SECURITY AGREEMENT
(GRANTOR)
This SECURITY AGREEMENT is made as of July 14, 1999, by REHABILICARE
INC., a Minnesota corporation, with chief executive office at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Grantor"), in favor of U.S. Bank National
Association, with an ▇▇▇▇▇▇ ▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Lender").
RECITALS:
A. Grantor has requested extensions of credit from Lender
pursuant to the terms of that certain Credit Agreement dated as of even date
herewith (the Credit Agreement as it may be amended, modified, supplemented,
increased or restated from time to time being the "Credit Agreement") between
Grantor and Lender;
B. As a condition to such extensions of credit, Lender requires
that Grantor grant a security interest in its assets in accordance with this
Agreement.
C. Grantor has determined that the execution, delivery and
performance of this Agreement is in its best business and pecuniary interest.
NOW, THEREFORE, for good and valuable consideration the receipt and
adequacy of which are hereby acknowledged by each of the parties hereto, it is
agreed as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
in this Section:
"ACCOUNTS" shall mean any right to payment for Goods sold or leased or
for services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"CHATTEL PAPER" shall mean any writing or writings which evidence both
a monetary obligation and a security interest in or a lease of specific Goods.
"COLLATERAL" shall mean all property in which a security interest is
granted hereunder.
"CONTROLLED PROPERTY" shall mean property of every kind and description
in which Grantor has or may acquire any interest, now or hereafter at any time
in the possession or control of Lender for any reason and all dividends and
distributions on or other rights in connection with such property.
"CREDIT AGREEMENT" shall have the meaning set forth in the recitals
hereto.
"DATA PROCESSING RECORDS AND SYSTEMS" shall mean all of Grantor's
now existing or hereafter acquired electronic data processing and computer
records, software, systems, manuals, procedures, disks, tapes and all other
storage media and memory.
"DEFAULT" shall mean any event which if it continued uncured would,
with notice or lapse of time or both, constitute an Event of Default.
"DOCUMENT" shall mean any ▇▇▇▇ of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods or any other
document which in the regular course of business or financing is treated as
adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the Goods it covers or any
receipt issued for Goods which are stored under a statute requiring a bond
against withdrawal or under a license for the issuance of receipts in the
nature of warehouse receipts.
"EQUIPMENT" shall mean any Goods, other than Inventory, used or
bought for use primarily in business.
"EVENT OF DEFAULT" shall have the meaning specified in Article VI
hereof.
"FIXTURES" shall mean any Goods which have become so affixed to
particular real estate that an interest in them arises under real estate law.
"GENERAL INTANGIBLES" shall mean any personal property (including
things in action) other than Goods, Accounts, Chattel Paper, Documents,
Instruments and money.
"GOODS" shall mean any tangible personal property, including all
things that are movable, but not including money, Documents, Instruments,
Accounts, Chattel Paper, General Intangibles or minerals or the like before
extraction.
"GRANTOR" shall have the meaning set forth in the preamble hereto.
"INSTRUMENTS" shall mean any negotiable instrument or certificated
or non-certificated security or any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease and is
of a type which is in the ordinary course of business transferred by delivery
with any necessary endorsement or assignment.
"INSURANCE PROCEEDS" shall mean all proceeds of any and all
insurance policies payable to Grantor with respect to any Collateral, or on
behalf of any Collateral, whether or not such policies are issued to or owned
by Grantor.
"INVENTORY" shall mean any Goods held for sale or lease or furnished
or to be furnished under contracts of service, or raw materials, work in
process or materials used or consumed in a business.
"LENDER" shall have the meaning set forth in the preamble hereto.
"PROCEEDS" shall mean whatever is received upon the sale, exchange,
collection or other disposition of Collateral or Proceeds, including but not
limited to Insurance Proceeds.
"PRODUCTS" shall mean any goods now or hereafter manufactured,
processed or assembled with any of the Collateral.
Other terms defined herein shall have the meanings ascribed to them
herein. All capitalized terms used herein and not specifically defined herein
shall have the meaning ascribed to them in the Credit Agreement.
ARTICLE II
SECURITY INTERESTS
As security for the payment of all Obligations, Grantor hereby
grants to Lender a security interest in all of Grantor's now owned or
hereafter acquired or arising:
Accounts;
Chattel Paper;
Controlled Property;
Documents;
Equipment and Fixtures;
General Intangibles;
Instruments;
Inventory;
Proceeds (whether cash or non-cash Proceeds, including
Insurance Proceeds and non-cash Proceeds of all types); and
Products of all the foregoing.
ARTICLE III
REPRESENTATIONS AND COVENANTS OF GRANTOR
Grantor represents, warrants and covenants that:
3.1 AUTHORIZATION. The execution and performance of this
Agreement have been duly authorized by all necessary action and do not and
will not: (a) require any consent or approval of the stockholders of any
entity, or the consent of any governmental entity that has not been obtained;
or (b) violate any provision of any indenture, contract, agreement or
instrument to which it is a party or by which it is bound.
3.2 TITLE TO COLLATERAL. Grantor has good and marketable title
to all of the Collateral and none of the Collateral is subject to any
security interest
except for the security interest created pursuant to this Agreement or other
security interests permitted by the Credit Agreement (such other security
interests being "Permitted Liens").
3.3 DISPOSITION OR ENCUMBRANCE OF COLLATERAL. Grantor will not
encumber, sell or otherwise transfer or dispose of the Collateral without the
prior written consent of Lender except as provided in this paragraph or for
Permitted Liens. Until a Default or Event of Default has occurred and is
continuing, Grantor may sell Collateral consisting of:
(a) Inventory in the ordinary course of business to the
extent permitted by SECTION 9.2 of the Credit Agreement;
(b) Equipment or other property to the extent permitted
by SECTION 9.2 of the Credit Agreement; and
(c) License any Patents, Trademarks, Copyrights or
applications therefor, trade secrets, know-how and other intellectual
property in the ordinary course of business, provided the Borrower
receives as consideration an amount not less than the fair value of
such license and provided further that if such license is an exclusive
license, then Borrower retains such rights as may be necessary to allow
Borrower to perform its obligations to the licensee or others under
applicable manufacturing contracts and that such license does not
restrict the assignment of such rights to the Lender.
3.4 VALIDITY OF ACCOUNTS. Grantor warrants that all Collateral
consisting of Accounts, Chattel Paper and Instruments included in Grantor's
schedules, financial statements or books and records are bona fide existing
obligations created by the sale and actual delivery of Inventory or the
rendition of services to customers in the ordinary course of business, which
Grantor then owns free and clear of any security interest other than the
security interest created by this Agreement or other Permitted Liens and
which are then unconditionally owing to Grantor without defenses, offset or
counterclaim except those arising in the ordinary course of business that are
immaterial in the aggregate and that the unpaid principal amount of any such
Chattel Paper or Instrument and any security therefor is and will be as
represented to Lender on the date of the delivery thereof to Lender.
3.5 MAINTENANCE OF TANGIBLE COLLATERAL. Grantor will maintain
the tangible Collateral in good condition and repair. At the time of
attachment and perfection of the security interest granted pursuant hereto
and thereafter, all tangible Collateral will be located and will be
maintained only at the locations set forth on Exhibit A hereto. Except as
otherwise permitted by Section 3.3, Grantor will not remove such Collateral
from such locations unless, prior to any such removal, Grantor has given
written notice to Lender of the location or locations to which Grantor
desires to remove the Collateral, Lender has given its written consent to
such removal, and Grantor has delivered to Lender acknowledgment copies of
financing statements filed where appropriate to continue the perfection of
Lender's security interest as a first priority security interest therein.
Lender's security interest attaches to all of the Collateral wherever located
and
Grantor's failure to inform Lender of the location of any item or items of
Collateral shall not impair Lender's security interest therein.
3.6 NOTATION ON CHATTEL PAPER. For purposes of the security
interest granted pursuant to this Agreement, Lender has been granted a direct
security interest in all Chattel Paper constituting part of the Collateral
and such Chattel Paper is not claimed merely as Proceeds of Inventory. Upon
Lender's request, Grantor will deliver to Lender the original of all Chattel
Paper. Grantor will not execute any copies of such Chattel Paper constituting
part of the Collateral other than those which are clearly marked as a copy.
Lender may stamp any such Chattel Paper with a legend reflecting Lender's
security interest therein.
3.7 INSTRUMENTS AS PROCEEDS. Notwithstanding any other
provision in this Agreement concerning Instruments, Grantor covenants that
Instruments constituting cash Proceeds (for example, money and checks) shall
be deposited in deposit accounts with Lender containing only Proceeds.
3.8 PROTECTION OF COLLATERAL. All expenses of protecting,
storing, warehousing, insuring, handling and shipping of the Collateral, all
costs of keeping the Collateral free of any liens, encumbrances and security
interests prohibited by this Agreement and of removing the same if they
should arise, and any and all excise, property, sales and use taxes imposed
by any state, federal or local authority on any of the Collateral or in
respect of the sale thereof, shall be borne and paid by Grantor and if
Grantor fails to promptly pay any thereof when due, Lender may, at its
option, but shall not be required to pay the same whereupon the same shall
constitute Obligations and shall bear interest at the Default Rate and shall
be secured by the security interest granted hereunder.
3.9 INSURANCE. Grantor will procure and maintain, or cause to
be procured and maintained, insurance issued by responsible insurance
companies insuring the Collateral against damage and loss by theft, fire,
collision (in the case of motor vehicles), and such other risks as are
usually carried by owners of similar properties or as may be requested by
Lender in an amount equal to the replacement value thereof, and, in any
event, in an amount sufficient to avoid the application of any co-insurance
provisions and payable, in the case of any loss in excess of $50,000.00, to
Grantor and Lender jointly. All such insurance shall contain an agreement by
the insurer to provide Lender with 30 days' prior notice of cancellation and
an agreement that the interest of Lender shall not be impaired or invalidated
by any act or neglect of Grantor nor by the occupation of the premises
wherein such Collateral is located for purposes more hazardous than are
permitted by said policy. Grantor will maintain, with financially sound and
reputable insurers, insurance with respect to its properties and business
against such casualties and contingencies of such types (which may include,
without limitation, public and product liability, larceny, embezzlement,
business interruption or other criminal misappropriation insurance) and in
such amounts as may from time to time be reasonably required by Lender.
Grantor will deliver evidence of such insurance and the policies of insurance
or copies thereof to Lender upon request.
3.10 COMPLIANCE WITH LAW. Grantor will not use the Collateral,
or knowingly permit the Collateral to be used, for any unlawful purpose or in
violation of any federal, state or municipal law.
3.11 BOOKS AND RECORDS; ACCESS.
(a) Grantor will permit Lender and its representatives,
at reasonable times and intervals, to examine Grantor's books and
records (including Data Processing Records and Systems) with respect to
the Collateral and make extracts therefrom and copies thereof at any
time and from time to time, and Grantor will furnish such information
and reports to Lender and its representatives regarding the Collateral
as Lender and its representatives may from time to time request.
Grantor will also permit Lender and its representatives to inspect the
Collateral at reasonable times and intervals. Grantor's obligation to
pay the Lender's cost and expenses for such examinations are set forth
in SECTION 8.5 of the Credit Agreement.
(b) Lender shall have authority, at any time, to place,
or require Grantor to place, upon Grantor's books and records relating
to Accounts, Chattel Paper and other rights to payment covered by the
security interest granted hereby a notation or legend stating that such
Accounts, Chattel Paper and other rights to payment are subject to
Lender's security interest.
3.12 NOTICE OF DEFAULT. By no later than five (5) Business Days
after any officer of Grantor obtains knowledge of the existence of any
Default or Event of Default, Grantor will give notice to Lender that such
Default or Event of Default exists, stating the nature thereof, the period of
existence thereof, and what action Grantor proposes to take with respect
thereto.
3.13 ADDITIONAL DOCUMENTATION. Grantor will execute, from time
to time, such financing statements, assignments, and other documents covering
the Collateral, including Proceeds, as Lender may reasonably request in order
to create, evidence, perfect, maintain or continue its security interest in
the Collateral (including additional Collateral acquired by Grantor after the
date hereof), and Grantor will pay the cost of filing the same in all public
offices in which Lender may deem filing to be appropriate and will notify
Lender promptly upon acquiring any additional Collateral that may require an
additional filing. Upon request, Grantor will deliver to Lender all Grantor's
Documents Chattel Paper and Instruments.
3.14 CHIEF EXECUTIVE OFFICE. The location of the chief executive
office of Grantor is located in the state set forth in the preamble hereto
and will not be changed from such state without 30 days' prior written notice
to Lender. Grantor warrants that its books and records concerning Accounts
and Chattel Paper constituting part of the Collateral are located at its
chief executive office.
3.15 NAME OF GRANTOR. Grantor's true name is as set forth in the
preamble hereto. Grantor has not used any other name within the past five
years except those described on Exhibit
A attached hereto. Neither Grantor nor, to Grantor's knowledge, any
predecessor in title to any of the Collateral has executed any financing
statements or security agreements presently effective as to the Collateral
except those described on Exhibit A attached hereto.
3.16 DISPUTES; ETC. Grantor shall advise Lender promptly of
Inventory in excess of $50,000.00 for any one customer in any fiscal year or
in excess of $100,000.00 in the aggregate for all customers in any fiscal
year which are returned by a customer(s) or otherwise recovered from such
customer(s) and unless instructed to deliver such Inventory to Lender,
Grantor shall resell such Inventory for Lender and assign or deliver to
Lender the resulting Accounts or other Proceeds. Grantor shall also advise
Lender promptly of all disputes and claims in excess of $50,000.00 for any
one obligor on the Collateral in any fiscal year or in excess of $100,000.00
in the aggregate for all obligors in any fiscal year and settle or adjust
them at no expense to Lender. After the occurrence and during the continuance
of an Event of Default, Lender may at all times settle or adjust such
disputes and claims directly with the customers for amounts and upon terms
which Lender considers commercially reasonable. No discount, credit or
allowance shall be granted by Grantor to any customer without Lender's
written consent other than discounts, credits, allowances, adjustments and
returns made or granted by Grantor in the ordinary course of business.
3.17 POWER OF ATTORNEY. Grantor appoints Lender, or any other
person whom Lender may from time to time designate, as Grantor's attorney
with power, to: (a) endorse Grantor's name on any checks, notes, acceptances,
drafts or other forms of payment or security evidencing or relating to any
Collateral that may come into Lender's possession; (b) sign Grantor's name on
any invoice or ▇▇▇▇ of lading relating to any Collateral, on drafts against
customers, on schedules and confirmatory assignments of Accounts, Chattel
Paper, Documents or other Collateral, on notices of assignment, financing
statements under the Uniform Commercial Code (the "Code") and other public
records, on verifications of accounts and on notices to customers; (c) notify
the post office authorities to change the address for delivery of Grantor's
mail to an address designated by Lender; (d) to receive and open all mail
addressed to Grantor; (e) send requests for verification of Accounts, Chattel
Paper, Instruments or other Collateral to customers; and (f) do all things
necessary to carry out this Agreement; PROVIDED, HOWEVER, that so long as no
Event of Default has occurred and is continuing, Lender shall not exercise
the powers granted pursuant to Section 3.17(c) or (d). Grantor ratifies and
approves all acts of the attorney within the scope of the authority granted.
Neither Lender nor the attorney will be liable for any acts of commission or
omission nor for any error in judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable so long as any Obligation
remains unpaid. Grantor waives presentment and protest of all instruments and
notice thereof, notice of default and dishonor and all other notices to which
Grantor may otherwise be entitled.
3.18 PATENTS AND TRADEMARKS; ETC. Grantor agrees with Lender
that, until the security interest granted by this Agreement has been
terminated in accordance with the terms hereof:
(a) Grantor will perform all acts and execute all
documents including, without limitation, grants of security interest,
in form suitable for filing with the United States
Patent and Trademark Office, reasonably requested by Lender at any
time to evidence, perfect, maintain, record and enforce Lender's
interest in the Collateral comprised of patents (collectively the
"Patents"), patent applications (collectively the "Patent
Applications), trademarks or service marks (collectively the
"Trademarks") or of any applications therefor (collectively the
"Trademark Applications") or otherwise in furtherance of the
provisions of this Agreement; PROVIDED, HOWEVER, that Grantor shall
be not be required to execute any assignment that, by its execution,
might cause rights in any intent-to-use trademark application or any
other rights in Patents or Trademarks to be impaired or invalid;
(b) Except to the extent that Lender shall consent in
writing, Grantor (either itself or through licensees) will, unless
Grantor shall reasonably determine that a Trademark (or the use of a
Trademark in connection with a particular class of goods or products)
is not of material economic value to Grantor, (i) continue to use each
Trademark on each and every trademark class of goods in order to
maintain each Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under each Trademark as may be necessary
to prevent impairment of such Trademark, (iii) employ each Trademark
with the appropriate notice of application or registration to the
extent required by applicable law to maintain such Trademark, (iv) not
use any Trademark except for the uses for which registration or
application for registration of such Trademark has been made, unless
such use is otherwise lawful, and (v) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated;
(c) Except to the extent that Lender shall consent in
writing, Grantor will not, unless Grantor shall reasonably determine
that a Patent is not of material economic value to Grantor relative to
associated expenses, do any act, or not to do any act, whereby any
Patent may become abandoned or dedicated;
(d) Unless Grantor shall reasonably determine that a
Patent, Patent Application, Trademark or Trademark Application is not
of material economic value to Grantor, Grantor shall notify Lender
immediately if it knows, or has reason to know, of any reason that any
Patent, Patent Application, Trademark or Trademark Application may
become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court) regarding Grantor's
ownership of any Patent or Trademark, its rights to register the same,
or to keep and maintain the same;
(e) If Grantor, either itself or through any agent,
employee, licensee or designee, shall file a Patent Application or
Trademark Application for the registration of any Trademark with the
United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof,
Grantor shall
promptly inform Lender, and, upon request of Lender, shall promptly
execute and deliver any and all agreements, instruments, documents
and papers as Lender may reasonably request to evidence Lender's
security interest in such Patent or Trademark and the goodwill and
general intangibles of Grantor relating thereto or represented
thereby; PROVIDED, HOWEVER, that Grantor shall be not be required to
execute any assignment that, by its execution, might cause rights in
any intent-to-use trademark application or any other rights in
Patents or Trademarks to be impaired or invalid;
(f) Unless Grantor shall reasonably determine that a
Patent Application or Trademark Application is not of material economic
value to Grantor, Grantor will take all commercially reasonable steps,
including, without limitation, proceedings before the United States
Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to pursue each
Patent Application and Trademark Application and to maintain each
issued Patent and Trademark Registration including, without limitation,
filing of applications for renewal and affidavits of use;
(g) Unless Grantor shall reasonably determine that a
Patent or Trademark is not of material economic value to Grantor,
Grantor shall promptly notify Lender if any Patent or Trademark is
infringed, misappropriated or diluted by a third party and take such
commercially reasonable action as Grantor shall reasonably deem
appropriate under the circumstances to protect such Patent or
Trademark; and
(h) Grantor agrees that it will not enter into any
agreement (for example, a license agreement) which is inconsistent with
Grantor's obligations under this Agreement.
3.19 COPYRIGHTS. Grantor agrees with Lender that, until the
security interest granted by this Agreement has been terminated in accordance
with the terms hereof:
(a) Grantor will perform all acts and execute all
documents including, without limitation, grants of security interest,
in form suitable for filing with the United States Copyright Office,
reasonably requested by Lender at any time to evidence, perfect,
maintain, record and enforce Lender's interest in the Collateral
comprised of copyrights or copyright applications (collectively the
"Copyrights") or otherwise in furtherance of the provisions of this
Agreement; PROVIDED, HOWEVER, that Grantor shall not be required to
file any documents that might cause trade secret rights in software or
any other rights in material that is subject to copyright protection to
be impaired or invalid;
(b) Except to the extent that the Lender shall consent in
writing, Grantor (either itself or through licensees) will, unless
Grantor shall reasonably determine that a Copyright is not of material
economic value to Grantor, publish the materials for which a Copyright
has been obtained (the "Works") with any notice of copyright
registration required by applicable law to preserve the Copyright;
(c) Unless Grantor shall reasonably determine that a
Copyright is not of material economic value to Grantor, Grantor shall
notify the Lender immediately if it knows, or has reason to know, of
any reason that any Copyright may become abandoned or dedicated or of
any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Copyright Office or
any court) regarding Grantor's ownership of any Copyright, its right to
register the same, or to keep and maintain the same;
(d) If Grantor, either itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Copyright with the United States Copyright Office
or any similar office or agency in any other country or any political
subdivision thereof, Grantor shall promptly inform Lender, and, upon
request of Lender, execute and deliver any and all agreements,
instruments, documents and papers as Lender may request to evidence
Lender's security interest in such Copyright and the Works relating
thereto or represented thereby; PROVIDED, HOWEVER, that Grantor shall
not be required to file any documents that might cause trade secret
rights in software or any other rights in material that is subject to
copyright protection to be impaired or invalid;
(e) Unless Grantor shall reasonably determine that a
Copyright is not of material economic value to Grantor, Grantor will
take all commercially reasonable steps, including, without limitation,
proceedings before the United States Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the
Copyrights;
(f) In the event that any Copyright is infringed by a
third party, Grantor shall promptly notify Lender and shall, unless
Grantor shall reasonably determine that such Copyright is not of
material economic value to Grantor, promptly take such commercially
reasonable actions as Grantor shall reasonably deem appropriate under
the circumstances to protect such Copyright; and
(g) Grantor agrees that it will not enter into any
agreement (for example, a license agreement) which is inconsistent with
Grantor's obligations under this Agreement.
ARTICLE IV
COLLECTIONS
Except as otherwise provided in this Article IV, Grantor
shall continue to collect, at its own expense, all amounts due or to become
due to Grantor under the Accounts constituting part of the Collateral and all
other Collateral. In connection with such collections, Grantor may take (and,
at Lender's direction, shall take) such action as Grantor or Lender may deem
necessary or advisable to enforce collection of the Accounts and such other
Collateral; PROVIDED, HOWEVER, that, Lender shall have the right at any time
after the occurrence and during the continuance of a Default or Event of
Default, without giving written notice to Grantor of Lender's intention to do
so, to notify the account debtors under any Accounts or obligors with respect
to such other Collateral of the assignment of such Accounts and such other
Collateral to Lender and to direct such account debtors or obligors to make
payment of all amounts due or to become due to Grantor thereunder directly to
Lender and, upon such notification and at the expense of Grantor, to enforce
collection of any such Accounts or other Collateral, and to adjust, settle or
compromise the amount or payment thereof in the same manner and to the same
extent as Grantor might have done, but unless and until Lender does so or
gives Grantor other instructions, Grantor shall make all collections for
Lender. In addition to its rights under the preceding sentence to this
Section, Lender, at any time after the occurrence and during the continuance
of a Default or Event of Default, may require that Grantor instruct all
current and future account debtors and obligors on other Collateral to make
all payments directly to a lockbox (the "Lockbox") controlled by Lender. All
payments received in the Lockbox shall be transferred to a special bank
account (the "Collateral Account") maintained at Lender subject to withdrawal
by Lender only. After Lender's exercise of its rights to direct account
debtors or other obligors on any Collateral to make payments directly to
Lender or to require Grantor to establish a Lockbox, Grantor shall
immediately deliver all full and partial payments on any Collateral received
by Grantor to Lender in their original form, except for endorsements where
necessary. Lender at its sole discretion, may hold any collections on the
Collateral delivered to it or deposited in the Collateral Account as cash
collateral or may apply such collections to the payment of the Obligations in
such order as Lender may elect; provided, however, that after an Event of
Default has occurred and is continuing, Lender shall apply all collections in
accordance with Section 7.7. Until such payments are so delivered to Lender,
such payments shall be held in trust by Grantor for and as Lender's property,
and shall not be commingled with any funds of Grantor. Any application of any
collection to the payment of any Obligation is conditioned upon final payment
of any check or other instrument.
ARTICLE V
ASSIGNMENT OF INSURANCE
Grantor hereby assigns to Lender, as additional security for payment
of the Obligations, any and all monies due or to become due under, and any
and all other rights of Grantor with respect to, any and all policies of
insurance covering the Collateral. So long as no Default or Event of Default
has occurred and is continuing, Grantor may itself adjust and collect for any
losses of up to an aggregate amount of $100,000.00 for all occurrences during
any of Grantor's
fiscal years and Grantor may use the resulting Insurance Proceeds for the
replacement, restoration or repair of the Collateral. After the occurrence
and during the continuance of a Default or an Event of Default, or after the
aggregate amount of losses arising out of all occurrences during any of
Grantor's fiscal years exceeds $100,000.00, Lender may (but need not) in its
own name or in Grantor's name execute and deliver proofs of claim, receive
such monies, and settle or litigate any claim against the issuer of any such
policy and Grantor directs the issuer to pay any such monies directly to
Lender and Lender, at its sole discretion and regardless of whether Lender
exercises its right to collect Insurance Proceeds under this sentence, may
apply any Insurance Proceeds to the payment of the Obligations, whether due
or not, in such order and manner as Lender may elect or may permit Grantor to
use such Insurance Proceeds for the replacement, restoration or repair of the
Collateral.
ARTICLE VI
EVENTS OF DEFAULT
The occurrence of any Event of Default as defined in the Credit
Agreement shall constitute an Event of Default hereunder ("Event of Default").
ARTICLE VII
RIGHTS AND REMEDIES ON DEFAULT
Upon the occurrence of an Event of Default, and at any time
thereafter until such Event of Default is cured to the satisfaction of
Lender, and in addition to the rights granted to Lender under Articles IV and
V hereof, Lender may exercise any one or more of the following rights and
remedies:
7.1 ACCELERATION OF OBLIGATIONS. Declare any and all
Obligations to be immediately due and payable, and the same shall thereupon
become immediately due and payable without further notice or demand.
7.2 RIGHT OF OFFSET. Offset any deposits, including unmatured
time deposits, then maintained by Grantor with Lender, whether or not then
due, against any indebtedness then owed by Grantor to Lender whether or not
then due.
7.3 DEAL WITH COLLATERAL. In the name of Grantor or otherwise,
demand, collect, receive and give receipt for, compound, compromise, settle
and give acquittance for and prosecute and discontinue any suits or
proceedings in respect of any or all of the Collateral.
7.4 REALIZE ON COLLATERAL. Take any action which Lender may
deem reasonably necessary or desirable in order to realize on the Collateral,
including, without limitation, the power to perform any contract, to endorse
in the name of Grantor any checks, drafts, notes, or other instruments or
documents received in payment of or on account of the Collateral.
7.5 ACCESS TO PROPERTY. Enter upon and into and take possession
of all or such part or parts of the properties of Grantor, including lands,
plants, buildings, machinery, equipment, Data Processing Records and Systems
and other property as may be necessary or appropriate in the reasonable
judgment of Lender, to permit or enable Lender to store, lease, sell or
otherwise dispose of or collect all or any part of the Collateral, and use
and operate said properties for such purposes and for such length of time as
Lender may reasonably deem necessary or appropriate for said purposes without
the payment of any compensation to Grantor therefor. Grantor shall provide
Lender with all information and assistance requested by Lender to facilitate
the storage, leasing, sale or other disposition or collection of the
Collateral after an Event of Default has occurred and is continuing.
7.6 OTHER RIGHTS. Exercise any and all other rights and
remedies available to it by law or by agreement, including rights and
remedies under the Uniform Commercial Code as adopted in the relevant
jurisdiction or any other applicable law, or under the Credit Agreement and,
in connection therewith, Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender, and any notice of intended disposition of any of the Collateral
required by law shall be deemed reasonable if such notice is mailed or
delivered to Grantor at its address as shown on Lender's records at least 10
days before the date of such disposition.
7.7 APPLICATION OF PROCEEDS. All proceeds of Collateral shall
be applied in accordance with Minnesota Statutes Section 336.9-504, and such
proceeds applied toward the Obligations shall be applied in such order as
Lender may elect.
7.8 PATENTS AND TRADEMARKS. Upon the occurrence and during the
continuance of an Event of Default:
(a) Lender may, at any time and from time to time, upon
thirty (30) days' prior notice to Grantor, license or, to the extent
permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patent or Trademark, throughout the world for such term or
terms, on such conditions, and in such manner, as Lender shall in its
sole discretion determine;
(b) Lender may (without assuming any obligations or
liability thereunder), at any time enforce (and shall have the
exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one
or more license or other agreements with respect to any Patent or
Trademark and take or refrain from taking any action under any such
license or other agreement, and Grantor hereby releases Lender from,
and agrees to hold Lender free and harmless from and against, any
claims arising out of, any action taken or omitted to be taken with
respect to any such license or agreement;
(c) Any and all payments received by Lender under or in
respect of any Patent or Trademark (whether from Grantor or otherwise),
or received by Lender by virtue of the exercise of the licenses or
assignments granted to Lender by this Section 7.8 shall be applied to
the Obligations in accordance with Section 7.7 hereof;
(d) Lender may exercise in respect of the Patents and
Trademarks, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code;
(e) In order to implement the sale, lease, assignment,
license, sublicense or other disposition of any of the Patents and
Trademarks pursuant to this Section 7.8, Lender may, at any time,
execute and deliver on behalf of Grantor one or more instruments of
assignment of the Patents and Trademarks (or any application or
registration thereof), in form suitable for filing, recording or
registration in any country. Grantor agrees to pay when due all
reasonable costs incurred in any such transfer of the Patents and
Trademarks, including any taxes, fees and reasonable attorneys' fees;
(f) In the event of any sale, lease, assignment, license,
sublicense or other disposition of any of the Patents or Trademarks
pursuant to this Section, Grantor shall supply to Lender or its
designee its know-how and expertise relating to the manufacture and
sale of the products relating to any Patent or Trademark subject to
such disposition, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products;
and
(g) For the purpose of enabling Lender to exercise rights
and remedies under this Agreement at such time as Lender shall be
lawfully entitled to exercise such rights and remedies, and for no
other purpose, Grantor hereby grants to Lender, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense at such time any
Patent or Trademark, now owned or hereafter acquired by Grantor, and
wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may
be recorded or stored and to all computer and automatic machinery
software and programs used for the compilation or printout thereof.
7.9 COPYRIGHTS. Upon the occurrence and during the continuance
of an Event of Default:
(a) Lender may, at any time and from time to time, upon
thirty (30) days' prior notice to Grantor, license or, to the extent
permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Copyright, for such term or terms, on such conditions, and
in such manner, as Lender shall in its sole discretion determine;
(b) Lender may (without assuming any obligations or
liability thereunder), at any time , enforce (and shall have the
exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one
or more license or other agreements with respect to any Copyright and
take or refrain from taking any action under any such license or other
agreement and Grantor hereby releases Lender from, and agrees to hold
Lender free and harmless from and against, any claims arising out of,
any action taken or omitted to be taken with respect to any such
license or agreement;
(c) Any and all payments received by Lender under
or in respect of any Copyright (whether from Grantor or otherwise), or
received by Lender by virtue of the exercise of the licenses or
assignments granted to Lender by this Section 7.9 shall be applied to
the Obligations in accordance with Section 7.7;
(d) Lender may exercise in respect of the Copyrights, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code;
(e) In order to implement the sale, lease, assignment,
license, sublicense or other disposition of any of the Copyrights
pursuant to this Section 7.9, Lender may, at any time, execute and
deliver on behalf of Grantor one or more instruments of assignment of
the Copyrights (or any application or registration thereof), in form
suitable for filing, recording or registration in the Copyright Office
or any country where the relevant Copyright is of material economic
value to Grantor. Grantor agrees to pay when due all reasonable costs
incurred in any such transfer of the Copyrights, including any taxes,
fees and reasonable attorneys' fees; and
(f) For the purpose of enabling Lender to exercise rights
and remedies under this Agreement at such time as Lender shall be
lawfully entitled to exercise such rights and remedies, and for no
other purpose, Grantor hereby grants to Lender an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any Copyright,
now owned or hereafter acquired by Grantor, and wherever the same may
be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and
to all computer and automatic machinery software and programs used for
the compilation or printout thereof.
ARTICLE VIII
MISCELLANEOUS
8.1 NO LIABILITY ON COLLATERAL. It is understood that Lender
does not in any way assume any of Grantor's obligations under any of the
Collateral. Grantor hereby agrees to indemnify Lender against all liability
arising in connection with or on account of any of the Collateral, except for
any such liabilities arising on account of Lender's negligence or willful
misconduct.
8.2 NO WAIVER. Lender shall not be deemed to have waived any of
its rights hereunder or under any other agreement, instrument or paper signed
by Grantor unless such waiver be in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
8.3 REMEDIES CUMULATIVE. All rights and remedies of Lender
shall be cumulative and may be exercised singularly or concurrently, at their
option, and the exercise or enforcement of any one such right or remedy shall
not bar or be a condition to the exercise or enforcement of any other.
8.4 GOVERNING LAW/JURISDICTION. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties
shall be governed by, the laws of the State of Minnesota, except to the
extent that the perfection of the security interest hereunder, or the
enforcement of any remedies hereunder, with respect to any particular
Collateral shall be governed by the laws of a jurisdiction other than the
State of Minnesota. AT THE OPTION OF LENDER, THIS AGREEMENT MAY BE ENFORCED
IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST.
▇▇▇▇, MINNESOTA; AND GRANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY
SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT GRANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY
FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
8.5 EXPENSES. Grantor agrees to pay the reasonable attorneys'
fees and legal expenses incurred by Lender in the exercise of any right or
remedy available to it under this Agreement, whether or not suit is
commenced, including, without limitation, attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or judgment.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of Grantor and
Lender.
8.7 RECITALS. The above Recitals are true and correct as of the
date hereof and constitute a part of this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as
of the date and year first above written.
REHABILICARE INC.
By:
Its:
EXHIBIT A
I. Financing Statements on File Listing Grantor or Any Predecessor in
Title as Debtor
See SCHEDULE 7.12 to the Credit Agreement which is
incorporated herein by reference.
II. Location of Inventory
Any County of any State.
III. Prior Names
Medical Devices, Inc.