prior period
comparative data required by GAAP and for variations from GAAP which
in the aggregate are not material) and fairly present the consolidated
financial condition of the Borrower and its Subsidiaries as at such
dates and the results of their consolidated operations and changes in
financial position for the respective periods then ended. Since June
30, 1998, no event has occurred which materially, adversely affects
the Borrower's consolidated condition (financial or otherwise),
business operations, properties or assets.
(b) The pro forma unaudited balance sheet of the
Borrower delivered to the Bank pursuant to SECTION 6.1(m) has been
prepared on a basis in conformity with GAAP (except for the omission
of footnotes and prior period comparative data required by GAAP and
for variations from GAAP which in the aggregate are not material and
for reallocations of values with respect to categories of assets
acquired in connection with, and adjustment for actual fees, expenses
and transaction costs incurred in connection with, the Transactions)
and presents fairly the financial condition of the Borrower, assuming
consummation of the Transactions.
(c) The projections provided to the Bank pursuant to
SECTION 6.1(p) have been prepared on the basis of the assumptions
which are set forth therein. Such projections have been prepared in
good faith and represent, on the date of this Agreement, the good
faith opinion of the Borrower's management as to the most probable
course of business of the Borrower on the basis of the assumptions
which are set forth therein.
SECTION 7.6 LITIGATION. Except as described in SCHEDULE 7.6 attached
hereto and incorporated herein by reference, there are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against
or affecting the Borrower or any of its Subsidiaries, or any of its
properties, before any court or arbitrator, or any governmental
28
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, could constitute an Adverse
Event.
SECTION 7.7 CONTINGENT OBLIGATIONS. Except as described in SCHEDULE
7.7 attached hereto and incorporated herein by reference, neither the
Borrower nor any of its Subsidiaries has any Contingent Obligations which are
material.
SECTION 7.8 COMPLIANCE. The Borrower and each of its Subsidiaries
are in material compliance with all statutes and governmental rules and
regulations applicable to them.
SECTION 7.9 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Borrower or any of its Subsidiaries of any
applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
threatens to impose a material liability on such Person or which would
require a material expenditure by such Person to cure except as described in
SCHEDULE 7.9. Neither the Borrower nor any of its Subsidiaries has received
any notice to the effect that any part of its operations or properties is not
in material compliance with any such law, rule, regulation or order or notice
that it or its property is the subject of any governmental investigation
evaluating whether any remedial action is needed to respond to any release of
any toxic or hazardous waste or substance into the environment, the
consequences of which non-compliance or remedial action could constitute an
Adverse Event except as described in SCHEDULE 7.9.
SECTION 7.10 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings
and regulations issued under the provisions of ERISA and the Code setting
forth those requirements. No Reportable Event has occurred and is continuing
with respect to any Plan. All of the minimum funding standards applicable to
such Plans have been satisfied and there exists no event or condition which
would permit the institution of proceedings to terminate any Plan under
Section 4042 of ERISA. The current value of the Plans' benefits guaranteed
under Title IV of ERISA does not exceed the current value of the Plans'
assets allocable to such benefits.
SECTION 7.11 REGULATION U. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve Board), and no part of the proceeds
of any Loan will be used to purchase or carry margin stock or for any other
purpose which would violate any of the margin requirements of the Board of
the Governors of the Federal Reserve System.
SECTION 7.12 OWNERSHIP OF PROPERTY; LIENS. The Borrower and each of
its Subsidiaries have good and marketable title to their respective
properties, including all properties and assets referred to in the pro forma
financial statements of the Borrower referred to in SECTION 7.5(B) (other
than property disposed of since the date of such financial statements in the
ordinary course of business). None of the properties, revenues or assets of
the Borrower or
29
any of its Subsidiaries is subject to a Lien, except for: (a) Liens listed on
SCHEDULE 7.12 attached hereto and incorporated herein by reference; or (b)
Liens allowed under SECTION 9.11.
SECTION 7.13 INDEBTEDNESS. Except for Indebtedness permitted by
SECTION 9.10, neither the Borrower nor any of its Subsidiaries has any
Indebtedness.
SECTION 7.14 GUARANTY OF SURETYSHIP. Except for Contingent
Obligations permitted by SECTION 9.12, neither the Borrower nor any of its
Subsidiaries is a party to any contract of guaranty or suretyship and none of
its assets is subject to such a contract.
SECTION 7.15 TAXES. Except as described on SCHEDULE 7.15 attached
hereto and incorporated herein by reference, each of the Borrower and each of
its Subsidiaries has filed all federal, state and local tax returns required
to be filed and has paid or made provision for the payment of all taxes due
and payable pursuant to such returns and pursuant to any assessments made
against it or any of its property and all other taxes, fees and other charges
imposed on it or any of its property by any governmental authority (other
than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges. The sum of the
charges, accruals and reserves on the books of the Borrower and each of its
Subsidiaries in respect of taxes and other governmental charges are adequate
to pay and discharge all such taxes.
SECTION 7.16 TRADEMARKS, PATENTS. The Borrower and each of its
Subsidiaries possess or have the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of their respective businesses, without known conflict with the
rights of others. SCHEDULE 7.16 attached hereto and incorporated herein by
reference is a complete list of all such patents and trademarks.
SECTION 7.17 INVESTMENT COMPANY ACT. Neither the Borrower nor any of
its Subsidiaries is an "investment company" and is not "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 7.18 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any of its Subsidiaries is a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" of a holding company or of a
subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 7.19 SUBSIDIARIES. The Borrower does not have any
Subsidiaries except for: (a) Subsidiaries in existence on the date of this
Agreement and described on SCHEDULE 7.19; and (b) additional subsidiaries
permitted by SECTION 9.6.
30
SECTION 7.20 PARTNERSHIPS AND JOINT VENTURES. Neither the Borrower
nor any of its Subsidiaries is a partner (limited or general) or joint
venturer in any partnerships or joint ventures except: (a) those in existence
on the date of this Agreement and described on SCHEDULE 7.20 ; and (b)
additional partnerships and joint ventures permitted by SECTION 9.7.
SECTION 7.21 USE OF PROCEEDS. The Term Loan will be used to
consummate the Transactions including costs related to the Transactions set
forth in SCHEDULE B. The Revolving Loans will be used to consummate the
Transactions, to provide working capital to the Borrower and for other
general corporate purposes. SECTION 7.22 SOLVENCY. Each Loan Party
is Solvent after giving effect to the making of the Loans in the full amount
available hereunder, the incurrence of the Indebtedness pursuant to the Loan
Documents, the granting of Liens pursuant to the Loan Documents and the
consummation of the Transactions.
SECTION 7.23 INSURANCE. SCHEDULE 7.23 attached hereto and
incorporated herein by reference sets forth a summary of the property and
casualty insurance program carried by the Borrower or any of its Subsidiaries
on the date hereof, including any self-insurance or risk assumption agreed to
by such Person or imposed upon such Person by any such insurer.
SECTION 7.24 CONTRACTS; LABOR MATTERS. Except as disclosed on
SCHEDULE 7.24 attached hereto and incorporated herein by reference: (a)
neither the Borrower nor any of its Subsidiaries is a party to any contract
or agreement, or subject to any charge, corporate restriction, judgment,
decree or order, the performance of which could constitute an Adverse Event;
(b) on the Closing Date: (i) neither the Borrower nor any of its Subsidiaries
is a party to any labor dispute; and (ii) there are no strikes or walkouts
relating to any labor contracts to which the Borrower or any of its
Subsidiaries is subject.
SECTION 7.25 ACCURACY OF INFORMATION. All factual information
heretofore or herewith furnished by the Borrower to the Bank for purposes of
or in connection with this Agreement or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by the
Borrower to the Bank will be, true and accurate in every material respect on
the date as of which such information is dated or certified and no such
information contains any material misstatement of fact or omits to state any
fact necessary to make the statements contained therein not misleading.
SECTION 7.26 REPRESENTATIONS AND WARRANTIES UNDER TRANSACTION
DOCUMENTS. All representations and warranties made by the Borrower or any of
its Subsidiaries in any of the Transaction Documents or in the certificates
delivered in connection therewith are true and correct in all material
respects as of the date hereof with the same force and effect as though made
on and as of the date hereof, and such representations and warranties of the
Borrower or any of its Subsidiaries are hereby confirmed to the Bank and made
representations and warranties of the Borrower hereunder as fully as if set
forth herein. The Borrower has no knowledge that any of the representations
and warranties made in the Transaction Documents by
31
or on behalf of any party thereto other than the Borrower or any of its
Subsidiaries are untrue or incorrect.
SECTION 7.27 YEAR 2000. The Borrower has reviewed and assessed its
and each of its Subsidiaries' respective business operations and computer
systems and applications to address the "year 2000 problem" (that is, that
computer applications and equipment used by the Borrower or any of its
Subsidiaries, directly or indirectly through third parties, may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000). The Borrower reasonably believes that the year 2000 problem will not
result in a material adverse change in the Borrower's consolidated business
condition (financial or otherwise), operations, properties or prospects or
ability to repay the Bank. The Borrower agrees that this representation will
be true and correct on and shall be deemed made by the Borrower on each date
the Borrower requests any Loan under this Agreement or any Note or delivers
any information to the Bank. The Borrower will promptly deliver to the Bank
such information relating to this representation as the Bank requests from
time to time.
SECTION 7.28 SURVIVAL OF REPRESENTATIONS. All representations and
warranties contained in this ARTICLE VII shall survive the delivery of the
Notes, the making of the Loans evidenced thereby and any investigation at any
time made by or on behalf of the Bank shall not diminish the Bank's rights to
rely thereon.
ARTICLE VIII
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment
is terminated or expires and the Loans and all other Obligations of the
Borrower to the Bank hereunder and under the Notes and the other Loan
Documents have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will do, and cause each of its Subsidiaries
to do, all of the following:
32
SECTION 8.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank:
(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, the annual audit
report (which may be included in the 10K Reports described below) of
the Borrower prepared in conformity with GAAP, consisting of at least
consolidated statements of operations and retained earnings and cash
flows, and a consolidated balance sheet as at the end of such year,
setting forth in each case in comparative form corresponding figures
from the previous annual audit, certified without qualification by
independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Bank together with: (i)
the related consolidating statements; (ii) any management letters,
management reports or other supplementary comments or reports to the
Borrower or its board of directors furnished by such accountants; and
(iii) a statement by the accounting firm performing such audit stating
that it has reviewed this Agreement and that in performing its
examination nothing came to its attention that caused it to believe
that any Default or Event of Default exists, or, if such Default or
Event of Default exists, describing its nature.
(b) As soon as available and in any event within 45 days
after the end of each fiscal quarter of each fiscal year, a copy (which
may be included in the 10Q Reports described below) of the unaudited
consolidated financial statements of the Borrower prepared in
conformity with GAAP (except for the omission of footnotes and prior
period comparative data required by GAAP and for variations from GAAP
which in the aggregate are not material) consisting of a consolidated
balance sheet as of the close of such fiscal quarter and related
consolidated statements of operations and retained earnings and cash
flow for such fiscal quarter and from the beginning of such fiscal year
to the end of such fiscal quarter and comparative figures for the
corresponding portion of the preceding fiscal year.
(c) As soon as available, and in any event within 45 days
after the end of each quarter of each fiscal year, a compliance
certificate (the "Compliance Certificate") in the form of EXHIBIT E
attached hereto signed by the Borrower's chief financial officer.
(d) As soon as available and in any event within 10 days
after the filing thereof, a copy of the Borrower's 10K Report (or any
successor report) filed with the SEC.
(e) As soon as available and in any event within 10 days
after the filing thereof (but in no event later than 55 days after the
end of each of the first three (3) fiscal quarters of each fiscal year
of the Borrower), a copy of the Borrower's 10Q Report (or any successor
report) filed with the SEC.
(f) As soon as available and in any event within 30 days
after the filing thereof, a copy of any other report not described
above which is filed by the Borrower or any of its Subsidiaries with
the SEC.
33
(g) By no later than five (5) Business Days after
becoming aware of any Default or Event of Default, a notice describing
the nature thereof and what action the Borrower proposes to take with
respect thereto.
(h) By no later than five (5) Business Days after
becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event or any "prohibited transaction" (as defined in Section
4975 of the Code), a notice specifying the nature thereof and what
action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or
have a trustee appointed for any Plan.
(i) By no later than five (5) Business Days after
becoming aware of the occurrence thereof, notice of the institution of
any litigation, arbitration or governmental proceeding against the
Borrower, any of its Subsidiaries or any of their respective property
which, if determined adversely to such Person, would constitute an
Adverse Event, or the rendering of a judgment or decision in such
litigation or proceeding which constitutes an Adverse Event, and the
steps being taken by the Borrower or its Subsidiary with respect
thereto.
(j) By no later than five (5) Business Days after
becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower or any of its Subsidiaries and
of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters: (i) in which an
adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other
permits held by the Borrower or any of its Subsidiaries which are
material to such Person's operations; or (ii) which will or threatens
to impose a material liability on the Borrower or any of its
Subsidiaries to any other Person or which will require a material
expenditure by the Borrower or any of its Subsidiaries to cure any
alleged problem or violation.
(k) By not later than 30 days after the commencement of
any of the Borrower's fiscal years, the annual plan for the Borrower's
then current fiscal year consisting of projected consolidated and
consolidating balance sheets and projected consolidated and
consolidating statements of operations and cash flows approved by the
Borrower's board of directors together with the assumptions underlying
such projections certified by the Borrower's chief financial officer or
treasurer as being such annual plan.
(l) By not later than 30 days after the Closing Date, a
copy of the Borrower's consolidated balance sheet immediately following
the making of the initial Revolving Loan and the Term Loan and the
consummation of the Transactions.
34
(m) From time to time, such other information regarding
the business, operation and financial condition of the Borrower or any
of its Subsidiaries as the Bank may reasonably request.
SECTION 8.2 CORPORATE EXISTENCE. Except as permitted by SECTION 7.1
or SECTION 9.1, maintain its corporate existence and good standing under the
laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction in which the character of the properties owned,
leased or operated by it or the business conducted by it makes such
qualification necessary and where the failure to so qualify could constitute
an Adverse Event.
SECTION 8.3 INSURANCE. Maintain with financially sound and reputable
insurance companies such insurance as may be required by any Loan Document or
by law and such other insurance in such amounts and against such hazards as
is customary in the case of reputable corporations engaged in the same or
similar business and similarly situated.
SECTION 8.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and
reports which are required by law to be filed by it and pay before they
become delinquent all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind
(including, without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result
in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by
appropriate proceedings, and as long as the Borrower's or any of its
Subsidiaries' title to its property is not materially adversely affected, its
use of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set
aside on the Borrower's or its Subsidiaries books in accordance with GAAP;
provided further that, in all events, the Borrower and its Subsidiaries shall
pay or cause to be paid all such taxes, assessments, charges or levies
forthwith upon the commencement of foreclosure of any Lien which may have
attached as security therefor.
SECTION 8.5 INSPECTION. Permit any Person designated by the Bank to
visit and inspect any of its properties, corporate books and financial
records, to examine and to make copies of its books of accounts and other
financial records, and to discuss the affairs, finances and accounts of the
Borrower or any of its Subsidiaries with, and to be advised as to the same
by, its officers at such reasonable times and intervals as the Bank may
designate; PROVIDED, HOWEVER, that the expenses of the Bank for such visits,
inspections and examinations shall be at the expense of the Bank so long as
no Event of Default exists, but any such visits, inspections, and
examinations made while any Event of Default is continuing shall be at the
expense of the Borrower.
SECTION 8.6 MAINTENANCE OF PROPERTIES. Maintain its properties used
or useful in the conduct of its business in good condition, repair and
working order, and supplied with all necessary equipment, and make all
necessary repairs, renewals, replacements, betterments, and improvements
thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times.
35
SECTION 8.7 BOOKS AND RECORDS. Keep adequate and proper records and
books of account in which full and correct entries will be made of its
dealings, business and affairs.
SECTION 8.8 COMPLIANCE. Comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject.
SECTION 8.9 ERISA. Maintain each Plan in compliance with all
material applicable requirements of ERISA and of the Code and with all
material applicable rulings and regulations issued under the provisions of
ERISA and of the Code.
SECTION 8.10 ENVIRONMENTAL MATTERS. Observe and comply with all
laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise constitute or result in an Adverse Event.
ARTICLE IX
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment
is terminated or expires and the Loans and all other Obligations of the
Borrower to the Bank hereunder and under the Notes and the other Loan
Documents have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will not do, and will not permit any of its
Subsidiaries to do, any of the following:
SECTION 9.1 MERGER. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person except for any such transaction
whereby any of the Borrower's Subsidiaries may merge or consolidate with the
Borrower or any other of the Borrower's Subsidiaries so long as: (a) the
Borrower is the surviving corporation in any transaction involving it; and
(b) the Borrower gives the Bank at least 30 days' prior written notice of
such transaction and takes all action required by the Bank to continue
perfection of the Bank's Lien in such Subsidiary's assets following
consummation of such transaction.
SECTION 9.2 SALE OF ASSETS. Sell, transfer, lease, or otherwise
convey all or any part of its assets except for:
(a) sales of Inventory in the ordinary course of business
and for the fair market value thereof;
(b) sales of equipment or other property for the fair
market value thereof so long as the Net Proceeds to be obtained from
any such transaction (or related series of transactions) does not
exceed $100,000.00 or the aggregate Net Proceeds determined on a
consolidated basis for the Borrower and its Subsidiaries from all such
transactions in any fiscal year does not exceed $250,000.00; PROVIDED,
HOWEVER, that contemporaneously
36
with the receipt of the Net Proceeds from any transaction permitted
by this subsection (b), the Borrower prepays the Term Loan in
accordance with SECTION 4.2(c); and
(c) transfers of the stock of Compex to a wholly-owned
Subsidiary to be organized under the laws of the United Kingdom ("UK
NewCo") so long as: (i) the Bank is given not less than 15 Business
Days' prior written notice of each such acquisition, (ii) no Default or
Event of Default exists immediately prior to such transfer or after
giving effect thereto; (iii) UK NewCo executes and/or delivers to the
Bank: (A) a Subsidiary Pledge Agreement in substantially the form of
the UK Pledge Agreement executed by the Borrower together with
appropriate stock powers; (B) UK NewCo's organizational documents,
which shall not contain any provision which may adversely affect the
rights of the Bank as a pledgee of Compex's stock; and (C) an opinion
of counsel in form and substance satisfactory to the Bank.
SECTION 9.3 CHANGE OF FISCAL YEAR. Change its fiscal year-end from
June 30.
SECTION 9.4 PLANS. Permit any condition to exist in connection with
any Plan which might constitute grounds for the PBGC to institute proceedings
to have such Plan terminated or a trustee appointed to administer such Plan;
permit any Plan to terminate under any circumstances which would cause the
Lien provided for in Section 4068 of ERISA to attach to any property, revenue
or asset of the Borrower or any of its Subsidiaries; or permit the
underfunded amount of Plan benefits guaranteed under Title IV of ERISA to
exceed $50,000.00.
SECTION 9.5 CHANGE IN NATURE OF BUSINESS. Make any material change
in the nature of its business as carried on at the date hereof.
SECTION 9.6 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. Except as
otherwise permitted by SECTION 9.9, either: (a) form or acquire any
corporation or company which would thereby become a Subsidiary; or (b) form
or enter into any partnership as a limited or general partner or form or
enter into any joint venture.
SECTION 9.7 OTHER AGREEMENTS. Enter into any agreement, bond, note
or other instrument with or for the benefit of any Person other than the Bank
which would: (a) prohibit the Borrower or any of its Subsidiaries from
granting, or otherwise limit the ability of the Borrower or any of its
Subsidiaries to grant to the Bank any Lien on any assets or properties of
such Person; or (b) be violated or breached by any Loan Party's performance
of its obligations under the Loan Documents.
SECTION 9.8 PAYMENT TERMS. Materially change its selling terms of
payment on accounts as in effect on the date of this Agreement or provide
dating terms.
37
SECTION 9.9 INVESTMENTS. Acquire for value, make, have or hold any
Investments, except:
(a) Investments outstanding on the date hereof and listed
on SCHEDULE 9.9 attached hereto and incorporated herein by reference;
(b) Travel advances to officers and employees in the
ordinary course of business;
(c) Investments in readily marketable direct obligations
of the United States of America having maturities of one year or less
from the date of acquisition;
(d) Certificates of deposit or bankers' acceptances, each
maturing within one year from the date of acquisition, issued by the
Bank;
(e) Commercial paper maturing within 270 days from the
date of issuance and given the highest rating by a nationally
recognized rating service;
(f) Repurchase agreements relating to securities issued
or guaranteed as to principal and interest by the United States of
America;
(g) Money market accounts acceptable to the Bank;
(h) Extensions of credit in the nature of accounts or
notes receivable arising from the sale of goods and services in the
ordinary course of business;
(i) Shares of stock, obligations or other securities
received in settlement of claims arising in the ordinary course of
business;
(j) the Transactions;
(k) Acquisitions by the Borrower or any of its
Subsidiaries of assets or businesses related to the Borrower's lines of
business as in existence on the date hereof so long as: (i) the Bank is
given not less than 15 Business Days' prior written notice of each such
acquisition, (ii) no Default or Event of Default exists immediately
prior to such acquisition or after giving effect thereto, (iii) the
aggregate purchase price (with the amount of any liabilities which are
assumed as part of such acquisition to be included as part of the
purchase price) for all such acquisitions during any fiscal year of the
Borrower does not exceed: (A) $2,500,000.00, if the Cash Flow Leverage
Ratio and the Pro Forma Cash Flow Leverage Ratio at the most recent
Quarterly Measurement Date was greater than 1.50 to 1.0; (B)
$5,000,000.00, if the Cash Flow Leverage Ratio and the Pro Forma Cash
Flow Leverage Ratio at the most recent Quarterly Measurement Date was
less than or equal to 1.50 to 1.0; and (iv) the acquisition is an asset
acquisition; and
38
(l) Additional Investments in any Subsidiary so long as,
in the case of any Subsidiary other than Compex, the sum of the
aggregate amount of such additional Investments or other extensions of
credit (regardless of whether such extension of credit constitutes an
Investment) by the Borrower or any other Subsidiary in such Subsidiary
does not exceed $500,000.00 during the term of this Agreement.
SECTION 9.10 INDEBTEDNESS. Incur, create, issue, assume or suffer to
exist any Indebtedness except:
(a) Indebtedness under this Agreement;
(b) Current liabilities, other than for borrowed money,
incurred in the ordinary course of business;
(c) Indebtedness existing on the date of this Agreement
and disclosed on SCHEDULE 9.10 attached hereto and incorporated herein
by reference; PROVIDED, HOWEVER, that no such Indebtedness shall be
refinanced without the express written consent of the Bank;
(d) Purchase Money Indebtedness secured by Liens
permitted under SECTION 9.11(c); and other Indebtedness so long as the
aggregate outstanding principal amount of Indebtedness permitted by
this SECTION 9.10(d) shall not exceed $2,000,000.00 at any time; and
(e) Indebtedness consisting of endorsements for
collection, deposit or negotiation and warranties of products or
services, in each case incurred in the ordinary course of business.
SECTION 9.11 LIENS. Create, incur, assume or suffer to exist any
Lien with respect to any property, revenues or assets now owned or hereafter
arising or acquired, except:
(a) Liens created by any of the Loan Documents;
(b) Liens existing on the date of this Agreement and
disclosed on SCHEDULE 7.12 hereto;
(c) Liens securing Purchase Money Indebtedness incurred
in connection with Capital Expenditures made after the date of this
Agreement by way of purchase money security interest, purchase money
mortgage, conditional sale or other title retention agreement,
Capitalized Lease or other deferred payment contract, and attaching
only to the property being acquired, provided that the Indebtedness
secured thereby is permitted as a Capital Expenditure at the time of
such incurrence and does not exceed the lesser of the purchase price or
the fair market value of such property at the time of its acquisition;
39
(d) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of the
Borrower;
(e) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payments therefor shall
not at the time be required to be made in accordance with the
provisions of SECTION 8.4;
(f) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall
not at the time be required to be made in accordance with the
provisions of SECTION 8.4;
(g) Deposits to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations of a
like nature incurred in the ordinary course of business; and
(h) Zoning restrictions, easements, licenses,
restrictions on the use of real property or irregularities in title
thereto, which do not materially impair the use of such property in the
operation of the Borrower's business or the value of such property for
the purpose of such business.
SECTION 9.12 CONTINGENT LIABILITIES. Except as provided in the Loan
Documents or as described on SCHEDULE 9.12 attached hereto and incorporated
herein by reference, either: (a) endorse, guarantee, contingently agree to
purchase or to provide funds for the payment of, or otherwise become
contingently liable upon, any obligation of any other Person, except by the
endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business; or (b) agree to maintain
the net worth or working capital of, or provide funds to satisfy any other
financial test applicable to, any other Person.
SECTION 9.13 TRANSACTIONS WITH RELATED PARTIES. Either: (a) permit
the direct or indirect transfer, distribution or payment of any of its funds,
assets or property to any Related Party, except that the Borrower or any of
its Subsidiaries may pay: (i) bona fide employee compensation (including
benefits) to Related Parties for services actually rendered to such Person;
(ii) expenses incurred by an employee in the ordinary course of business;
(iii) expenses or rents for services or property or the use thereof allocated
to such Person; PROVIDED, HOWEVER, that all such payments pursuant to
subsections (a)(i), (ii) and (iii) shall not exceed the amount which would be
payable in a comparable arm's length transaction with a third party who is
not a Related Party; (iv) Permitted Distributions to the extent permitted by
SECTION 9.15; and (v) other amounts permitted by other subsections of this
Section; (b) lend or advance money, credit or property to any Related Party;
(c) invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any assets or properties, of any
Related Party except as permitted by SECTION 9.15 or otherwise permitted by
other subsections of this Section; or (d) guarantee, assume, endorse or
otherwise become responsible for, or enter into any agreement or
40
instrument for the purpose of discharging or assuming (directly or
indirectly, through the purchase of goods, supplies or services or otherwise)
the indebtedness, performance, capability, obligations, dividends or
agreement for the furnishing of funds of any Related Party or any officer,
director or employee thereof except for the Guaranties permitted by SECTION
9.12.
SECTION 9.14 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a
party to any contract for the purchase or lease of materials, supplies or
other property or services if such contract requires that payment be made by
it regardless of whether or not delivery is ever made of such materials,
supplies or other property or services.
SECTION 9.15 RESTRICTED PAYMENTS. Purchase or redeem or otherwise
acquire for value any shares of the Borrower's stock, declare or pay any
dividends thereon (other than stock dividends), make any distribution on, or
payment on account of the purchase, redemption, defeasance or other
acquisition or retirement for value of, any shares of the Borrower's stock or
set aside any funds for any such purpose, or otherwise or make any
distribution of assets to its shareholders as such except that: (a) any of
the Borrower's direct or indirect wholly-owned Subsidiaries may pay dividends
to its corporate parent; and (b) so long as no Default or Event of Default
has occurred and is continuing at the time of the following described payment
or would result therefrom, the Borrower and any of its less than wholly-owned
Subsidiaries may pay dividends and/or redeem its shares of its stock so long
as the aggregate amount of all such dividends and redemptions does not exceed
$250,000.00 during any of the Borrower's fiscal years.
SECTION 9.16 USE OF PROCEEDS. Permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within
the meaning of Regulation U of the Federal Reserve Board, as amended from
time to time, and furnish to the Bank upon its request, a statement in
conformity with the requirements of Federal Reserve Form U-l referred to in
Regulation U.
SECTION 9.17 CASH FLOW LEVERAGE RATIO. Permit, as of any Quarterly
Measurement Date, the Cash Flow Leverage Ratio to be greater than the ratio
specified in the following table for any Quarterly Measurement Date occurring
in the specified period:
Maximum Cash Flow
Period Leverage Ratio
------ --------------
On and after June 30, 1999 to
and including March 31, 2000 3.00 to 1.0
On and after June 30, 2000 to and
including March31, 2001 2.50 to 1.0
At all times thereafter 2.00 to 1.0.
41
SECTION 9.18 FIXED CHARGE COVERAGE RATIO. Permit, as of any
Quarterly Measurement Date, the Fixed Charge Coverage Ratio to be less than
1.25:1.00.
SECTION 9.19 NET WORTH. Permit, as of any Quarterly Measurement
Date, the Borrower's Net Worth to be less than the greater of: (a)
$20,000,000.00; or (b) the greater of: (i) 90% of the actual Net Worth at the
immediately preceding fiscal year-end; or (ii) the minimum amount required by
this SECTION 9.19 to have been maintained as of such immediately preceding
fiscal year-end.
SECTION 9.20 SALE AND LEASE. Enter into any agreement providing for
the leasing by the Borrower or any of its Subsidiaries of property which has
been or is to be sold or transferred by the Borrower or any of its
Subsidiaries to the lessor thereof, or which is substantially similar in
purpose to property so sold.
SECTION 9.21 OTHER TRANSACTION DOCUMENTS. Amend, modify, or
supplement any provision of, or waive any other party's compliance with any
of the terms of, any Transaction Document in any manner which: (a) requires
the Borrower or any of its Subsidiaries to pay any additional consideration
under such Transaction Document or otherwise imposes any financial obligation
or burden on the Borrower or any of its Subsidiaries ; (b) could result in an
Adverse Event; or (c) is materially adverse to the rights and benefits of the
Bank under the Loan Documents.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default upon the expiration
of the cure period, if any, described in the relevant event:
(a) The Borrower shall fail to make, within three (3)
Business Days of when due, whether by acceleration or otherwise, (i)
any payment of principal of, or interest on, the Notes or (ii) any
fee or other amount required to be made to the Bank pursuant to any
Loan Document; or
(b) Any representation or warranty made or deemed to
have been made by or on behalf of any Loan Party in any of the Loan
Documents or by or on behalf of any Loan Party in any certificate,
statement, report or other writing furnished by or on behalf of any
Loan Party to the Bank pursuant to the Loan Documents shall prove to
have been false or misleading in any material respect on the date as
of which the facts set forth are stated or certified or deemed to
have been stated or certified; or
(c) The Borrower shall fail to comply with SECTION
8.1(g), SECTION 8.2, SECTION 8.3 or any Section of ARTICLE IX
hereof; or
42
(d) Any Loan Party shall fail to comply with any
agreement, covenant, condition, provision or term contained in the
Loan Documents on its part to be performed (and such failure shall
not constitute an Event of Default under any of the other provisions
of this SECTION 10.1) and such failure to comply shall continue for
30 calendar days after notice thereof to the Borrower by the Bank; or
(e) Any Loan Party shall become insolvent or shall
generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of any Loan Party or for a substantial part of
its property or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed
for any Loan Party or for a substantial part of its property and
shall not be discharged within 30 days; or
(f) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be
instituted by or against any Loan Party and, if instituted against any
Loan Party, shall have been consented to or acquiesced in by such Loan
Party, or shall remain undismissed for 60 days, or an order for relief
shall have been entered against any Loan Party, or any Loan Party shall
take any corporate action to approve institution of, or acquiesced in,
such a proceeding; or
(g) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower and, if instituted against any
Loan Party, shall be consented to or acquiesced in by any Loan Party or
shall remain for 60 days undismissed, or any Loan Party shall take any
corporate action to approve institution of, or acquiescence in, such a
proceeding; or
(h) A judgment or judgments for the payment of money in
excess of the sum of $50,000.00 in the aggregate shall be rendered
against any or all of the Loan Parties and such Loan Parties shall not
discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, prior to any execution
on such judgments by such judgment creditor, within 30 days from the
date of entry thereof, and within said period of 30 days, or such
longer period during which execution of such judgment shall be stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) The Borrower or any ERISA Affiliate shall terminate
any Plan if the Borrower or any ERISA Affiliate would be required to
make a contribution to such Plan, or would incur a liability or
obligation to such Plan, in excess of $50,000.00, or the PBGC shall
terminate any Plan if such termination causes the Borrower or any of
its ERISA Affiliates to incur any liability or obligation in excess of
$50,000.00; or
(j) The maturity of any Indebtedness of any Loan Party
(other than Indebtedness under this Agreement or the other Loan
Documents) in the aggregate amount of more than $50,000.00 for one or
more of the Loan Parties shall be accelerated,
43
or any one or more Loan Parties shall fail to pay any such
Indebtedness when due and any applicable grace period shall have
expired, or, in the case of such Indebtedness payable on demand,
when demanded, or any event shall occur or condition shall exist and
shall continue for more than the period of grace, if any, applicable
thereto and shall have the effect of causing, or permitting (any
required notice having been given and grace period having expired)
the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause such Indebtedness to become
due prior to its stated maturity or to realize upon any collateral
given as security therefor; or
(k) Any Change of Control shall occur; or
(l) If the validity or enforceability of any of the Loan
Documents shall be challenged by the Borrower or any other party
thereto, or shall fail to remain in full force and effect; or
(m) The Bank shall have determined in good faith (which
determination shall be conclusive) that (i) an Adverse Event has
occurred or (ii) the Bank's interest in any material Collateral has
been materially adversely affected or impaired, or the value thereof to
the Lender has been diminished to a material extent, or (iii) the
prospect of payment or performance of any obligation or agreement of
the Borrower under any of the Loan Documents is materially impaired,
and the condition giving rise to such determination does not constitute
an Event of Default under any of the other subsections of this SECTION
10.1; or
(n) (i) Any of David B. Kaysen, W. Glen Winchell or
William J. Sweeney shall cease to respectively be the Borrower's
President and Chief Executive Officer, Vice President and Chief
Financial Officer or Vice President Sales and Marketing, or shall cease
to perform the duties associated with such office as of the date of
this Agreement; (ii) the Borrower fails to appoint a successor
acceptable to the Bank, in its sole discretion, within 90 days of the
date on which such individual shall cease to hold the required office
and perform the required duties; and (iii) upon written notice from the
Bank to the Borrower that an acceptable successor has not been timely
appointed, the Borrower fails to pay the Loans and all other
Obligations and terminate the Commitment within 90 days after the
Borrower receives such written notice from the Bank; PROVIDED, HOWEVER,
that, for purposes of this Agreement, a Default shall be deemed to
exist only after the Bank delivers its written notice that an
acceptable successor has not been timely appointed.
SECTION 10.2 REMEDIES. If: (a) any Event of Default described in
SECTIONS 10.1(e), (f) or (g) shall occur, the Commitment shall automatically
terminate and the outstanding unpaid principal balance of the Notes, the
accrued interest thereon and all other Obligations under the Loan Documents
shall automatically become immediately due and payable; or (b) any other
Event of Default shall occur and be continuing, then the Bank may take any or
all of the following actions: (i) declare the Commitment terminated,
whereupon the Commitment shall terminate; (ii) declare that the outstanding
unpaid principal balance of the Notes, the accrued and
44
unpaid interest thereon and all other Obligations under the Loan Documents to
be forthwith due and payable, whereupon the Notes, all accrued and unpaid
interest thereon and all such Obligations shall immediately become due and
payable, in each case without demand or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding; (iii) exercise all rights and remedies under any
other instrument, document or agreement between the Borrower and the Bank;
and (iv) enforce all rights and remedies under any applicable law.
SECTION 10.3 OFFSET. In addition to the remedies set forth in
SECTION 10.2, upon the occurrence of any Event of Default or at any time
thereafter while such Event of Default continues, the Bank or any other
holder of the Notes may offset any and all balances, credits, deposits
(general or special, time or demand, provisional or final), accounts or
monies of the Borrower then or thereafter with the Bank or such other holder,
or any obligations of the Bank or such other holder of the Notes, against the
Indebtedness then owed by the Borrower to the Bank. The Borrower hereby
grants to the Bank and each other Note holder a security interest in all such
balances, credits, deposits, accounts or monies.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 WAIVER AND AMENDMENT. No failure on the part of the
Bank or the holder of any Note to exercise and no delay in exercising any
power or right hereunder or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The remedies herein and in any other instrument,
document or agreement delivered or to be delivered to the Bank hereunder or
in connection herewith are cumulative and not exclusive of any remedies
provided by law. No notice to or demand on the Borrower not required
hereunder or under any Note or any other Loan Document shall in any event
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the right of the Bank or the
holder of any Note to any other or further action in any circumstances
without notice or demand. No amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall be effective unless the same shall be in writing and signed
by the Bank, and then such amendment, modification, waiver or consent shall
be effective only in the specific instances and for the specific purpose for
which given.
SECTION 11.2 EXPENSES AND INDEMNITIES.
(a) LOAN DOCUMENTS. Whether or not any Loan is made, the
Borrower agrees to pay and reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including filing and
recording costs and fees and expenses of legal counsel, who may be
employees of the Bank, and including the costs of any appraisals and
environmental assessments) in connection with the preparation, review,
execution, delivery, amendment, modification or interpretation of the
Loan Documents. The
45
Borrower agrees to pay and reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including
reasonable fees and expenses of legal counsel, who may be employees
of the Bank in connection with the collection and enforcement of the
Loan Documents. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of the Loan Documents. The
Borrower agrees to indemnify and hold the Bank harmless from any loss
or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans or disbursing the
proceeds thereof.
(b) GENERAL INDEMNITY. In addition to the payment of
expenses pursuant to SECTION 11.2(a), whether or not the transactions
contemplated hereby shall be consummated, the Borrower hereby
indemnifies, and agrees to pay and hold the Bank, its affiliates and
any holder of any Notes, and their respective officers, directors,
employees, agents, successors and assigns (collectively called the
"INDEMNITEES") harmless from and against, any and all other
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for any of such Indemnitees in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto), that may be imposed
on, incurred by, or asserted against the Indemnitees (or any of them),
in any manner relating to or arising out of the Loan Documents, the
statements contained in any commitment letters delivered by the Bank,
the Bank's agreement to make the Loans, or the use or intended use of
the proceeds of any of the Loans (the "INDEMNIFIED LIABILITIES");
PROVIDED, HOWEVER, that the Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities arising
from the gross negligence or willful misconduct of an Indemnitee. To
the extent that the undertaking to indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute
the maximum portion that it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
(c) SURVIVAL. The obligations of the Borrower under this
SECTION 11.2 shall survive any termination of this Agreement.
SECTION 11.3 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party
in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier
or United States mail (postage prepaid) addressed to such party at the
address specified on the signature page hereof, or at such other address as
such party shall have specified to the other party hereto in writing. All
periods of notice shall be measured from the date of delivery thereof if
manually delivered, from the date of sending thereof if sent by telegram,
telex or facsimile transmission, from the first Business Day after the date
of sending if sent by overnight courier, or from four days after the date of
mailing if mailed; provided, however, that
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any notice to the Bank under ARTICLE II hereof shall be deemed to have been
given only when received by the Bank. The Borrower hereby authorizes the Bank
to rely upon the telephone or written instructions of any person identifying
himself as an authorized officer of the Borrower and upon any signature which
the Bank believes to be genuine, and the Borrower shall be bound thereby in
the same manner as if the Borrower were authorized or such signature were
genuine.
SECTION 11.4 SUCCESSORS. This Agreement shall be binding upon the
Borrower, the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Bank and the successors and assigns
of the Borrower and the Bank. The Borrower shall not assign its rights or
duties hereunder without the consent of the Bank. The Bank may assign its
rights and obligations under this Agreement and the Loan Documents to any
Person, without the prior consent of the Borrower.
SECTION 11.5 PARTICIPATIONS. The Bank may sell participation
interests in any or all of the Loans and in all or any portion of the
Commitment to any Person without the prior consent of the Borrower.
SECTION 11.6 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.7 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
SECTION 11.8 ENTIRE AGREEMENT. This Agreement, the Notes and the
other Loan Documents embody the entire agreement and understanding between
the Borrower and the Bank with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and either of the parties hereto may execute this
Agreement by signing any such counterpart.
SECTION 11.10 GOVERNING LAW. EXCEPT AS OTHERWISE PROVIDED IN ANY
LOAN DOCUMENT, THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A
PARTY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,
WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING
EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
SECTION 11.11 CONSENT TO JURISDICTION. AT THE OPTION OF THE BANK,
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE
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BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE
THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
SECTION 11.12 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH, OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11.13 RELEASE OF CERTAIN GUARANTIES; ETC. The Bank agrees
that any Subsidiary Guaranty executed and delivered by a Foreign Subsidiary
shall be terminated on the date (the "Subsidiary Guaranty Release Date") on
which the Bank receives the Borrower's consolidated financial statements for
any Quarterly Measurement Date occurring on or after June 30, 2000 together
with a Guaranty/Pledge Release Compliance Certificate in the form of EXHIBIT
F attached hereto appropriately completed and duly certified by the
Borrower's chief financial officer or treasurer certifying that the following
conditions (the "Subsidiary Guaranty Release Conditions") were satisfied as
of such Quarterly Measurement Date and the Subsidiary Guaranty Release Date,
as the case may be:
(a) as of such Quarterly Measurement Date: (i) the
Domestic Cash Flow Leverage Ratio was not greater than the maximum Cash
Flow Leverage Ratio permitted for such Quarterly Measurement Date; (ii)
the Domestic Fixed Charge Coverage Ratio was not less than 1.25 to 1.0;
and (iii) no Default or Event of Default has occurred and is
continuing; and
(b) as of the Subsidiary Guaranty Release Date, no
Default or Event of Default has occurred and is continuing.
Following receipt and approval by the Bank of the Guaranty/Pledge Release
Compliance Certificate, the Bank shall execute and deliver to the Borrower
the Guaranty/Pledge Release Acknowledgment Certificate in the form of EXHIBIT
G attached hereto, thereby acknowledging
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the termination of each Subsidiary Guaranty executed by a Foreign Subsidiary
and release the portion of the "Pledged Shares" described therein, all in
accordance with the terms thereof.
SECTION 11.14 COMPEX GUARANTY. At any time after December 31, 1999,
but prior to the occurrence of the Subsidiary Guaranty Release Date, the
Bank, in its sole discretion, by written notice to the Borrower, may require
that Compex SA amend its Subsidiary Guaranty to substantially conform to
EXHIBIT H attached hereto and the Borrower agrees that, within 10 Business
Days after the date of the Bank's notice, it will cause Compex SA to execute
and deliver such amended Subsidiary Guaranty together with any shareholder or
director resolutions and opinions of counsel as may be required by the Bank,
in its sole discretion.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
REHABILICARE INC.
By
Its
1811 Old Highway Eight
New Brighton, MN 55112-3493
Attention: Mr.W. Glen Winchell
Vice President Finance/CFO
Telephone: (651) 638-0428
Telecopier: (651) 638-0477
U.S. BANK NATIONAL ASSOCIATION
By
Its
U.S. Bank Place MPFP 0602
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Mr. Michael Staloch
Vice President
Telephone: (612) 973-0527
Telecopier: (612) 973-0823
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