EXHIBIT 10.1
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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THIS AGREEMENT is entered into as of March 26, 2003 by and between
STAAR SURGICAL COMPANY, a Delaware corporation ("Borrower"), and XXXXX FARGO
BANK, NATIONAL ASSOCIATION, a national banking association ("Bank").
Recital
Borrower and Bank have entered into an Amended and Restated Credit
Agreement dated as of March 29, 2002, as amended by a First Amendment to
Amended and Restated Credit Agreement dated July 31, 2002, a Second Amendment
to Amended and Restated Credit Agreement dated October 25, 2002 and a Third
Amendment to Amended and Restated Credit Agreement dated November 25, 2002
(said Agreement, as so amended, herein called the "Prior Credit Agreement"),
pursuant to which Borrower remains indebted to Bank under a line of credit in
the maximum principal amount of $3,000,000 as of February 28, 2003 (the
"Prior Line of Credit"), which is evidenced by an Amended and Restated
Revolving Line of Credit Note dated July 31, 2002 (the "Prior Line of Credit
Note"). The Prior Line of Credit Note matures on March 31, 2003, and the
outstanding balance under the Prior Line of Credit as of March 21, 2003 is
$2,253,660.06 in principal, plus accrued but unpaid interest. Borrower has
requested that Bank extend the maturity date of and restructure the Prior
Line of Credit, and Bank has agreed to do so subject to the terms and
conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Bank hereby agree that all of
the terms and conditions of the Prior Credit Agreement and the Prior Line of
Credit Note shall be and hereby are amended, restated and superseded by the
terms and conditions of this Agreement; provided, however, that (1) nothing
herein shall terminate any security interest in favor of Bank, and all such
security interests shall remain in full force and effect, and (2) upon the
Effective Date (as defined below), all references in the Loan Documents (as
defined below) to the Prior Credit Agreement shall be deemed to be references
to this Agreement. Borrower and Bank further agree as set forth below.
ARTICLE I
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CREDIT TERMS
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SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time
up to and including March 31, 2004, not to exceed at any time the aggregate
principal amount of $3,000,000 (the "Line of Credit"), the proceeds of which
shall be used for Borrower's general corporate purposes in the ordinary
course of its business, including, without limitation, for lending to direct
or indirect subsidiaries (each a "Subsidiary") of Borrower for their general
corporate purposes in the ordinary course of their business. Borrower's
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto (the
"Line of Credit Note"), all terms of which are incorporated herein by this
reference. Advances, interest, fees and other amounts outstanding or accrued
under the Prior Line of Credit as of the Effective Date (as defined in
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Section 3.1 below) of this Agreement shall be deemed to be advances,
interest, fees and other amounts outstanding or accrued, respectively, under
the Line of Credit.
(b) Borrowing and Repayment. Borrower may from time to time
during the term of the Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations,
terms and conditions contained herein or in the Line of Credit Note;
provided, however, that the total outstanding borrowings under the Line of
Credit shall not at any time exceed the maximum principal amount available
thereunder, as set forth above.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of each advance
hereunder shall bear interest at a rate per annum equal at all times to the
sum of the Prime Rate in effect from time to time plus 5.00%.
(b) Prime Rate. The term "Prime Rate" shall mean at any time
the rate of interest most recently announced within Bank at its principal
office as its "prime rate," with the understanding that such "prime rate" is
one of Bank's base rates, serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof in such internal publication or
publications as Bank may designate. Each change in the rate of interest
shall become effective on the date each Prime Rate change is announced within
Bank.
(c) Computation and Payment. Interest shall be computed on the
basis of a 360-day year and actual days elapsed. Interest shall be payable
at the times and place set forth in each promissory note or other instrument
required hereby.
(d) Unused-Commitment Fee. Borrower shall pay Bank a fee at the
rate of 1.25% per annum, computed on the basis of a 360-day year and actual
days elapsed, on the average daily unused amount of the Line of Credit, from
the date hereof until the maturity date of the Line of Credit, payable
monthly in arrears on the first business day of each calendar month,
commencing on April 1, 2003, and on the maturity date of the Line of Credit.
(e) Restructuring and Extension Fee. Borrower shall pay Bank
Bank a restructuring and extension fee in an amount equal to $100,000 in the
following manner: $30,000 shall be due and payable on the Effective Date and
$70,000 shall be due and payable on December 31, 2003; provided, however, if all
of the advances, interest, fees and other amounts outstanding or accrued under
this Agreement and the other Loan Documents are paid in full on or before
December 31, 2003 and the Line of Credit is terminated, then the $70,000 fee due
on December 31, 2003 shall be waived and Borrower shall have no obligation to
pay such fee. The restructuring and extension fee shall be deemed earned in full
on the Effective Date.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all principal, interest and fees due hereunder by charging Borrower's
deposit account number 4159-251172 with Bank, or any other deposit account
maintained by Borrower with Bank, for the full amount thereof. Should there
be insufficient funds in any such deposit account to pay all such sums when
due, the full amount of such deficiency shall be immediately due and payable
by Borrower.
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SECTION 1.4. MANDATORY PREPAYMENT.
(a) Application of Proceeds. Borrower will, on each date of
receipt by Borrower, or by any Subsidiary of Borrower, of (i) Net Cash
Proceeds (as defined below) from the sale, lease, transfer or other
disposition of any asset of Borrower or any Subsidiary thereof that is
prohibited by Section 5.5(d), (ii) Net Cash Proceeds from the sale or
issuance of any equity interests in Borrower or any Subsidiary thereof, or
any warrants, options or other rights to acquire any such equity interests,
(iii) Net Cash Proceeds from the incurrence by Borrower or any Subsidiary
thereof of any indebtedness not permitted by Section 5.4 or (iv) insurance or
condemnation proceeds from any casualty or condemnation in respect of any
asset of Borrower or any Subsidiary thereof (except to the extent that any
such proceeds in respect of a single casualty or condemnation do not exceed
$10,000 (or the equivalent in one or more currencies) in the aggregate),
prepay an aggregate principal amount of the advances outstanding hereunder
equal to the amount of such Net Cash Proceeds or insurance or condemnation
proceeds. All prepayments pursuant to this Section 1.4(a) shall be made
together with accrued interest to the date of such prepayment on the
principal amount prepaid. Whether or not the applicable Net Cash Proceeds or
insurance or condemnation proceeds exceed the aggregate principal amount of
advances then outstanding hereunder in any case in which a prepayment is
required hereunder, the Line of Credit shall be automatically and permanently
reduced by the amount equal to such Net Cash Proceeds or insurance or
condemnation proceeds.
(b) Net Cash Proceeds. As used herein, "Net Cash Proceeds"
means (a) with respect to any sale, lease, transfer or other disposition of
any asset by any entity, the difference between (i) the aggregate amount
received by such entity in cash or cash equivalents (including, without
limitation, any cash or cash equivalents received by way of deferred payment
pursuant to a note receivable, other noncash consideration or otherwise, but
only as and when such cash or cash equivalents are so received) in connection
with such transaction, minus (ii) the sum of (A) the reasonable and customary
fees, commissions and other out-of-pocket expenses incurred by such entity in
connection with such transaction (other than amounts payable to affiliates of
such entity), (B) indebtedness (other than the advances hereunder) required
to be paid as a result of such transaction and (C) federal, state and local
taxes incurred and paid in connection with such transaction; (b) with respect
to any sale or issuance of any equity interests (including, without
limitation, stock, member interests or partnership interests) in any entity,
or any warrants, options or other rights to acquire such equity interests
(including, without limitation, any convertible securities), by any entity,
the amount equal to the difference between (i) the aggregate amount received
by such entity in cash or cash equivalents (including, without limitation,
any cash or cash equivalents received by way of deferred payment pursuant to
a note receivable, other noncash consideration or otherwise, but only as and
when such cash or cash equivalents are so received) in connection with such
transaction, minus (ii) the reasonable and customary fees, commissions and
other out-of-pocket expenses incurred by such entity in connection with such
transaction (other than amounts payable to affiliates of such entity); and
(c) with respect to any incurrence of indebtedness by any entity, the
difference between (i) the aggregate amount received by such entity in cash
or cash equivalents in connection with such transaction, minus (ii) the sum
of (A) the reasonable and customary fees, commissions and other out-of-pocket
expenses incurred and paid or payable by such entity in connection with such
transaction (other than amounts payable to affiliates of such entity) and (B)
indebtedness (other than the advances hereunder) required to be paid as a
result of such transaction.
(c) Overadvances. If at any time the aggregate principal amount
of advances outstanding under this Agreement exceeds the maximum amount of
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the Line of Credit, Borrower will immediately, without any notice or request
by Bank, repay the advances in the amount equal to such excess.
SECTION 1.5 COLLATERAL. As security for all indebtedness of Borrower
to Bank subject hereto, Borrower hereby grants to Bank security interests of
first priority in all of Borrower's right, title and interest in and to the
following, whether now owned or hereafter acquired, whether now or hereafter
existing, and wherever located: all account receivables, rights to payment,
general intangibles, patents, copyrights, trademarks, deposit accounts,
chattel paper, instruments, documents, inventory, equipment, investment
property (including, without limitation, all stock of, and other equity
interests in, Borrower's Subsidiaries), letter-of-credit rights, letters of
credit and money. All of the foregoing shall be further evidenced by and
subject to the terms of such further security agreements, financing
statements and other documents as Bank shall reasonably require, all in form
and substance satisfactory to Bank, including, without limitation, a
Continuing Security Agreement--Rights to Payment and Inventory dated as of
January 13, 2000, a Stock Pledge Agreement dated as of March 14, 2002, a
Copyright Security Agreement dated as of March 29, 2002, a Patent Security
Agreement dated as of March 29, 2002 and a Trademark Security Agreement dated
as of March 29, 2002. Without limiting the generality of the foregoing
sentence, Borrower shall deliver such pledge agreements, documents,
instruments, opinions and filings as Bank shall require to perfect the
security interest in the stock of a foreign Subsidiary of Borrower under
relevant applicable foreign law. Borrower shall reimburse Bank immediately
upon demand for all costs and expenses incurred by Bank in connection with
any of the foregoing security, including, without limitation, filing and
recording fees and costs of appraisals, audits (including, without
limitation, pursuant to Section 4.2 hereof) and title insurance.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and
final payment, and satisfaction and discharge, of all obligations of Borrower
to Bank subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly
organized and existing and in good standing under the laws of the State of
Delaware and is qualified or licensed to do business (and is in good standing
as a foreign corporation, if applicable) in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify
or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, security agreement, contract, instrument and other document
required hereby or at any time hereafter delivered to Bank in connection
herewith including, without limitation, a Continuing Security
Agreement--Rights to Payment and Inventory dated as of January 13, 2000, a
Stock Pledge Agreement dated as of March 14, 2002, a Copyright Security
Agreement dated as of March 29, 2002, a Patent Security Agreement dated as of
March 29, 2002 and a Trademark Security Agreement dated as of March 29, 2002
(collectively the "Loan Documents") have been duly authorized, executed and
delivered and constitute legal, valid and binding agreements and obligations
of Borrower or the party which executed the same, enforceable in accordance
with their respective terms or, upon their execution and delivery in
accordance with the provisions hereof, will constitute legal, valid and
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binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not violate any
provision of any law or regulation, or contravene any provision of the
Certificate of Incorporation or Bylaws of Borrower, or result in any breach
of or default under any contract, obligation, indenture or other instrument
to which Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending or, to the best of
Borrower's knowledge, threatened actions, claims, investigations, suits or
proceedings by or before any governmental authority, referee, arbitrator,
court or administrative agency which could have a material adverse effect on
the financial condition or operation of Borrower, other than those disclosed
by Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENTS. The financial
statements of Borrower dated February 28, 2003, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) are complete and
correct and present fairly the financial condition of Borrower, (b) disclose
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) have been prepared in accordance
with generally accepted accounting principles consistently applied. Since
the date of such financial statements there has been no material adverse
change in the financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its
assets or properties, except in favor of Bank or as otherwise permitted by
Bank in writing.
SECTION 2.6. INCOME-TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may
be bound that requires the subordination in right of payment of any of
Borrower's obligations subject to this Agreement to any other obligation of
Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, any and all permits, consents, approvals, franchises and
licenses required, and any and all rights to trademarks, trade names,
patents, copyrights and fictitious names necessary, to enable it to conduct
the business in which it is now engaged, in compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended or recodified from time to time ("ERISA").
Borrower has not violated any provision of any defined employee pension
benefit plan (as defined in ERISA) maintained or contributed to by Borrower
(each, a "Plan"). No Reportable Event as defined in ERISA has occurred and
is continuing with respect to any Plan initiated by Borrower. Borrower has
met its minimum funding requirements under ERISA with respect to each Plan.
Each Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents therefor and under generally accepted
accounting principles.
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SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase-money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by
Borrower to Bank in writing prior to the date hereof, Borrower is in
compliance in all material respects with all applicable federal and state
environmental, hazardous-waste, health and safety statutes, and any and all
rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower's operations and/or properties, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended, modified or
supplemented from time to time. None of the operations of Borrower is the
subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of
any toxic or hazardous waste or substance into the environment. Borrower has
no material contingent liability in connection with any release of any toxic
or hazardous waste or substance into the environment.
SECTION 2.12. PATENTS. No patent has been issued in the United
States to or for the benefit of, and no patent application has been filed in
the United States by or on behalf of, Borrower or any Subsidiary thereof,
except as listed on Schedule A to the Patent Security Agreement dated as of
March 29, 2002 between Borrower and Bank or as otherwise disclosed to Bank in
writing from time to time.
SECTION 2.13 CREDIT FACILITIES. Since September 30, 2001, no
credit facility has been available to Borrower or any Subsidiary thereof
except for (a) the credit facility made available to Borrower by Bank
pursuant to this Agreement or the Prior Credit Agreement, (b) the credit
facility made available to Staar Surgical AG, a Swiss corporation ("Swiss
Sub"), by UBS AG, (c) a credit facility made available to Domilens GmbH, a
German corporation ("Domilens"), in an amount not exceeding $500,000 (or the
equivalent in one or more currencies) and (d) such other credit facilities
(including, without limitation, the principal terms thereof) as disclosed by
Borrower to Bank in writing from time to time.
ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS TO EFFECTIVENESS. This Agreement shall
become effective on the date (the "Effective Date") on which all of the
conditions specified below have been fulfilled to Bank's satisfaction.
(a) Approval of Bank Counsel. All legal matters incidental to
the effectiveness of this Agreement shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed by the
parties thereto (other than Bank):
(i) this Agreement and the Line of Credit Note;
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(ii) a certificate of the President or Chief Financial
Officer of Borrower and the Secretary of Borrower certifying (A) that there
has been no amendment to Borrower's charter documents since the delivery to
Bank of an Officers' Certificate dated March 29, 2002 pursuant to Section
3.1(b)(iv) of the Prior Credit Agreement (the "Prior Officers' Certificate"),
(B) that there has been no amendment to Borrower's bylaws since the delivery
to Bank of the Prior Officers' Certificate, (C) that Borrower is in good
standing in the States of Delaware and California, (D) that the
representations and warranties of Borrower contained in the Loan Documents
are correct on and as of the Effective Date as though made on and as of such
date, (E) that no Event of Default (as defined in Section 6.1 hereof) or
event that, with the giving of notice or the passage of time or both, would
constitute an Event of Default has occurred and is continuing or would be
caused by the effectiveness of this Agreement and (F) that attached to such
certificate is Borrower's current financial projections; and
(iii) such other documents as Bank may require.
(c) Financial Condition. There shall have been no material
adverse change, as determined by Bank, in the financial condition or business
of Borrower.
(d) Fee, Etc. Borrower shall have paid to Bank, by Bank's
debiting of one or more of Borrower's deposit accounts with Bank, (i) a
restructuring and extension fee of $30,000.00 and (ii) all other amounts
payable to Bank pursuant to this Agreement or otherwise, to the extent that a
statement for the same has been delivered to Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by Borrower
hereunder shall be subject to the fulfillment to Bank's satisfaction of each
of the conditions set forth below.
(a) Compliance. The representations and warranties contained
herein and in each of the other Loan Documents shall be true on and as of the
date of the signing of this Agreement and on the date of each extension of
credit by Bank pursuant hereto, with the same effect as though such
representations and warranties had been made on and as of each such date, and
on each such date no Event of Default, and no condition, event or act which,
with the giving of notice or the passage of time or both, would constitute an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional
documents which may be required thereby in connection with such extension of
credit.
SECTION 3.3. CERTAIN DELIVERIES AFTER EFFECTIVE DATE. By no later
than April 30, 2003, Bank shall have received, in form and substance
satisfactory to Bank, each of the following:
(a) one or more certificates from the State of Delaware
certifying that (i) the copy of Borrower's charter documents, including,
without limitation, all amendments, attached to such certificate is correct
and complete, (ii) Borrower has paid all franchise taxes to the date of such
certificate and (iii) Borrower is duly incorporated and in good standing
under the laws of the State of Delaware;
(b) a good-standing certificate and a tax-status certificate with
respect to Borrower from the State of California;
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(c) a copy of the resolutions of the Board of Directors of
Borrower authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is or will be a party and
(ii) the borrowings contemplated hereunder, certified by the Secretary of
Borrower, which certificate states that such resolutions thereby certified
have not been amended, modified, revoked or rescinded and are in full force
and effect;
(d) a certificate of the Secretary of Borrower certifying as to
the incumbency and specimen signature of each officer of Borrower executing
any Loan Document or any other document delivered in connection herewith
and a certificate of another officer of Borrower certifying as to the
incumbency and specimen signature of the Secretary of Borrower;
(e) evidence of insurance coverage on all of Borrower's
property, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank and, where required by Bank, with loss-payable
endorsements in favor of Bank; and
(f) copies of all legal documentation relating to the credit
facility made available to Swiss Sub by UBS AG.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that, so long as Bank remains committed to extend
credit to Borrower pursuant hereto or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise
consents in writing, observe all of the affirmative covenants set forth below.
SECTION 4.1. PUNCTUAL PAYMENTS. Borrower shall punctually pay all
principal, interest, fees and other liabilities due under the Loan Documents
at the applicable time and place, and in the manner, specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Borrower shall maintain adequate
books and records in accordance with generally accepted accounting principles
consistently applied and shall permit any representative of Bank, at any
reasonable time, to inspect, audit and examine such books and records, to
make copies of the same and to inspect the properties of Borrower, including,
without limitation, for the purpose of (a) conducting collateral audits,
either by Bank or an outsider auditor retained thereby, at least semiannually
with the first such audit to be performed in the second quarter of 2003, and
(b) conducting patent audit updates, by Ernst & Young LLP or another outside
auditor retained by Bank, to update, among other things, the reports
previously prepared concerning the market value and orderly liquidation value
of the patents of Borrower and its Subsidiaries.
SECTION 4.3. FINANCIAL STATEMENTS AND OTHER INFORMATION. Borrower
shall provide to Bank all of the following, in form and detail satisfactory
to Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Borrower, the consolidated balance sheet of
Borrower and its consolidated Subsidiaries as of the end of such year and the
related consolidated statements of income, cash flows and shareholders'
equity of Borrower and its consolidated Subsidiaries for such year, setting
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forth in each case in comparative form the corresponding figures for the
preceding fiscal year, together in each case with (i) an unqualified opinion
thereon of independent public accountants acceptable to Bank stating that
such financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of Borrower and
its consolidated Subsidiaries in conformity with generally accepted
accounting principles as of the end of, and for, the period presented and
(ii) a copy of any letter of such accountants to the management of Borrower
in connection with such financial statements (except that the letter of such
accountants to the management of Borrower in connection with Borrower's 2002
financial statements may be delivered pursuant to Section 4.3(i));
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods of each fiscal
year of Borrower, the unaudited consolidated balance sheet of Borrower and
its consolidated Subsidiaries as of the end of such period and the related
unaudited consolidated statements of income and cash flows of Borrower and
its consolidated Subsidiaries for the three, six or nine months then ended,
as set forth in Borrower's quarterly reports on Form 10-Q, together in each
case with a certificate of the Chief Financial Officer of Borrower stating
that such financial statements present fairly, in all material respects, the
consolidated financial position and results of operations of Borrower and its
consolidated Subsidiaries in conformity with generally accepted accounting
principles as of the end of, and for, the period presented (subject to normal
year-end audit adjustments and the absence of footnotes);
(c) promptly upon Borrower's filing thereof with the United
States Securities and Exchange Commission, a copy of each document so filed
by Borrower pursuant to the Securities Exchange Act of 1934;
(d) within 45 days after the end of each fiscal month, unaudited
consolidated and consolidating balance sheets of Borrower as of the end of
such month and unaudited consolidated and consolidating statements of income
and cash flows of Borrower for such month and for the period commencing at
the end of the preceding fiscal year and ending with the end of such month,
all in form, scope and detail satisfactory to Bank and duly certified by the
Chief Financial Officer of Borrower as having been prepared in accordance
with generally accepted accounting principles (subject to normal year-end
audit adjustments and the absence of footnotes), together in each case with
(i) a narrative discussion and analysis by such officer concerning the
financial performance of Borrower, and any variance of more than 10% from
Borrower's projections which has been delivered to Bank as an attachment to
the officers' certificate pursuant to Section 3.1(b)(ii), evidenced by such
financial statements and (ii) a duly completed Compliance Certificate
executed by the Chief Financial Officer of Borrower substantially in the form
of Exhibit B hereto or otherwise in form and scope acceptable to Bank;
(e) not later than Friday of each calendar week, (i) a
projection of the consolidated cash flow of Borrower, detailing cash receipts
and cash disbursements, for the 13-week period commencing on such Friday and
(ii) a comparison of Borrower's actual consolidated cash flow for the
immediately preceding week to the projection of such cash flow, together with
a written explanation of any variance exceeding 10%, in each case in form,
scope and detail satisfactory to Bank and duly certified by an officer of
Borrower, and in a manner, acceptable to Bank;
(f) within 45 days after the end of each semiannual fiscal
period of Borrower, commencing with such period ending on June 30, 2003, an
aged listing of the United States domestic accounts receivable and United
States domestic accounts payable of Borrower and its United States domestic
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Subsidiaries as of the last day of such period, in form, scope and detail
satisfactory to Bank and duly certified by an officer of Borrower, and in a
manner, acceptable to Bank;
(g) promptly (i) upon Borrower's becoming aware of the same,
notice of any declination by UBS AG to extend its credit facility for Swiss
Sub and (ii) upon execution of the same, copies of (A) all amendments or
restatements of the loan agreement between Swiss Sub and UBS AG and (B) all
other documents executed by Swiss Sub, Borrower or any affiliate of either
thereof in connection with such loan agreement;
(h) within 45 days after the end of each semiannual fiscal
period of Borrower, commencing with such period ending on June 30, 2003, (i)
written notice in reasonable detail of the filing during such period of any
application by or on behalf of Borrower or any Subsidiary thereof with the
United States Patent and Trademark Office, the United States Copyright Office
or any other office with respect to, or the acquisition during such period by
Borrower or any Subsidiary thereof of any interest in (including, without
limitation, any interest as exclusive licensee), any patent, trademark,
copyright or other intellectual property, together with upon the request of
Bank a copy of such application or the documentation concerning such
acquisition, as applicable, and (ii) in the event that no such filing or
acquisition has been made during such period, a certificate executed by the
Chief Financial Officer of Borrower certifying to that effect;
(i) not later than September 30, 2003, copy of the letter
prepared by independent public accountants of Borrower to the management of
Borrower in connection with Borrower's 2002 annual audited financial
statements; and
(j) promptly upon request by Bank, such other information
concerning the business, condition (financial or otherwise), operations,
performance, properties or prospects of Borrower or any Subsidiary thereof as
Bank may from time to time reasonably request (including, without limitation,
any information described above on a more frequent basis).
SECTION 4.4. COMPLIANCE. Borrower shall, and shall cause each
Subsidiary thereof to, (a) preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business and (b) comply with the provisions of all documents
pursuant to which it is organized and/or which govern its continued existence
and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to it and/or its business.
SECTION 4.5. INSURANCE. Borrower shall, and shall cause each
Subsidiary thereof to, (a) maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower or such Subsidiary, as applicable, including, without limitation,
fire, extended-coverage, public-liability, flood, property-damage and
workers'- compensation insurance, with all such insurance carried with
companies and in amounts satisfactory to Bank, and (b) deliver to Bank from
time to time at Bank's request schedules setting forth all such insurance
then in effect.
SECTION 4.6. FACILITIES. Borrower shall, and shall cause each
Subsidiary thereof to, (a) keep all properties useful or necessary to its
business in good repair and condition and (b) from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
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SECTION 4.7. TAXES AND OTHER LIABILITIES. Borrower shall, and
shall cause each Subsidiary thereof to, pay and discharge when due any and
all indebtedness, obligations, assessments and taxes, both real and personal,
including, without limitation, federal and state income taxes and state and
local property taxes and assessments, except such (a) as Borrower may in good
faith contest or as to which a bona fide dispute may arise and (b) for which
Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Borrower shall promptly give notice in
writing to Bank of any litigation pending or threatened against Borrower or
any Subsidiary thereof with a claim in excess of $500,000 (or the equivalent
in one or more currencies).
SECTION 4.9. FINANCIAL CONDITION. Borrower shall maintain the
consolidated financial condition of it and its consolidated Subsidiaries as
follows, using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by
the definitions herein):
(a) Current Ratio not less than 1.10 to 1.00, tested as of the last
day of each fiscal month commencing with March of 2003, with "Current Ratio"
being defined as total current assets divided by total current liabilities;
(b) Tangible Net Worth, tested as of the last day of each fiscal
month commencing with March of 2003, not less than $13,500,000, with "Tangible
Net Worth" being defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets;
(c) for each fiscal quarter of Borrower, operating cash flow (as
defined in accordance with Financial Accounting Standards Board Statement No. 95
("FASB 95")) to be greater than the sum of required capitalized lease payments
plus required debt repayments plus capital expenditures (as defined in
accordance with FASB 95), tested as of the last day of each such fiscal quarter
commencing with the quarter ending September of 2003;
(d) for each fiscal month of Borrower, negative variance from
projected revenues (based on the monthly and quarterly projections which has
been delivered to Bank as an attachment to the officers' certificate pursuant to
Section 3.1(b)(ii)) to be less than 15%, tested as of the last day of each
fiscal month commencing with March of 2003; provided, however, that, if Borrower
fails to comply with the foregoing covenant in respect of any fiscal month, then
such failure shall not constitute a default of such covenant unless Borrower
fails to comply with such covenant when applied to such fiscal month combined
with the immediately preceding fiscal month; further provided, however, that, if
Borrower fails to comply with the foregoing covenant in respect of any fiscal
month and the immediately preceding fiscal month, then such failure shall not
constitute a default of such covenant unless Borrower fails to comply with such
covenant when applied to such fiscal month combined with the immediately
preceding two fiscal months;
(e) net operating income, tested as of the last day of each fiscal
month commencing with September of 2003, not less than $1, with "net operating
income" being defined as income before interest income or expense, equity in
earnings of any unconsolidated affiliate, currency-exchange gains or losses, any
other income or expenses, taxes and minority interests in affiliates; and
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(f) ratio of total liabilities to Tangible Net Worth not more than
1.10 to 1.00, tested as of the last day of each fiscal month commencing with
March of 2003.
SECTION 4.10. NOTICES TO BANK. Borrower shall promptly (but in no
event more than five (5) days after the occurrence of each event or matter
described below) give written notice to Bank in reasonable detail of (a) the
occurrence of any Event of Default or any condition, event or act which, with
the giving of notice or the passage of time or both, would constitute an
Event of Default, (b) any change in the name or organizational structure of
Borrower, (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency with respect
to any Plan, (d) any termination or cancellation of any insurance policy
which Borrower is required to maintain and (e) any uninsured or partially
uninsured loss through liability or property damage (including, without
limitation, from fire, theft or any other cause affecting Borrower's
property) in excess of an aggregate of $500,000 (or the equivalent in one or
more currencies).
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
Borrower covenants that, so long as Bank remains committed to extend
credit to Borrower pursuant hereto or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise
consents in writing, observe all of the negative covenants set forth below.
SECTION 5.1. USE OF FUNDS. Borrower shall not, and shall not
permit any Subsidiary thereof to, use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Borrower shall not, and shall
not permit any Subsidiary thereof to, make any capital expenditure (as
defined in accordance with FASB 95) in excess of $2,000,000 (or the
equivalent in one or more currencies) in the aggregate for Borrower and its
Subsidiaries in any fiscal year.
SECTION 5.3. LEASE EXPENDITURES. Borrower shall not, and shall
not permit any Subsidiary thereof to, incur any operating lease expense in
excess of $1,500,000 (or the equivalent in one or more currencies) in the
aggregate for Borrower and its Subsidiaries in any fiscal year.
SECTION 5.4. OTHER INDEBTEDNESS. Borrower shall not, and shall
not permit any Subsidiary thereof to, create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans,
advances, capitalized leases or purchase-money indebtedness, whether secured
or unsecured, matured or unmatured, liquidated or unliquidated, joint or
several, except for (a) liabilities of Borrower to Bank, (b) liabilities of
Swiss Sub to UBS AG not exceeding Swiss Francs 5,000,000, (c) liabilities of
Domilens to any financial institution not exceeding $500,000 (or the
equivalent in one or more currencies), (d) purchase-money indebtedness and
capitalized leases of Borrower or any Subsidiary thereof incurred in
connection with the purchase or lease of equipment, so long as the
outstanding principal amount of indebtedness incurred in connection with such
purchase or lease of equipment, whether before or after the date hereof, at
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no time exceeds $1,000,000 (or the equivalent in one or more currencies) in
the aggregate, (e) liabilities permitted by Section 5.7 hereof and (f) any
other liabilities of Borrower or any Subsidiary thereof existing as of, and
disclosed to Bank prior to, the date hereof.
SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Borrower
shall not, and shall not permit any Subsidiary thereof to, (a) merge into or
consolidate with any other entity, (b) make any substantial change in the
nature of its business as conducted as of the date hereof, (c) acquire all or
substantially all of the assets of any other entity or (d) sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
its assets, except in the ordinary course of its business.
SECTION 5.6. GUARANTIES. Borrower shall not, and shall not permit
any Subsidiary thereof to, guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, or pledge or hypothecate any assets thereof as security for,
any liabilities or obligations of any other person or entity, except any of
the foregoing in favor of Bank.
SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Borrower shall not,
and shall not permit any Subsidiary thereof to, make any loan, advance or
other extension of credit (including, without limitation, for products sold)
to, or investment in, any person or entity, except for (a) loans, advances
and other extensions of credit by Borrower to its foreign Subsidiaries not
exceeding $8,500,000 (or the equivalent in one or more currencies) in the
aggregate at any time outstanding, (b) loans, advances and other extensions
of credit by Swiss Sub or any Subsidiary of Swiss Sub to Swiss Sub or any
other Subsidiary of Swiss Sub, (c) loans, advances and other extensions of
credit to Borrower by any Subsidiary thereof and (d) investments by Borrower
in any Subsidiary thereof, and investments by any Subsidiary of Borrower in
any Subsidiary of such Subsidiary, to the extent such investments are
existing as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.8. DIVIDENDS, DISTRIBUTIONS. Borrower shall not, and
shall not permit any Subsidiary thereof to, (a) declare or pay any dividend
or distribution either in cash, stock or any other property or (b) redeem,
retire, repurchase or otherwise acquire any shares of any class of stock of
Borrower or any Subsidiary thereof; provided, however, that any Subsidiary of
Borrower may pay dividends to Borrower, and any Subsidiary of Borrower may
pay dividends to any other Subsidiary of Borrower if and to the extent that
such dividends are used to pay dividends to Borrower.
SECTION 5.9. PLEDGE OF ASSETS. Borrower shall not, and shall not
permit any of its Subsidiaries to, mortgage, pledge or grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
or such Subsidiary's assets now owned or hereafter acquired (including,
without limitation, all or any part of the shares of any direct or indirect
Subsidiary of Borrower), except any of the foregoing in favor of Bank or
which are existing as of, and disclosed to Bank in writing prior to, the date
hereof.
ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
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(a) Borrower fails to pay any principal, interest, fee or other
amount when due hereunder or under any other Loan Document;
(b) any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any
other party under, this Agreement or any other Loan Document proves to be
incorrect, false or misleading in any material respect when furnished or made;
(c) Borrower defaults in the performance of or compliance with
any obligation, agreement or other provision contained herein or in any other
Loan Document (other than those referred to in subsections (a) and (b) above);
(d) Borrower defaults in the payment or performance of any
obligation, or any defined event of default occurs, under the terms of any
contract or instrument (other than any of the Loan Documents) pursuant to
which Borrower has incurred any debt or other liability to any person or
entity, including, without limitation, Bank;
(e) a notice of judgment lien is filed against Borrower; an
abstract of judgment is recorded against Borrower in any county in which
Borrower has an interest in real property; a notice of levy and/or of a writ
of attachment or execution, or other like process, is served against the
assets of Borrower; or a judgment is entered against Borrower;
(f) Borrower becomes insolvent, suffers or consents to, or
applies for the appointment of, a receiver, trustee, custodian or liquidator
for itself or any of its property, generally fails to pay its debts as they
become due or makes a general assignment for the benefit of creditors;
Borrower files a voluntary petition in bankruptcy, or seeking reorganization,
in order to effect a plan or other arrangement with creditors or any other
relief under the Bankruptcy Reform Act, Title 11 of the United States Code,
as amended or recodified from time to time (the "Bankruptcy Code"), or under
any other state or federal law granting relief to debtors, whether now or
hereafter in effect; any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, or Borrower files an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition; Borrower
is adjudicated a bankrupt; or an order for relief is entered against Borrower
by any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors;
(g) any event occurs or condition exists which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents; or
(h) Borrower is dissolved or liquidated; or Borrower or any of
its directors, stockholders or members takes action seeking to effect the
dissolution or liquidation of Borrower.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of
Default: (a) all indebtedness of Borrower under each of the Loan Documents,
any term thereof to the contrary notwithstanding, shall at Bank's option and
without notice become immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are hereby expressly
waived by Borrower; (b) the obligation, if any, of Bank to extend any further
credit under any of the Loan Documents shall immediately cease and terminate;
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and (c) Bank shall have all rights, powers and remedies available under each
of the Loan Documents, or accorded by law, including, without limitation, the
right to resort to any or all security for any credit subject hereto and to
exercise any or all of the rights of a beneficiary or secured party pursuant
to applicable law. All rights, powers and remedies of Bank may be exercised
at any time by Bank and from time to time after the occurrence of an Event of
Default, are cumulative and not exclusive, and shall be in addition to any
other rights, powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of
Bank in exercising any right, power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof or the
exercise of any other right, power or remedy. Any waiver, consent or
approval of any kind by Bank of any breach of or default under any of the
Loan Documents must be in writing and shall be effective only to the extent
set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any
party is required or may desire to give to any other party under any
provision of this Agreement must be in writing delivered to each party at the
following address:
Borrower: Staar Surgical Company
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Bank: Xxxxx Fargo Bank, National Association
000 Xxxxx Xxxxx Xxxxxx, 0xx Floor
MAC X0000-000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxx
or to such other address as either party may designate by written notice to
the other party. Each such notice, request and demand shall be deemed given
or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent
by mail, upon the earlier of the date of receipt or three (3) days after
deposit into the U.S. mail, first-class postage prepaid; and (c) if sent by
telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall
pay to Bank immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including, without limitation,
reasonable attorneys' fees (to include, without limitation, outside counsel
fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of
this Agreement and the other Loan Documents, Bank's continued administration
hereof and thereof, and the preparation of any amendments and waivers hereto
and thereto, (b) the enforcement of Bank's rights and/or the collection of
any amounts which become due to Bank under any of the Loan Documents, and
(c) the prosecution or defense of any action in any way related to any of the
Loan Documents, including without limitation, any action for declaratory
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relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including, without limitation, any of the
foregoing incurred in connection with any bankruptcy proceeding (including,
without limitation, any adversary proceeding, contested matter or motion
brought by Bank or any other person) relating to Borrower or any other person
or entity.
SECTION 7.4. INDEMNITY. Borrower agrees to indemnify and hold
harmless Bank and its directors, officers, employees, agents and advisors
(each of the foregoing an "Indemnified Party") from and against any and all
claims, demands, actions, damages (including, without limitation, all
foreseeable and unforeseeable consequential damages), losses, assessments,
liabilities, costs and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection
with or by reason of, or in connection with the preparation for a defense of,
any investigation, litigation or proceeding arising out of, related to or in
connection with (a) the actual or proposed use of the proceeds of any advance
hereunder, any of the Loan Documents or any of the transactions contemplated
by any of the Loan Documents, (b) the actual or alleged presence of any
hazardous material in, on or under (i) any property owned or operated by
Borrower or any Subsidiary thereof, (ii) any property to which any hazardous
material has migrated from any property owned or operated by Borrower or any
Subsidiary thereof or (iii) any property at which Borrower or any Subsidiary
thereof has disposed of any hazardous material (whether or not legal at the
time of such disposal) or (c) any environmental proceeding relating in any
way to Borrower or any Subsidiary thereof, in any case whether or not such
investigation, litigation or proceeding is brought by Borrower, any
Subsidiary thereof, any of their respective directors, shareholders or
creditors or an Indemnified Party, whether or not any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated; provided, however, that Borrower shall not be liable
to the extent that any such claim, demand, action, damage, loss, assessment,
liability or expense is found in a final, nonappealable judgment by a court
of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct.
SECTION 7.5. SUCCESSORS, ASSIGNMENT. This Agreement shall be
binding upon, and inure to the benefit of, the heirs, executors,
administrators, legal representatives, successors and assigns of the parties;
provided, however, that Borrower may not assign or transfer its interest
hereunder without Bank's prior written consent. Bank reserves the right to
sell, assign, transfer, negotiate or grant participations in all or any part
of, or any interest in, Bank's rights and benefits under each of the Loan
Documents. In connection therewith, Bank may disclose all documents and
information which Bank now has or may hereafter acquire relating to any
credit subject hereto, Borrower or its business, or any collateral required
hereunder.
SECTION 7.6. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
other Loan Documents constitute the entire agreement between Borrower and
Bank with respect to each credit subject hereto and supersede all prior
negotiations, communications, discussions and correspondence concerning the
subject matter hereof. This Agreement may be amended or otherwise modified
only in a writing signed by each party to be bound by such amendment or
modification.
SECTION 7.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is made
and entered into for the sole protection and benefit of the parties hereto
and their respective permitted successors and assigns, and no other person or
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entity shall be a third-party beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or any other of
the Loan Documents to which it is not a party.
SECTION 7.8. TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
SECTION 7.9. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
SECTION 7.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which when taken together shall
constitute one and the same Agreement.
SECTION 7.11. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California.
SECTION 7.12. RELEASE OF CLAIMS. Borrower represents and warrants
to Bank that it has diligently and thoroughly investigated the existence of
any Claim (as defined below) and that, to its knowledge and belief, no Claim
exists and no facts exist that could give rise to or support a Claim. As
additional consideration for Bank's entering into this Agreement, Borrower
and each of its agents, employees, directors, officers, attorneys,
affiliates, subsidiaries, successors and assigns (each a "Releasing Party")
hereby release and forever discharge Bank and each of its agents, direct and
indirect shareholders, employees, directors, officers, attorneys, branches,
affiliates, subsidiaries, successors and assigns (each a "Released Party")
from any and all damages, losses, claims, demands, liabilities, obligations,
actions and causes of action whatsoever (collectively "Claims") that the
Releasing Parties or any of them may, as of the effective date of this
Agreement, have or claim to have against any or all of the Released Parties,
in each case whether currently known or unknown or with respect to which the
facts are currently known or unknown, in any way relating to, arising out of
or based upon any Loan Document (including, without limitation, the Prior
Credit Agreement), any amendment, waiver or other modification with respect
thereto, the negotiation or documentation hereof or thereof, any of the
transactions contemplated hereby or thereby, or any act or omission in
connection with any of the foregoing, including, without limitation, all such
Claims heretofore sustained or that may arise as a consequence of the
dealings between the parties up to the effective date of this Agreement in
connection with or in any way related to any Loan Document or any amendment,
waiver or other modification with respect thereto. Each Releasing Party
further represents and warrants that it has not heretofore assigned, and
covenants and agrees that it will not hereafter xxx any Released Party upon,
any Claim released or purported to be released under this section. Each
Releasing Party will indemnify and hold harmless the Released Parties against
any loss or liability on account of any actions brought by any Releasing
Party or its assigns or prosecuted on behalf of any Releasing Party and
relating to any Claim released or purported to be released under this
section. It is further understood and agreed that any and all rights under
the provisions of Section 1542 of the California Civil Code are expressly
waived by each of the Releasing Parties. Section 1542 of the California
Civil Code provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
-17-
Borrower acknowledges that it has had the opportunity to be advised by legal
counsel in respect of the negotiation, execution and delivery of this
Agreement, including, without limitation, this release of claims.
SECTION 7.13. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by
either party, to submit to binding arbitration all claims, disputes and
controversies between them (and their respective employees, officers,
directors, attorneys and other agents), whether arising in tort, contract or
otherwise arising out of or relating to in any way (i) any advance under this
Agreement, any Loan Document or the negotiation, execution,
collateralization, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination of
any Loan Document or (ii) any request for additional credit.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed at a location in California selected by the American Arbitration
Association (the "AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice-of-law provision in any of the documents between the parties; and
(iii) be conducted by the AAA, or such other administrator as the parties
shall mutually agree upon, in accordance with the AAA's commercial dispute
resolution procedures, unless the claim or counterclaim is at least
$1,000,000 (or the equivalent in one or more currencies) exclusive of claimed
interest, arbitration fees and costs, in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large, complex
commercial disputes (the commercial dispute resolution procedures or the
optional procedures for large, complex commercial disputes to be referred to,
as applicable, as the "Rules"). If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth herein shall
control. Any party that fails or refuses to submit to arbitration following
a demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any dispute. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of any
party to (i) foreclose against real or personal property collateral; (ii)
exercise self-help remedies relating to collateral or proceeds of collateral
such as setoff or repossession; or (iii) obtain provisional or ancillary
remedies such as replevin, injunctive relief, attachment or the appointment
of a receiver, before during or after the pendency of any arbitration
proceeding. This exclusion does not constitute a waiver of the right or
obligation of any party to submit any dispute to arbitration or reference
hereunder, including, without limitation. those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000 (or the
equivalent in one or more currencies) or less will be decided by a single
arbitrator selected according to the Rules, who shall not render an award
greater than $5,000,000 (or the equivalent in one or more currencies). Any
dispute in which the amount in controversy exceeds $5,000,000 (or the
equivalent in one or more currencies) will be decided by majority vote of a
panel of three arbitrators; provided, however, that all three arbitrators
must actively participate in all hearings and deliberations. The arbitrator
will be a neutral attorney licensed in the State of California or a neutral
retired judge of the state or federal judiciary of California, in either case
-18-
with a minimum of ten years experience in the substantive law applicable to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to the
statutes of limitation in determining any claim. In any arbitration
proceeding the arbitrator will decide (by documents only or with a hearing at
the arbitrator's discretion) any pre-hearing motions which are similar to
motions to dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance with
the substantive law of California and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to
the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the California Rules of Civil Procedure or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including, without limitation,
the plaintiff, to submit the controversy or claim to arbitration if any other
party contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly
limited to matters directly relevant to the dispute being arbitrated and must
be completed not later than 20 days before the hearing date and within 180
days of the filing of the dispute with the AAA. Any requests for an
extension of the discovery periods, or any discovery disputes, will be
subject to final determination by the arbitrator upon a showing that the
request for discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of any
dispute arising pursuant to the terms of this Agreement shall be determined
by a separate arbitration proceeding, and such dispute shall not be
consolidated with other disputes or included in any class proceeding.
(g) Payment of Arbitration Costs and Fees. The arbitrator shall
award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no dispute shall be
submitted to arbitration if the dispute concerns indebtedness secured
directly or indirectly, in whole or in part, by any real property unless (i)
the holder of the mortgage, lien or security interest specifically elects in
writing to proceed with the arbitration, or (ii) all parties to the
arbitration waive any rights or benefits that might accrue to them by virtue
of the single-action rule of California, thereby agreeing that all
indebtedness and obligations of the parties, and all mortgages, liens and
security interests securing such indebtedness and obligations, shall remain
fully valid and enforceable. If any such dispute is not submitted to
arbitration, the dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general
reference agreement is intended to be specifically enforceable in accordance
with said Section 638. A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA's selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the
court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude
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any arbitration proceeding within 180 days of the filing of the dispute with
the AAA. No arbitrator or other party to an arbitration proceeding may
disclose the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business or by
applicable law or regulation. If more than one agreement for arbitration by
or between the parties potentially applies to a dispute, the arbitration
provision most directly related to the Loan Documents or the subject matter
of the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties.
SECTION 7.14. WAIVERS. As of the Effective Date but subject to
satisfaction of the terms and conditions specified herein, Bank hereby waives
the Events of Default caused by Borrower's violation of the covenants
contained in Section 4.9(e) of the Prior Credit Agreement with respect to
February of 2003 and in Section 5.3 of the Prior Credit Agreement with
respect to the 2002 fiscal year. Except for the foregoing waivers, the
execution, delivery and effectiveness of this Agreement shall not operate as
a waiver of any right, power or remedy of Bank under any of the Loan
Documents or constitute a waiver of any provision of any of the Loan
Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first written above.
STAAR SURGICAL COMPANY
By:
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Name:
---------------------
Title:
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XXXXX FARGO BANK, NATIONAL ASSOCIATION
By:
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Name: Xxxxx X. Xxx
Title: Vice President
