Exhibit 10.1

 

LOGO [g88678img001.jpg]

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT

 

THIS FIRST AMENDED AND RESTATED LOAN AGREEMENT (“Agreement”) is made and entered
into as of November 1, 2005 by and between RESMED CORP., a Minnesota
corporation, and RESMED EAP HOLDINGS INC. a Delaware corporation, whose
obligations hereunder shall be joint and several (each individually, a
“Borrower”, and collectively, the “Borrowers”) and UNION BANK OF CALIFORNIA,
N.A. (“Bank”).

 

RECITALS

 

A. ResMed Corp., ResMed International, Inc. (collectively, the “Existing
Borrowers”) and Bank are parties to the Loan Agreement dated as of April 11,
2003, as amended (collectively, the “Existing Loan Agreement”), pursuant to
which the Bank provided Existing Borrowers with various credit facilities.

 

B. As part of a reorganization of its business units, ResMed, Inc., as parent
company of ResMed Corp., ResMed International, Inc. and Resmed EAP Holdings
Inc., has requested that ResMed International, Inc. be removed as a loan party
and that Resmed EAP Holdings Inc. be substituted in its place.

 

C. Borrowers and Bank wish to enter into this Agreement which shall amend,
restate, replace and supercede (but shall not constitute a novation of) the
Existing Loan Agreement and which hereinafter shall govern the credit facilities
provided to Borrowers by Bank.

 

SECTION 1. THE LOAN

 

1.1.1 The Revolving Loan A. Bank will loan to Borrowers an amount not to exceed
Fifteen Million Dollars ($15,000,000) outstanding in the aggregate at any one
time (the “Revolving Loan A”). Borrower may borrow, repay and reborrow all or
part of the Revolving Loan A in amounts of not less than One Million Dollars
($1,000,000) in accordance with the terms of the Revolving Note A. All
borrowings of the Revolving Loan A must be made before October 1, 2008 at which
time all unpaid principal and interest of the Revolving Loan shall be due and
payable. The Revolving Loan A shall be evidenced by a promissory note (the
“Revolving Note A”) on the standard form used by Bank for commercial loans. Bank
shall enter each amount borrowed and repaid in Bank’s records and such entries
shall be deemed to be the amount of the Revolving Loan A outstanding. Omission
of Bank to make any such entries shall not discharge Borrowers of their
obligation to repay in full with interest all amounts borrowed.

 

1.1.1.1 The Standby L/C Sublimit. As a sublimit to the Revolving Loan A, Bank
shall issue, for the account of Borrowers, one or more irrevocable, standby
letters of credit (individually, an “L/C” and collectively, the “L/Cs”). All
such standby L/Cs shall be drawn on such terms and conditions as are acceptable
to Bank. The aggregate amount available to be drawn under all outstanding L/Cs
and the aggregate amount of unpaid reimbursement obligations under drawn L/Cs
shall not exceed Two Million Dollars ($2,000,000) and shall reduce, dollar for
dollar, the maximum amount available under the Revolving Loan A. No standby L/C
shall have an expiry

 

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date more than twelve months from its date of issuance and each L/C shall be
governed by the terms of (and Borrower agrees to execute) Bank’s standard form
for standby L/C applications and reimbursement agreements. No L/C shall expire
after October 1, 2008.

 

1.1.2 The Revolving Loan B. Bank will loan to Borrowers an amount not to exceed
Twenty Five Million Dollars ($25,000,000) outstanding in the aggregate at any
one time (the “Revolving Loan B”). Borrower may borrow, repay and reborrow all
or part of the Revolving Loan B in amounts of not less than One Million Dollars
($1,000,000) in accordance with the terms of the Revolving Note B. All
borrowings of the Revolving Loan B must be made before October 1, 2008, at which
time all unpaid principal and interest of the Revolving Loan shall be due and
payable. The Revolving Loan B shall be evidenced by a promissory note (the
“Revolving Note B”) on the standard form used by Bank for commercial loans. Bank
shall enter each amount borrowed and repaid in Bank’s records and such entries
shall be deemed to be the amount of the Revolving Loan B outstanding. Omission
of Bank to make any such entries shall not discharge Borrowers of their
obligation to repay in full with interest all amounts borrowed.

 

1.2 Terminology.

 

As used herein the word “Loan” shall mean, collectively, all the credit
facilities described above.

 

As used herein the word “Note” shall mean, collectively, all the promissory
notes described above.

 

As used herein, the words “Loan Documents” shall mean all documents executed in
connection with this Agreement.

 

1.3 Purpose of Loan. The proceeds of the Revolving Loan A and Revolving Loan B
shall be used for working capital and general corporate purposes.

 

1.4 Interest. The unpaid principal balance of Revolving Loan A and Revolving
Loan B shall bear interest at the rate or rates provided in the Revolving Note A
and the Revolving Note B and selected by Borrower. The Revolving Loan A and
Revolving Loan B may be prepaid in full or in part only in accordance with the
terms of the Revolving Note A and Revolving Note B and any such prepayment shall
be subject to the prepayment fee provided for therein.

 

1.5 Unused Commitment Fee. On the last calendar day of the third month following
the execution of this Agreement and on the last calendar day of each three-month
period thereafter until June 2, 2008, or the earlier termination of the Loan,
Borrowers shall pay to Bank a fee on the average unused portion of the Loan for
the preceding quarter computed on the basis of actual days elapsed of a year of
360 days in accordance with the table below:

 

Average Unused Portion of the Loan

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Per Annum Fee

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Less than $25,000,000

   0 basis points

Greater than or equal to $25,000,000 but less than $32,500,000

   12.5 basis points

Greater than or equal to $32,500,000

   25 basis points

 

1.6 Balances. Borrowers shall maintain their primary domestic depository
accounts with Bank so long as the Loan remains available to Borrowers.

 

1.7 Disbursement. Upon execution hereof, Bank shall disburse the proceeds of the
Loan as provided in Bank’s standard form Authorization executed by Borrowers.

 

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1.8 Security. Prior to any disbursement of the Loan, Borrowers shall have
executed a security agreement, on Bank’s standard form, and a financing
statement, suitable for filing in the office of the Secretary of State of the
State of California and any other state designated by Bank, granting to Bank a
first priority security interest in such of Borrower’s property as is described
in said security agreement. Exceptions to Bank’s first priority, if any, are
permitted only as otherwise provided in this Agreement or specifically in
writing by Bank. ResMed Corp. shall also have executed a deed of trust, in
Bank’s standard form, granting to Bank a first-priority lien in the real
property described in said deed of trust. Borrower shall comply with all of
Bank’s requirements with respect to such real property collateral, including,
but not limited to, appraisal, assessment of environmental risk, recording and
obtaining of title insurance. At Bank’s request, Borrowers will also obtain
executed landlord’s and mortgagee’s waivers on Bank’s form covering all of
Borrowers’ property located on leased or encumbered real property.

 

1.9 Controlling Document. In the event of any inconsistency between the terms of
this Agreement and any Note or any of the other Loan Documents, the terms of
such Note or other Loan Documents will prevail over the terms of this Agreement.

 

SECTION 2. CONDITIONS PRECEDENT

 

Bank shall not be obligated to disburse all or any portion of the proceeds of
the Loan unless at or prior to the time for the making of such disbursement, the
following conditions have been fulfilled to Bank’s satisfaction:

 

2.1 Compliance. Borrower shall have performed and complied with all terms and
conditions required by this Agreement to be performed or complied with by it
prior to or at the date of the making of such disbursement and shall have
executed and delivered to Bank the Note and other documents deemed necessary by
Bank.

 

2.2 Guaranties. ResMed, Inc. (“Guarantor”) shall have executed and delivered to
Bank a continuing guaranty in form and amount satisfactory to Bank.

 

2.3 Borrowing Resolution. Borrowers shall have provided Bank with certified
copies of resolutions duly adopted by the Board of Directors of each Borrower,
authorizing this Agreement and the Loan Documents. Such resolutions shall also
designate the persons who are authorized to act on Borrowers’ behalf in
connection with this Agreement and to do the things required of Borrowers
pursuant to this Agreement.

 

2.4 Termination Statements. Borrower shall have provided Bank with UCC-2
termination statements executed by such secured creditors as may be required by
Bank suitable for filing with the Secretary of State in each state designated by
Bank.

 

2.5 Continuing Compliance. At the time any disbursement is to be made, there
shall not exist any event, condition or act which constitutes an event of
default under Section 6 hereof or any event, condition or act which with notice,
lapse of time or both would constitute such event of default; nor shall there be
any such event, condition, or act immediately after the disbursement were it to
be made.

 

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SECTION 3. REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants that:

 

3.1 Business Activity. The principal business of Borrowers is the design,
manufacture and distribution of breathing devices and other electrical
instruments.

 

3.2 Affiliates and Subsidiaries. Borrowers’ affiliates and subsidiaries (those
entities in which Borrowers have either a controlling interest or at least a 25%
ownership interest) and their addresses, and the names of Borrowers’ principal
shareholders, are as provided on a schedule delivered to Bank on or before the
date of this Agreement.

 

3.3 Authority to Borrow. The execution, delivery and performance of this
Agreement, the Note and all other agreements and instruments required by Bank in
connection with the Loan are not in contravention of any of the terms of any
indenture, agreement or undertaking to which Borrowers are a party or by which
it or any of its property is bound or affected.

 

3.4 Financial Statements. The financial statements of Borrowers, as presented by
Guarantor on a consolidated and consolidating basis inclusive of Borrowers,
including both a balance sheet at June 30, 2005, together with supporting
schedules, and an income statement for the twelve (12) months ended June 30,
2005, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of the Guarantor and Borrowers during
the period covered thereby. Since June 30, 2005, there has been no material
adverse change in the financial condition or operations of Borrower.

 

3.5 Title. Except for assets which may have been disposed of in the ordinary
course of business, Borrowers have good and marketable title to all of the
property reflected in its financial statements delivered to Bank and to all
property acquired by Borrowers since the date of said financial statements, free
and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.

 

3.6 Litigation. There is no litigation or proceeding pending or threatened
against Borrowers or any of its property which is reasonably likely to affect
the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrowers’ insurance
coverage.

 

3.7 Default. Borrowers are not now in default in the payment of any of its
material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.

 

3.8 Organization. Borrowers are duly organized and existing under the laws of
the state of its organization, and have the power and authority to carry on the
business in which it is engaged and/or proposes to engage.

 

3.9 Power. Borrowers have the power and authority to enter into this Agreement
and to execute and deliver the Note and all of the other Loan Documents.

 

3.10 Authorization. This Agreement and all things required by this Agreement
have been duly authorized by all requisite action of Borrowers.

 

3.11 Qualification. Borrowers are duly qualified and in good standing in any
jurisdiction where such qualification is required.

 

3.12 Compliance With Laws. Borrowers are not in violation with respect to any
applicable laws, rules, ordinances or regulations which materially affect the
operations or financial condition of Borrowers.

 

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3.13 ERISA. Any defined benefit pension plans as defined in the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), of Borrowers meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.

 

3.14 Regulation U. No action has been taken or is currently planned by
Borrowers, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect. Borrowers are not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and none of the proceeds of the Loan will be used directly or
indirectly for such purpose.

 

3.15 Continuing Representations. These representations shall be considered to
have been made again at and as of the date of each disbursement of the Loan and
shall be true and correct as of such date or dates.

 

SECTION 4. AFFIRMATIVE COVENANTS

 

Until the Note and all sums payable pursuant to this Agreement or any other of
the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrowers agree that:

 

4.1 Use of Proceeds. Borrowers will use the proceeds of the Loan only as
provided in subsection 1.3 above.

 

4.2 Payment of Obligations. Borrowers will pay and discharge promptly all taxes,
assessments and other governmental charges and claims levied or imposed upon it
or its property, or any part thereof, provided, however, that Borrowers shall
have the right in good faith to contest any such taxes, assessments, charges or
claims and, pending the outcome of such contest, to delay or refuse payment
thereof provided that adequately funded reserves are established by it to pay
and discharge any such taxes, assessments, charges and claims.

 

4.3 Maintenance of Existence. Borrowers will maintain and preserve its existence
and assets and all rights, franchises, licenses and other authority essential
and necessary for the conduct of its business and will maintain and preserve its
property, equipment and facilities in good order, condition and repair. Bank
may, at reasonable times, visit and inspect any of the properties of Borrowers.

 

4.4 Records. Borrowers will keep and maintain full and accurate accounts and
records of its operations according to generally accepted accounting principles
and will permit Bank to have access thereto, to make examination and photocopies
thereof, and to make audits during regular business hours. Costs for such audits
shall be paid by Borrowers.

 

4.5 Information Furnished. Borrowers will furnish or cause Guarantor to furnish
to Bank:

 

(a) Within forty-five (45) days after the close of each of the first, second and
third fiscal quarters, and ninety (90) days after the close of the fourth fiscal
quarter, Guarantor’s unaudited consolidating and consolidated balance sheet as
of the close of such fiscal quarter, its unaudited consolidating and
consolidated income and expense statement with supportive schedules and
statement of retained earnings for that fiscal quarter, prepared in accordance
with generally accepted accounting principles;

 

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(b) Within ninety (90) days after the close of each fiscal year, a copy of
Guarantor’s statement of financial condition including at least its consolidated
balance sheet as of the close of such fiscal year, its consolidated income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Guarantor and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year;

 

(c) As soon as available, copies of such financial statements and reports as
Borrowers or Guarantor may file with any state or federal agency, including
those filed with the Securities and Exchange Commission;

 

(d) Such other financial statements and information as Bank may reasonably
request from time to time;

 

(e) In connection with each financial statement provided hereunder, a statement
executed by the Chief Financial Officer or Vice President Treasury and Finance
or Regional Controller of Borrowers, certifying, to the best of such person’s
knowledge, that no default has occurred and no event exists which with notice or
the lapse of time, or both, would result in a default hereunder and a
certification, in form and detail acceptable to Bank, demonstrating that
Borrowers are in compliance with all covenants under this Agreement;

 

(f) Prompt written notice to Bank of all material events of default under any of
the terms or provisions of this Agreement or of any other agreement, contract,
document or instrument entered, or to be entered into with Bank; and of any
litigation which, if decided adversely to Borrowers or Guarantor, would have a
material adverse effect on Borrowers’ or Guarantor’s financial condition; and of
any other matter which has resulted in, or is likely to result in, a material
adverse change in its financial condition or operations; and

 

(g) Prior written notice to Bank of any changes in Borrowers’ or Guarantor’s
officers and other senior management; Borrowers’ or Guarantor’s names; and
location of Borrowers’ or Guarantor’s assets, principal place of business or
chief executive office.

 

4.6 Total Funded Debt to EBITDA Ratio. Borrowers shall cause Guarantor to at all
times maintain a Total Funded Debt to EBITDA Ratio of not greater than 2.50 :
1.0. “Total Funded Debt” shall mean, for the Guarantor and its subsidiaries on a
consolidated basis, the sum of the outstanding principal of all indebtedness
including, without duplication, all indebtedness for borrowed money, deferred
purchase price of property or services evidenced by a note, bond, debenture or
similar instrument, obligations in respect of acceptances issued or created
representing extensions of credit, and all liabilities secured by any lien on
any property owned. “EBITDA” shall mean, for the Guarantor and its subsidiaries
on a consolidated basis, net income, exclusive of extraordinary gains and
losses, plus (i) payment or provisions for income taxes, (ii) depreciation and
amortization, (iii) interest expense, and (iv) non-cash stock option expenses.
For purposes of calculating this covenant, EBITDA shall be measured for the
quarter most recently ended and the immediately preceding three fiscal quarters.

 

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4.7 Senior Funded Debt to EBITDA Ratio. Borrowers shall cause Guarantor to at
all times maintain a Senior Funded Debt to EBITDA Ratio of not greater than the
correlative ratio indicated below for such fiscal quarter:

 

Fiscal Quarter Ending

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   Maximum Senior Funded
Debt to EBITDA Ratio

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June 30, 2005

   1.50 : 1

September 30, 2005

   1.50 : 1

December 31, 2005

   2.00 : 1

March 31, 2006

   2.00 : 1

June 30, 2006

   2.00 : 1

September 30, 2006

   2.00 : 1

December 31, 2006

   2.00 : 1

March 31, 2007

   2.00 : 1

June 30, 2007

   1.75 : 1

September 30, 2007

   1.50 : 1

December 31, 2007

   1.50 : 1

March 31, 2008

   1.50 : 1

June 30, 2008

   1.50 : 1

 

“Senior Funded Debt” shall mean, for the Guarantor and its subsidiaries on a
consolidated basis, the sum of the outstanding principal of all indebtedness
including, without duplication, all indebtedness for borrowed money, deferred
purchase price of property or services evidenced by a note, bond, debenture or
similar instrument, obligations in respect of acceptances issued or created
representing extensions of credit, and all liabilities secured by any lien on
any property owned, less any indebtedness that, by its terms, is specifically
subordinated in right of payment to Bank and other senior indebtedness of the
Guarantor and its subsidiaries including those 4% Convertible Subordinated Notes
maturing June 20, 2006 issued by the Guarantor in the initial amount of
$180,000,000 pursuant to that certain Indenture dated as of June 20, 2001. For
purposes of calculating this covenant, EBITDA shall be measured for the quarter
most recently ended and the immediately preceding three fiscal quarters.

 

4.8 Tangible Net Worth. Borrowers shall cause Guarantor to at all times maintain
Tangible Net Worth of not less than the correlative value indicated below, less
Permitted Stock Repurchases, for such fiscal quarter:

 

Fiscal Quarter Ending

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   Tangible Net Worth

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June 30, 2005

   $ 170,000,000

September 30, 2005

   $ 170,000,000

December 31, 2005

   $ 170,000,000

March 31, 2006

   $ 170,000,000

June 30, 2006 and as of the last day of each fiscal quarter thereafter

   $ 200,000,000

 

“Tangible Net Worth” shall mean net worth of Guarantor and its subsidiaries on a
consolidated basis increased by indebtedness of Guarantor and its subsidiaries
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
“Permitted Stock Repurchases” shall mean such amount of Guarantor’s common stock
as the Guarantor may repurchase as permitted under Section 5.7 hereof.

 

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4.9 Discrete Quarterly Consolidated EBITDA. Borrowers shall cause Guarantor to
at all times maintain EBITDA of not less than the correlative value indicated
below for such fiscal quarter:

 

Fiscal Quarter Ending

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   Discrete Quarterly
Consolidated EBITDA

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June 30, 2005

   $ 22,000,000

September 30, 2005

   $ 22,000,000

December 31, 2005

   $ 22,000,000

March 31, 2006

   $ 22,000,000

June 30, 2006 and as of the last day of each fiscal quarter thereafter

   $ 25,000,000

 

For purposes of calculating this covenant, EBITDA shall be measured solely for
the quarter most recently ended.

 

4.10 Rolling Four-Quarter Unconsolidated EBITDA. ResMed Corp. will maintain
minimum EBITDA of not less than $3,000,000. For purposes of calculating this
covenant, EBITDA shall be measured for the quarter most recently ended and the
immediately preceding three fiscal quarters.

 

4.11 US Liquidity. Borrowers will maintain Liquidity of not less than
$30,000,000. “Liquidity” shall mean the sum of cash, marketable securities, and
net accounts receivable of Borrowers on a combined basis that have been pledged
to Bank under the Loan Documents and are maintained in the United States.

 

4.12 Insurance. Borrowers will and shall cause Guarantor to keep all of their
insurable property, real, personal or mixed, insured by companies and in amounts
approved by Bank against fire and such other risks, and in such amounts, as is
customarily obtained by companies conducting similar business with respect to
like properties. Borrowers will furnish to Bank statements of its insurance
coverage, will promptly furnish other or additional insurance deemed necessary
by and upon request of Bank to the extent that such insurance may be available
and hereby assigns to Bank, as security for Borrower’s obligations to Bank, the
proceeds of any such insurance. Prior to any disbursement of the Loan, Bank will
be named loss payee on all policies insuring collateral and such policies shall
require at least ten (10) days’ written notice to Bank before any policy may be
altered or cancelled. Borrowers will and shall cause Guarantor to maintain
adequate worker’s compensation insurance and adequate insurance against
liability for damage to persons or property.

 

4.13 Additional Requirements. Borrowers will promptly, upon demand by Bank, take
such further action and execute all such additional documents and instruments in
connection with this Agreement as Bank in its reasonable discretion deems
necessary, and promptly supply Bank with such other information concerning its
affairs as Bank may request from time to time.

 

4.14 Litigation and Attorneys’ Fees. Borrowers will pay promptly to Bank upon
demand, reasonable attorneys’ fees (including but not limited to the reasonable
estimate of the allocated costs and expenses of in-house legal counsel and legal
staff) and all costs and other expenses paid or incurred by Bank in collecting,
modifying or compromising the Loan or in enforcing or exercising its rights or
remedies created by, connected with or provided for in this Agreement or any of
the Loan Documents, whether or not an arbitration, judicial action or other
proceeding is commenced. If such proceeding is commenced, only the prevailing
party shall be entitled to attorneys’ fees and court costs.

 

4.15 Bank Expenses. Borrowers will pay or reimburse Bank for all costs, expenses
and fees incurred by Bank in preparing and documenting this Agreement and the
Loan, and all amendments and modifications thereof, including but not limited to
all filing and recording fees, costs of appraisals, insurance and attorneys’
fees, including the reasonable estimate of the allocated costs and expenses of
in-house legal counsel and legal staff.

 

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4.16 Reports Under Pension Plans. Borrowers will and shall cause Guarantor to
furnish to Bank, as soon as possible and in any event within 15 days after
Borrower knows or has reason to know that any event or condition with respect to
any defined benefit pension plans of Borrowers or Guarantor described in
Section 3 above has occurred, a statement of an authorized officer of Borrowers
or Guarantor describing such event or condition and the action, if any, which
Borrowers or Guarantor proposes to take with respect thereto.

 

SECTION 5. NEGATIVE COVENANTS

 

Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrowers agrees that:

 

5.1 Encumbrances and Liens. Borrowers will not, and shall cause Guarantor to
not, except in the ordinary course of its business as currently conducted,
create, assume or suffer to exist any mortgage, pledge, security interest,
encumbrance, or lien (other than for taxes not delinquent and for taxes and
other items being contested in good faith) on property of any kind, whether
real, personal or mixed, now owned or hereafter acquired, or upon the income or
profits thereof, except to Bank.

 

5.2 Borrowings. Borrowers will not, and shall cause Guarantor to not, except in
the ordinary course of its business as currently conducted, sell, discount or
otherwise transfer any account receivable or any note, draft or other evidence
of indebtedness, except to Bank.

 

5.3 Sale of Assets, Liquidation or Merger. Borrowers will not, and will cause
Guarantor to not, except in the ordinary course of its business as currently
conducted, liquidate nor dissolve nor enter into any consolidation, merger,
partnership or other combination, nor convey, nor sell, nor lease all or the
greater part of its assets or business, nor purchase or lease all or the greater
part of the assets or business of another; provided, however, Guarantor and its
subsidiaries may acquire, merge or consolidate with another corporation if
Guarantor is the surviving corporation and provided that: (i) any note or
indebtedness incurred by Borrowers or Guarantor in connection with such
acquisition is subordinated to Bank, (ii) all such assets acquired by Borrowers
will not be subject to any lien or encumbrance following the effective date of
such combination other than that of Bank’s, and (iii) prior to and giving effect
to such acquisition, no Default shall have occurred and Borrowers will have
delivered to Bank a certificate of compliance prepared on a pro forma basis
assuming such acquisition had occurred demonstrating that Borrowers shall remain
in compliance with the terms of this Agreement.

 

5.4 Loans, Advances and Guaranties. Borrowers will not and shall cause Guarantor
to not, except in the ordinary course of its business as currently conducted,
make any loans or advances, become a guarantor or surety, pledge its credit or
properties in any manner or extend credit.

 

5.5 Investments. Borrowers will not and shall cause Guarantor to not purchase
the debt or equity of another person or entity except for savings accounts and
certificates of deposit of Bank, direct U.S. Government obligations, municipal
obligations rated by Moody’s as A-1 or better or rated by Standard & Poor’s as
P-1 or better, obligations issued by corporations rated by Moody’s as A-2 or
better or rated by Standard & Poor’s as P-2 or better, and other instruments
rated by Moody’s as Aaa or rated by Standard & Poor’s as AAA. Except for U.S.
Government obligations, all such permitted investments shall mature within
eighteen months of purchase.

 

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5.6 Payment of Dividends. Borrowers will not and shall cause Guarantor to not
declare or pay any dividends, other than a dividend payable in its own common
stock, or authorize or make any other distribution with respect to any of its
stock now or hereafter outstanding.

 

5.7 Retirement of Stock. Borrowers will not and shall cause Guarantor to not
acquire or retire any share of its capital stock for value except as such action
is approved by Guarantor’s board of directors and is disclosed to Bank prior to
the execution of such action.

 

5.8 Parent and Subsidiary Property. Borrowers will not transfer any property to
its parent or any affiliate of its parent, except for value received in the
normal course of business as business would be conducted with an unrelated or
unaffiliated entity.

 

5.9 Lease Obligations. Borrowers will not and shall cause Guarantor to not incur
new lease obligations as lessee except for equipment or real property needed by
Borrowers or Guarantor and its subsidiaries in the ordinary course of its
business.

 

5.10 Changes In Internal Operational Matters. (i) Borrowers will not and shall
cause Guarantor to not make any material change (from that existing on the
closing date) to such Borrowers’ or Guarantor’s transfer pricing activity, cash
flow or accounting structure and (ii) ResMed Corp. shall not make any material
change in its practice of purchasing inventory from its affiliates at current
transfer pricing (except to the extent such change is required by applicable
law), and selling such inventory in the domestic market, except, in each case
set forth in clause (i) or (ii), with the prior written consent of Bank (such
consent not to be withheld if such change could not adversely affect the
benefits to Bank of the structure evidenced by this Agreement, including the
likely value of the Guaranty and other Loan Documents, in each case as
determined by Bank in its reasonable discretion).

 

SECTION 6. EVENTS OF DEFAULT

 

The occurrence of any of the following events (“Events of Default”) shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:

 

6.1 Borrowers shall default in the due and punctual payment of the principal of
or the interest on the Note or any of the other Loan Documents; or

 

6.2 Any default shall occur under the Note; or

 

6.3 Borrowers or Guarantor shall materially default in the due performance or
observance of any covenant or condition of the Loan Documents; or

 

6.4 Any guaranty or subordination agreement required hereunder is breached or
becomes ineffective, or any Guarantor or subordinating creditor dies, disavows
or attempts to revoke or terminate such guaranty or subordination agreement; or

 

6.5 There is a change in ownership or control of twenty percent (20%) or more of
the issued and outstanding stock of Borrowers or Guarantor and the acquiring
entity is not owned by or controlled by Guarantor or a subsidiary of Guarantor.

 

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SECTION 7. MISCELLANEOUS PROVISIONS

 

7.1 Additional Remedies. The rights, powers and remedies given to Bank hereunder
shall be cumulative and not alternative and shall be in addition to all rights,
powers and remedies given to Bank by law against Borrowers or any other person,
including but not limited to Bank’s rights of setoff or banker’s lien.

 

7.2 Nonwaiver. Any forbearance or failure or delay by Bank in exercising any
right, power or remedy hereunder shall not be deemed a waiver thereof and any
single or partial exercise of any right, power or remedy shall not preclude the
further exercise thereof. No waiver shall be effective unless it is in writing
and signed by an officer of Bank.

 

7.3 Inurement. The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assignees of Borrowers, and any
assignment by Borrowers without Bank’s consent shall be null and void.

 

7.4 Applicable Law. This Agreement and all other agreements and instruments
required by Bank in connection therewith shall be governed by and construed
according to the laws of the State of California.

 

7.5 Severability. Should any one or more provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective. In the event of any conflict between the provisions of this
Agreement and the provisions of any note or reimbursement agreement evidencing
any indebtedness hereunder, the provisions of such note or reimbursement
agreement shall prevail.

 

7.6 Integration Clause. Except for documents and instruments specifically
referenced herein, this Agreement constitutes the entire agreement between Bank
and Borrowers regarding the Loan and all prior communications verbal or written
between Borrowers and Bank shall be of no further effect or evidentiary value.

 

7.7 Defined Terms. Unless otherwise specifically defined in this Agreement, all
accounting terms used herein shall be interpreted in accordance with generally
accepted accounting principals.

 

7.8 Construction. The section and subsection headings herein are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

 

7.9 Amendments. This Agreement may be amended only in writing signed by all
parties hereto.

 

7.10 Counterparts. Borrowers and Bank may execute one or more counterparts to
this Agreement, each of which shall be deemed an original, but when together
shall be one and the same instrument.

 

7.11 Sale; Assignment; Participations. Bank may, in the ordinary course of its
business, sell to any bank, financial institution, or other lender, which
additional bank, financial institution or other lender shall be subject to the
consent of Borrowers, such consent not to be unreasonably withheld, all or any
part of its rights and obligations under this Agreement and the other Loan
Documents, as documented on Bank’s standard form of assignment and acceptance
agreement.

 

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SECTION 8. SERVICE OF NOTICES

 

8.1 Any notices or other communications provided for or allowed hereunder shall
be effective only when given by one of the following methods and addressed to
the respective party at its address given with the signatures at the end of this
Agreement and shall be considered to have been validly given: (a) upon delivery,
if delivered personally; (b) upon receipt, if mailed, first class postage
prepaid, with the United States Postal Service; (c) on the next business day, if
sent by overnight courier service of recognized standing; and (d) upon
telephoned confirmation of receipt, if telecopied.

 

8.2 The addresses to which notices or demands are to be given may be changed
from time to time by notice delivered as provided above.

 

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THIS AGREEMENT is executed on behalf of the parties by duly authorized officers
as of the date first above written.

 

UNION BANK OF CALIFORNIA, N.A.       RESMED CORP. By:   /s/ Bruce A. Breslau    
  By:   /s/ Peter C. Farrell

Title:

  Senior Vice President       Title:   CEO By:   /s/ Douglas S. Lambell      

By:

  /s/ David Pendarvis

Title:

  Vice President      

Title:

  Secretary Address:   530 ‘B’ Street, 4th Floor       Address:   14040
Danielson Street     San Diego, CA 92101           Poway, CA 92064 Attention:  

Douglas S. Lambell, VP

     

Attention:

    Telecopier:  

(619) 230-3766

      Telecopier:   (858) 746-2830 Telephone:  

(619) 230-3029

     

Telephone:

                RESMED EAP HOLDINGS INC.             By:   /s/ Peter C. Farrell
           

Title:

  CEO                                   By:   /s/ David Pendarvis            

Title:

  Secretary            

Address:

 

14040 Danielson Street

Poway, CA 92064

                             

Attention:

               

Telecopier:

 

(858) 746-2830

           

Telephone:

       

 

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