EXHIBIT 10.02
CREDIT AND SECURITY AGREEMENT
(Ex-Im Bank Guaranteed Loan No. AP076760XX)
Dated as of September 28, 2000
LECTEC CORPORATION, a Minnesota corporation (the "Borrower"),
and XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used in this
Agreement have the meanings given in the Borrower Agreement. In addition, in the
following terms have the meanings given below:
"Accounts Receivable" shall mean all right, title and interest
of the Borrower now owned or hereafter acquired in (i) "accounts" (as
such term is defined in the UCC), other receivables, book debts and
other forms of obligations, whether arising out of a sale, lease or
other disposition of goods or other property, out of a rendering of
services, out of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or agreement; (ii)
rights in, to and under all purchase orders or receipts for goods or
services; (iii) rights to any goods represented or purported to be
represented by any of the foregoing (including unpaid sellers' rights
of rescission, replevin, reclamation and stoppage in transit and rights
to returned, reclaimed or repossessed goods); (iv) moneys due or to
become due to the Borrower under all purchase orders and contracts for
the sale or lease of goods or the performance of services or both by
the Borrower (whether or not yet earned by performance on the part of
the Borrower), including the proceeds of the foregoing; (v) any notes,
drafts, chattel paper, bond, letters of credit, insurance proceeds or
other instruments, documents and writings evidencing or supporting the
foregoing; and (vi) all collateral security and guarantees of any kind
given by any other Person with respect to any of the foregoing; whether
created, generated or earned by the Borrower or by some other Person
who subsequently transfers such Person's interest to the Borrower,
whether or not already earned by performance, and howsoever evidenced;
together with all other rights and interests (including all Liens)
which the Borrower may at any time have by law or agreement against any
account debtor or other obligor obligated to make any payment or
against any property of such account debtor or other obligor; and
including all rights to payment in the nature of general intangibles.
"Advance" has the meaning given in Section 2.1.
"Affiliate" or "Affiliates" means LecTec International
Corporation, a corporation organized under the laws of the U.S. Virgin
Islands, and any Person controlled by, controlling or under common
control with the Borrower, including (without limitation) any
subsidiary of the Borrower. For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Credit And Security Agreement, as
amended, supplemented and restated from time to time.
"Availability" means the least of:
(a) the difference of (i) the Borrowing Base and (ii) the
outstanding principal balance of the Advances; or
(b) the difference of (i) the Maximum Amount and (ii) the
outstanding principal balance of the Advances and
(B); or
(c) the difference of $2,800,000 and the outstanding
principal balance of the WFBCI Advances.
"Borrower Agreement" means the Borrower Agreement of even date
herewith by and between the Borrower and the Lender in the form
attached hereto as Exhibit B.
"Borrowing Base" means, at any time and subject to change from
time to time in the Lender's sole discretion, 90% of Eligible
Export-Related Accounts Receivable.
"Borrowing Base Certificate" means a certificate,
substantially in the form attached hereto as Exhibit D, executed by the
Borrower and accepted by the Lender.
"Business Day" means any day on which the Federal Reserve Bank
of New York is open for business.
"Buyer" shall mean a Person that has entered into one or more
Export Orders with the Borrower.
"Closing Date" means the date of this Agreement.
"Collateral" means all Accounts, Equipment, General
Intangibles, Inventory and Investment Property, together with (i) all
other collateral described in any Security Document, (ii) all
substitutions and replacements for and products of any of the foregoing
property, (iii) all sums on deposit in the Special Account, (iv) in the
case of all tangible property, together with (A) all accessions,
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any such goods, and
(B) all warehouse receipts, bills of
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lading and other documents of title now or hereafter covering such
goods, and (v) all proceeds of any and all of the foregoing property.
"Collateral Account" has the meaning given in the U.S. Dollar
Collateral Account Agreement (the "U.S. Dollar Collateral Account" and
the Multi-Currency Collateral Account Agreement (the "Multi-Currency
Collateral Account").
"Collateral Account Agreements" means the Collateral Account
Agreement of even date herewith by and among the Borrower, Xxxxx Fargo
Bank Minnesota, National Association and the Lender (the "U.S. Dollar
Collateral Account Agreement") and the Collateral Account Agreement of
even date herewith by and among the Borrower, Xxxxx Fargo Bank
Minnesota, N.A.--Grand Cayman Branch and the Lender (the
"Multi-Currency Collateral Account Agreement").
"Costs" means all expenditures or obligations incurred and all
assets expended in the manufacture or provision of Items.
"Country Limitation Schedule" shall mean the schedule
published from time to time by Ex-Im Bank and provided to the Borrower
by the Lender which sets forth on a country by country basis whether
and under what conditions Ex-Im Bank will provide coverage for the
financing of export transactions to countries listed therein.
"Credit Facility" means the credit facility made available to
the Borrower pursuant to Article II.
"Debarment Regulations" shall mean, collectively, (i) the
Governmentwide Debarment and Suspension (Nonprocurement) regulations
(Common Rule), 53 Fed. Reg. 19204 (May 26, 1988), (ii) Subpart 9.4
(Debarment, Suspension, and Ineligibility) of the Federal Acquisition
Regulations, 48 C.F.R. 9.400-9.409 and (iii) the revised Governmentwide
Debarment and Suspension (Nonprocurement) regulations (Common Rule), 60
Fed. Reg. 33037 (June 26, 1995).
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the
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date the Lender notifies the Borrower in writing that such Default or
Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to two (2%) over the
Floating Rate, which rate shall change when and as the Floating Rate
changes.
"Dollars" or "$" shall mean the lawful currency of the United
States.
"Eligible Export-Related Accounts Receivable" means an
Export-Related Account Receivable excluding, however any Export-Related
Account Receivable:
(i) that does not arise from the sale of Items in the
ordinary course of the Borrower's business;
(ii) that is not subject to a valid, perfected first
priority Lien in favor of the Lender;
(iii) as to which any covenant, representation or
warranty contained in the Loan Documents with respect to such
Account Receivable has been breached;
(iv) that is not owned by the Borrower or is subject
to any right, claim or interest of another Person other than
the Liens in favor of the Lender and the Servicer;
(v) with respect to which an invoice has not been
sent;
(vi) that arises from the sale of defense articles or
defense services;
(vii) that is due and payable from a Buyer located in
a country with which Ex-Im Bank is prohibited from doing
business as designated in the Country Limitation Schedule;
(viii) that does not comply with the requirements of
the Country Limitation Schedule;
(ix) that is due and payable more than ninety (90)
days from the earlier of the date of the invoice or the
shipment date;
(x) that is not paid within sixty (60) calendar days
from its original due date, unless it is insured through Ex-Im
Bank export credit insurance for comprehensive commercial and
political risk, or through Ex-Im Bank approved private
insurers for comparable coverage, in which case it is not paid
within ninety (90) calendar days from its due date;
(xi) that arises from a sale of goods to or
performance of services for an employee of the Borrower, a
stockholder of the Borrower, a subsidiary of the Borrower, a
Person with a controlling interest in the Borrower or a Person
which shares common controlling ownership with the Borrower;
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(xii) that is backed by a letter of credit unless the
Items covered by the subject letter of credit have been
shipped;
(xiii) that the Lender or Ex-Im Bank, in its
reasonable judgment, deems uncollectible for any reason;
(xiv) that is due and payable in a currency other
than Dollars, except as may be approved in writing by Ex-Im
Bank;
(xv) that is due and payable from a military Buyer,
except as may be approved in writing by Ex-Im Bank;
(xvi) that does not comply with the terms of sale set
forth in Section 7 of the Loan Authorization Agreement;
(xvii) that is due and payable from a Buyer who (A)
applies for, suffers, or consents to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its
property or calls a meeting of its creditors, (B) admits in
writing its inability, or is generally unable, to pay its
debts as they become due or ceases operations of its present
business, (C) makes a general assignment for the benefit of
creditors, (D) commences a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (E)
is adjudicated as bankrupt or insolvent, (F) files a petition
seeking to take advantage of any other law providing for the
relief of debtors, (G) acquiesces to, or fails to have
dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy laws, or (H) takes any
action for the purpose of effecting any of the foregoing;
(xviii) that arises from a xxxx-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any
other repurchase or return basis or is evidenced by chattel
paper;
(xix) for which the Items giving rise to such Account
Receivable have not been shipped or the services giving rise
to such Account Receivable have not been performed by the
Borrower or the Account Receivable otherwise does not
represent a final sale;
(xx) that is subject to any offset, deduction,
defense, dispute, or counterclaim or the Buyer is also a
creditor or supplier of the Borrower or the Account Receivable
is contingent in any respect or for any reason;
(xxi) for which the Borrower has made any agreement
with the Buyer for any deduction therefrom, except for
discounts or allowances made in the ordinary course of
business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value
of each respective invoice related thereto;
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(xxii) for which any of the Items giving rise to such
Account Receivable have been returned, rejected or
repossessed;
(xxiii) to the extent it includes any finance
charges, service charges, taxes, discounts, credits,
allowances and Retainages;
(xxiv) that arise from the sale of Items containing
less than fifty percent (50%) US Content;
(xxv) that arise from the sale of Items containing
any Foreign Content not incorporated into such Items in the
US;
(xxvi) that arise from the sale of any Items to be
used in the construction, alteration, operation or maintenance
of nuclear power, enrichment, reprocessing, research or heavy
water production facilities; or
(xxvii) that are otherwise deemed ineligible for any
reason by the Lender or Ex-Im Bank in its discretion.
"Equipment" means all of the Borrower's "equipment", as such
term is defined in the UCC whether now or hereafter owned, including
all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically the goods
described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower;
"Event of Default" has the meaning specified in Section 7.1.
"Ex-Im Bank" or "Eximbank" means the Export-Import Bank of the
United States.
"Export Order" shall mean a written export order or contract
for the purchase by the Buyer from the Borrower of any of the Items.
"Export-Related Accounts Receivable" shall mean that portion
of Accounts Receivable consisting of the unpaid obligations of Buyers
arising from the sale of Items which is due and payable to the Borrower
in the United States.
"Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus three percent (3%), which annual rate shall change when
and as the Prime Rate changes.
"Foreign Content" means that portion of the cost of an Item
arising from materials which are not of US origin or from labor and
services not performed in the US.
"Funding Date" has the meaning given in Section 2.1.
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"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including all present and future contract rights,
patents, patent applications, copyrights, trademarks, trade names,
trade secrets, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use the
Borrower's name, and the goodwill of the Borrower's business; and
"GAAP" means generally accepted accounting principles issued
by the American Institute of Certified Public Accountants, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.2.
"Inventory" means all of the Borrower's inventory (as such
term is defined in the UCC), now or hereafter owned or acquired by the
Borrower, wherever located, including all inventory, merchandise, goods
and other personal property which are held by or on behalf of the
Borrower for sale or lease or are furnished or are to be furnished
under a contract of service or which constitute raw materials, whole
goods, spare parts or components, work in process or materials used or
consumed or to be used or consumed in the Borrower's business or in the
processing, production, packaging, promotion, delivery or shipping of
the same, including other supplies.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities;
"ISP" shall mean the International Standby Practices-ISP98,
International Chamber of Commerce Publication No. 590 and any
amendments and revisions thereof.
"Items" shall mean the finished goods or services which are
intended for export from the United States, as specified in Section
4(A) of the Loan Authorization Agreement.
"Lien" shall mean any mortgage, security deed or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, security title, easement or
encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including
any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement perfecting a
security interest under the UCC or comparable law of any jurisdiction)
by which property is encumbered or otherwise charged.
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"Loan Authorization Agreement" means the Loan Authorization
Notice attached as Exhibit E hereto.
"Loan Documents" means this Agreement, the Note, the Borrower
Agreement, the Loan Authorization Agreement, the Security Documents and
the Disclosure by the Borrower in favor of the Lender of even date
herewith.
"Lockbox" has the meaning given in Section 6.7.
"Master Guaranty" means that certain Master Guaranty Agreement
No. MN-MGA-99-001, dated as of July 20, 1999, by and between the Lender
and Ex-Im Bank.
"Maturity Date" means November 22, 2001
"Maximum Amount" means $800,000.
"Note" means the Borrower's revolving promissory note, payable
to the order of the Lender in substantially the form of Exhibit A
hereto.
"Obligations" means each and every debt, liability and
obligation of every type and description which the Borrower may now or
at any time hereafter owe to the Lender, all other indebtedness arising
under this Agreement, the Noteor any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or
hereafter entered into.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of
even date herewith, as the same may hereafter be amended, supplemented
or restated from time to time.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Permitted Liens" has the meaning set forth in Section 6.5.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability partnership, joint venture, trust,
unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or
government (whether national, federal, provincial, state, county, city,
municipal or otherwise, including any instrumentality, division,
agency, body or department thereof), and shall include such Person's
successors and assigns.
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"Premises" means all premises where the Borrower conducts its
business and has any rights of possession.
"Prime Rate" means the rate of interest publicly announced
from time to time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if
such bank ceases to announce a rate so designated, any similar
successor rate designated by the Lender.
"Prohibited Country" means any country in which Ex-Im Bank
coverage is not available for commercial reasons or in which Ex-Im Bank
is legally prohibited from doing business, as designated in the Country
Limitation Schedule.
"Security Documents" means this Agreement, the Collateral
Account Agreement, and the Patent and Trademark Security Agreement,
each of even date herewith.
"Security Interest" has the meaning given in Section 3.1.
"Servicer" means WFBCI.
"Tangible Net Worth" means the difference between (i) the
tangible assets of the Borrower, which, in accordance with GAAP are
tangible assets, after deducting adequate reserves in each case where,
in accordance with GAAP, a reserve is proper and (ii) all Debt of the
Borrower; provided, however, that notwithstanding the foregoing in no
event shall there be included as such tangible assets patents,
trademarks, trade names, copyrights, licenses, goodwill, receivables
from Affiliates, directors, officers or employees, prepaid expenses,
deposits, deferred charges or treasury stock or any securities or Debt
of the Borrower or any other securities unless the same are readily
marketable in the US or entitled to be used as a credit against federal
income tax liabilities, non-compete agreements and any other assets
designated from time to time by the Lender, in its sole discretion.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of Minnesota.
"UCP " shall mean the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 and any amendments and revisions thereof.
"US" means the United States of America.
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"US Content" means that portion of the cost of an Item arising
from materials which are of US origin or from labor and services
performed in the US.
"WFBCI" means Xxxxx Fargo Business Credit, Inc., a Minnesota
corporation.
"WFBCI Credit Agreement" means that certain Credit and
Security Agreement dated November 22, 1999, by and between the Borrower
and WFBCI, as the same may hereafter be amended, supplemented or
restated from time to time.
"WFBCI Credit Facility" means the credit facility extended to
the Borrower pursuant to the WFBCI Credit Agreement.
"WFBCI Advances" means the Advances as defined in the WFBCI
Credit Agreement, or as the context requires, the outstanding principal
balance thereof.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Advances. The Lender agrees to make advances (each
an "Advance") to the Borrower from time to time from the date all of the
conditions set forth in Section 4.1 are satisfied (the "Funding Date") to the
Termination Date, on the terms and subject to the conditions herein set forth,
to provide the Borrower with working capital to fulfill Export Orders. The
Lender shall have no obligation to make an Advance to the extent that the amount
of the requested Advance exceeds Availability. The Borrower's obligation to pay
the Advances shall be evidenced by the Note and shall be secured by the
Collateral. Within the limits set forth in this Section 2.1, the Borrower may
request Advances, prepay, and request additional Advances.
Section 2.2 Requests for Advances. The Borrower shall make
each request for an Advance to the Lender before 11:00 a.m. (Minneapolis,
Minnesota time) of the day of the requested Advance. Requests for Advances may
be made in writing or by telephone. The Lender will not consider any such
request unless the Lender has received from the Borrower, among other things, a
Borrowing Base Certificate as of a date not more than thirty (30) days before
the date of the requested Advance. Whenever the Borrower makes a request for an
Advance based on Eligible Export Inventory, it shall also indicate in its books
and records that such Inventory has been segregated for export and shall no
longer be considered Eligible Inventory under the WFBCI Credit Facility. Any
request for an Advance shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of the date
of the request.
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Section 2.3 Interest; Minimum Interest; Default Interest. All
interest shall be payable monthly in arrears on the first day of the month and
on the Termination Date.
(a) NOTE. Except as set forth in subsection (b), (c) and (d),
the outstanding principal balance of the Advances shall bear interest
at the Floating Rate.
(b) MINIMUM INTEREST. Notwithstanding the interest payable
pursuant to Section 2.3(a), the Borrower shall pay to the Lender
interest of not less than the applicable amount shown below during the
periods shown below (the "Minimum Interest Charge") during the term of
this Agreement (provided, however, that the Minimum Interest Charge
hereunder plus the Minimum Interest Charge under the WFBCI Credit
Facility shall not exceed the amounts set forth below), and the
Borrower shall pay any deficiency between the Minimum Interest Charge
and the amount of interest otherwise calculated under Sections 2.3(a)
and 2.3(c) on the date and in the manner provided in this Section 2.3:
Period Minimum Annual Interest
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Through 11/21/00 $80,000
Each 11/22 through the following 11/21 thereafter $95,000
(c) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(d) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
Section 2.4 Fees.
(a) APPLICATION FEE. The Borrower shall reimburse the Lender
for the $100 application fee payable to Ex-Im Bank in connection with
the Master Guaranty.
(b) ANNUAL FACILITY FEE. Upon the execution of this Agreement
and on each anniversary thereof, the Borrower shall pay the Lender a
fully earned and non-refundable facility fee of $12,000
(c) UNUSED LINE FEE. For the purposes of this Section 2.9(c),
"Unused Amount" means the Maximum Amount reduced by outstanding
Advances. The Borrower shall pay to the Lender an unused line fee at
the rate of one-quarter (.25%) per annum on the average daily Unused
Amount from the Closing Date to and including the Termination Date, due
and payable monthly
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in arrears on the first day of the month and on the Termination Date,
provided that the sum of the Unused Fee and the unused line fee under
the WFBCI Credit Facility shall not exceed one-quarter percent (.25%)
per annum times the difference of (i) $2,800,000 and (ii) the average
of the sum of the daily outstanding principal balance of the Advances
and the WFBCI Advances plus the L/C Amount under the WFBCI Credit
Agreement.
(d) AUDIT FEES. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently per $62.50 per hour per
auditor), together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection; provided that so
long as WFBCI is the Servicer the Borrower shall not have to reimburse
such costs and expenses to the extent it has already done so pursuant
to the WFBCI Credit Facility.
Section 2.5 Capital Adequacy; Increased Costs and Reduced
Return. If any Related Lender determines at any time that its Return has been
reduced as a result of any Rule Change, such Related Lender may require the
Borrower to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change. For purposes of this Section 2.10:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(c) "Return", for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital
requirements. Return may be calculated for each calendar quarter and
for the shorter period between the end of a calendar quarter and the
date of termination in whole of this Agreement.
(d) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the Closing Date, but the term does not include
any changes in applicable requirements that on the Closing Date are
scheduled to take place under the existing Capital Adequacy Rules or
any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
Related Lender.
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(e) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.6 Termination by the Borrower. The Borrower may
terminate this Agreement at any time upon 30 days' prior written notice to the
Lender so long as no Letter of Credit has been issued and is outstanding with an
expiration date after such date, and, subject to payment and performance of all
Obligations, may obtain any release or termination of the Security Interest to
which the Borrower is otherwise entitled by.
Section 2.7 Mandatory Prepayment. Without notice or demand, if
(i) the Borrowing Base shall at any time be less than the outstanding principal
balance of the Advances, the Borrower shall immediately prepay the Advances to
the extent necessary to eliminate such deficiency or increase the Borrowing Base
by furnishing additional Collateral to the Lender in form and amount
satisfactory to the Lender and Ex-Im Bank.
Section 2.8 Advances Without Request. The Borrower hereby
authorizes the Lender, in its discretion, at any time or from time to time
without the Borrower's request, to make Advances to pay accrued interest, fees,
uncollected items that have been applied to the Obligations, and other
Obligations due and payable from time to time.
Section 2.9 Use of Proceeds. The Borrower shall use the
proceeds of Advances for working capital to finance the manufacture, assembly,
production or purchase and subsequent sale of Items only. Without limiting the
generality of the foregoing, the Borrower shall not use any proceeds of Advances
for any purpose prohibited by the Borrower Agreement or (i) to acquire fixed
assets or capital goods for use in the Borrower's business; (ii) to acquire,
equip or rent commercial space overseas; (iii) to employ non-US residents in
offices outside the US; (iv) to serve as a retainage or warranty bond; or (v) to
repay pre-existing Debt or future indebtedness of the Borrower unrelated to the
Advances.
Section 2.10 Facility Subject to Ex-Im Bank Rules. The
Borrower acknowledges that the Lender is willing to make the Credit Facility
available to the Borrower because the Ex-Im Bank is willing to guaranty payment
of a significant portion of the Obligations pursuant to the Master Guaranty.
Accordingly, in the event of any inconsistency among the Loan Documents and the
Master Guaranty or related documents, the provision that is the more stringent
on the Borrower shall control.
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ARTICLE III
SECURITY INTEREST
Section 3.1 Grant of Security Interest. The Borrower hereby
grants to the Lender a security interest (the "Security Interest") in the
Collateral as security for the payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (either before or after the occurrence of
an Event of Default) notify any account debtor or other Person obligated to pay
the amount due that such right to payment has been assigned or transferred to
the Lender for security and shall be paid directly to the Lender. The Borrower
will join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the Lender may, but need not, as the Borrower's agent and attorney-in-fact,
notify the US Postal Service to change the address for delivery of the
Borrower's mail to any address designated by the Lender, otherwise intercept the
Borrower's mail, and receive, open and dispose of the Borrower's mail, applying
all Collateral as permitted under this Agreement and holding all other mail for
the Borrower's account or forwarding such mail to the Borrower's last known
address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take exclusive possession of the Premises at any time during
any Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender in good faith considers related.
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(c) The Lender's right to hold the Premises shall terminate
upon the earlier of payment in full of all Obligations, or final sale
or disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession or use of any of the
Premises; provided, however, that if the Lender does pay or account for
any rent or other compensation for the possession or use of any of the
Premises, the Borrower shall reimburse the Lender promptly for the full
amount thereof.
Section 3.5 License. Without limiting the generality of the
Patent and Trademark], the Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all trademarks,
franchises, trade names, copyrights and patents of the Borrower for the purpose
of selling, leasing or otherwise disposing of any or all Collateral following an
Event of Default.
Section 3.6 Filing a Copy. A carbon, photographic, or other
reproduction of this Agreement or of a financing statement signed by the
Borrower is sufficient as a financing statement.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Lender's Willingness
to Consider Making the Initial Advance and Issuing the Initial Letter of Credit.
The Lender's willingness to consider making the initial Advance or to issue the
initial Letter of Credit hereunder shall be subject to the condition precedent
that the Lender shall have received all of the following, each in form and
substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) The SBA/Ex-Im Bank Joint Application, properly completed
and executed by the Borrower.
(d) The Borrower Agreement, properly executed by the Borrower.
(e) A properly completed and executed Borrowing Base
Certificate as of a date not more than five (5) Business Days before
the date of this Agreement.
(f) An Exceptions Approval Letter, properly signed by Ex-Im
Bank.
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(g) A participation and servicing agreement, properly signed
by the Servicer.
(h) Copies of the Borrower's audited financial statements with
full disclosure.
(i) Copies of the Borrower's federal tax returns for the last
year together with all schedules thereto.
(j) A true and correct copy of any and all leases pursuant to
which the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease in favor of the
Lender and WFBCI.
(k) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, in the case of any goods held
by such Person for resale, (i) a consignee's acknowledgement and waiver
of liens, (ii) UCC financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC
searches showing that no other secured party has filed a financing
statement against such Person and covering property similar to the
Borrower's other than the Borrower, or if there exists any such secured
party, evidence that each such secured party has received notice from
the Borrower and the Lender sufficient to protect the Borrower's and
the Lender's interests in the Borrower's goods from any claim by such
secured party.
(l) An acknowledgement and waiver of liens from each warehouse
in which the Borrower is storing Inventory in favor of the Lender and
WFBCI.
(m) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, (i) an acknowledgement and
waiver of liens from each subcontractor who has possession of the
Borrower's goods from time to time, (ii) UCC financing statements
sufficient to protect the Borrower's and the Lender's interests in such
goods, and (iii) UCC searches showing that no other secured party has
filed a financing statement covering such Person's property other than
the Borrower, or if there exists any such secured party, evidence that
each such secured party has received notice from the Borrower and the
Lender sufficient to protect the Borrower's and the Lender's interests
in the Borrower's goods from any claim by such secured party.
(n) An acknowledgment and agreement from each licensor in
favor of the Lender, together with a true, correct and complete copy of
all license agreements in favor of the Lender and WFBCI.
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(o) The U.S. Dollar Collateral Account Agreement, properly
executed by the Borrower and Xxxxx Fargo Bank Minnesota, National
Association, and the Multi-Currency Collateral Account Agreement,
properly executed by the Borrower and Xxxxx Fargo Bank Minnesota,
N.A.--Grand Cayman Branch.
(p) The Patent and Trademark Security Agreement, properly
executed by the Borrower.
(q) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against the Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(r) A certificate of the Borrower's secretary or assistant
secretary certifying as to (i) the resolutions of the Borrower's
directors and if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) the Borrower's
articles of incorporation and bylaws, and (iii) the signatures of the
Borrower's officers or agents authorized to execute and deliver the
Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's behalf.
(s) A current certificate issued by the Secretary of State of
Minnesota, certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Minnesota.
(t) Evidence that (i) the Borrower is duly licensed or
qualified to transact business in all jurisdictions where the character
of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary, (ii)
it has obtained and maintains all necessary export licenses.
(u) A certificate of one of the Borrower's officers
confirming, in his personal capacity, the representations and
warranties set forth in Article V and in the Disclosure.
(v) An opinion of counsel to the Borrower, addressed to the
Lender.
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(w) Certificates of the insurance required hereunder, with all
hazard insurance containing a the Lender's loss payable endorsement in
the Lender's favor and with all liability insurance naming the Lender
as an additional insured.
(x) Payment of the fees and commissions due through the date
of the initial Advance and expenses incurred by the Lender through such
date and required to be paid by the Borrower under Sections 2.4(a), (b)
and 8.3, including all legal expenses incurred through the Closing
Date.
(y) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances. The Lender
will not consider any request for an Advance unless on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance, as the case may be, which constitutes a Default or
an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Name; Locations; Tax ID No.; Subsidiaries. During
its existence, the Borrower has done business solely under its corporate name as
set forth herein and under such trade names and such other corporate names as
disclosed to the Lender in writing before this Agreement is signed and
delivered. The address of the Borrower's chief executive office and principal
place of business and its federal tax identification number are set forth below
its signature to this Agreement. All Inventory is located at that location or at
one of the other locations disclosed to the Lender in writing before this
Agreement is signed and delivered. The Borrower has no subsidiaries except as
disclosed to the Lender in writing before this Agreement is signed and
delivered.
Section 5.2 Financial Condition; No Adverse Change. Before
this Agreement was signed and delivered, the Borrower furnished the Lender
certain of its audited and unaudited financial statements certified by the
Borrower. Those statements fairly present the Borrower's financial condition as
of the dates indicated therein and the results of its operations for the periods
then ended and were prepared in accordance with generally accepted accounting
principles. Since the date of the most recent financial statements, there has
been no material adverse change in the business, properties or condition
(financial or otherwise) of the Borrower.
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Section 5.3. Suspension and Debarment, etc. On the date of
this Agreement neither the Borrower nor its Principals are (a) debarred,
suspended, proposed for debarment with a final determination still pending,
declared ineligible or voluntarily excluded (as such terms are defined under any
of the Debarment Regulations referred to below) from participating in
procurement or nonprocurement transactions with any United States federal
government department or agency pursuant to any of the Debarment Regulations or
(b) indicted, convicted or had a civil judgment rendered against the Borrower or
any of its Principals for any of the offenses listed in any of the Debarment
Regulations. Unless authorized by Ex-Im Bank, the Borrower will not knowingly
enter into any transactions in connection with the Items with any person who is
debarred, suspended, declared ineligible or voluntarily excluded from
participation in procurement or nonprocurement transactions with any United
States federal government department or agency pursuant to any of the Debarment
Regulations. The Borrower will provide immediate written notice to the Lender if
at any time it learns that the certification set forth in this Section 5.3 was
erroneous when made or has become erroneous by reason of changed circumstances.
ARTICLE VI
COVENANTS OF THE BORROWER
So long as the Advances or any amount owing to the Lender
hereunder shall remain unpaid, the Borrower will comply with the requirements in
this Article, unless the Lender shall otherwise consent in writing.
Section 6.1 Reporting Requirements. The Borrower will deliver
to the Lender each of the following in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 120 days
after the end of each fiscal year of the Borrower, the Borrower's
audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Lender, which annual financial statements shall
include the Borrower's balance sheet as at the end of such fiscal year
and the related statements of the Borrower's income, retained earnings
and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that
in making the investigations necessary for said opinion they obtained
no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.9, and (iii) a
certificate of the Borrower's chief financial officer stating that such
financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder and, if so, stating in reasonable
detail the facts with respect thereto;
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(b) as soon as available and in any event within 15 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the
end of and for such month and for the year to date period then ended,
prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrower's chief financial officer, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Section
6.9;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable, and a calculation of the
Borrower's Accounts and Eligible Accounts as at the end of such month
or shorter time period;
(d) at least 30 days after the beginning of each fiscal year
of the Borrower, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the
Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as
the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower or which seek
a monetary recovery against the Borrower in excess of $50,000;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event;
(g) as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrower proposes to take with respect
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thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Borrower's chief financial
officer setting forth details as to such failure and the action which
the Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (A) any of the
following items exceeding $50,000 individually (i) any disputes or
claims by the Borrower's customers; (ii) credit memos; (iii) any goods
returned to or recovered by the Borrower; and (B) any change in the
persons constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
(o) as soon as available and in any event within fifteen (15)
days after the end of each month, a properly completed Borrowing Base
Certificate as at the end of such month, signed by the Borrower's chief
financial officer;
(p) as soon as available and in any event within fifteen (15)
days after the end of each month inventory certifications as at the end
of such month;
(q) as soon as available and in any event within three (3)
days after they are due, written notice of any and all taxes due but
not paid; and
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(r) promptly upon knowledge thereof, notice of any Items (and
the corresponding invoice amount) which are articles, services, or
related technical data that are listed on the United States Munitions
List (part 121 of title 22 of the Code of Federal Regulations).
So long as the Servicer is actively servicing the Loan Documents on behalf of
the Lender as described in Section 8.2, the Borrower shall provide to the
Servicer all reports required under this Section 6.1.
Section 6.2 Inspection. Upon the Lender's request, the
Borrower will permit any officer, employee, attorney, agent or accountant for
the Lender to audit, review, make extracts from or copy any and all records of
the Borrower and to inspect the Collateral at all times during ordinary business
hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send, or request the Borrower to send, requests for
verification of Accounts or notices of assignment to account debtors and other
obligors. The Borrower authorizes the Lender to verify Accounts as frequently as
daily and the Borrower understands the Lender intends to do so by telephone
and/or in writing.
Section 6.4 Account Debtors to Pay to Designated Accounts;
Pledge of Accounts. The Borrower shall instruct all of its Account debtors
paying for Items by check denominated in Canadian Dollars to make such payments
directly to a lockbox under the Lender's control, to be established with Royal
Bank of Canada for transfer to the Multi-Currency Collateral Account. Borrower
agrees to execute from time-to-time any documentation reasonably required by
Royal Bank of Canada with respect to such lockbox. The Borrower shall instruct
all of its Account debtors outside the US (except debtors making payments by
check denominated in Canadian Dollars) to make all payments for Items directly
by wire transfer to the U. S. Dollar Collateral Account. The Borrower hereby
pledges to, and grants the Lender a security interest in, all funds on deposit
in the Multi-Currency Collateral Account and in the U.S. Dollar Collateral
Account from time to time and all proceeds thereof, to secure payment of all of
the Borrower's obligations to the Lender whether now existing or hereafter
arising.
Section 6.5 No Other Liens. The Borrower will not create,
incur or suffer to exist any mortgage, deed of trust, pledge, lien, security
interest, assignment or transfer upon or of any of its assets, now owned or
hereafter acquired, to secure any indebtedness; excluding, however, from the
operation of the foregoing, the following (collectively, "Permitted Liens"):
(a) Liens for taxes, assessments or other governmental charges
or levies not delinquent, or, being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have
been taken by Borrower, provided, that, the Lien shall have no effect
on the priority of the
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Liens in favor of Lender or the value of the assets in which Lender has
such a Lien and a stay of enforcement of any such Lien shall be in
effect;
(b) deposits or pledges securing obligations under worker's
compensation, unemployment insurance, social security or public
liability laws or similar legislation;
(c) deposits or pledges securing bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of Borrower's business;
(d) judgment Liens that have been stayed or bonded;
(e) mechanics', workers', materialmen's or other like Liens
arising in the ordinary course of Borrower's business with respect to
obligations which are not due;
(f) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof, provided, that, any
such Lien shall not encumber any other property of Borrower;
(g) security interests being terminated concurrently with the
execution of the Loan Documents;
(h) Liens in favor of Lender securing the Loan Facility
Obligations;
(i) Liens disclosed in Section 6(D) of the Loan Authorization
Agreement
(j) Liens securing the WFBCI Advances; and
(k) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted, provided, however, that the Borrower
expressly agrees that it will not mortgage its real estate locally
known as 00000 Xxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx.
Section 6.6 Insurance. The Borrower will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
a the Lender's loss payable clause in favor of the Lender to the extent of its
interest.
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Section 6.7 Lockbox. Upon the Lender's request, the Borrower
will irrevocably direct all present and future Account debtors and other Persons
obligated to make payments on Receivables to make such payments directly to a
special lockbox, including without limitation the lockbox described in Section
6.4 (the "Lockbox") to be under the Lender's control.
Section 6.9 Minimum Tangible Net Worth. The Borrower will
maintain, at all times its Tangible Net Worth, determined as at the end of each
month, at an amount not less than $1.00.
Section 6.11 No Sale or Transfer of Collateral and Other
Assets. The Borrower will not sell, lease, assign, transfer or otherwise dispose
of (i) the stock of any subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to anyone other than the sale of
Inventory in the ordinary course of business.
Section 6.12 Consolidation and Merger; Asset Acquisition. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 6.13 Place of Business; Name; Organizational
Structure. The Borrower will not change the location of its chief executive
office or principal place of business from that disclosed pursuant to Section
5.1. The Borrower will not permit any tangible Collateral to be located in any
state or area in which a financing statement covering such Collateral would be
required to be, but has not in fact been, filed in order to perfect the Security
Interest. The Borrower will not change its name or organizational structure.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 7.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of the Obligations that becomes due
and payable;
(b) Any payment default shall occur under any agreement (other
than this Agreement) between the Borrower and the Lender, or the Lender
shall accelerate or demand payment of any obligations (other than
arising under this Agreement) owed to it by the Borrower, or the Lender
shall begin exercising its remedies against the Borrower;
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(d) Any payment default shall occur under any agreement
between the Borrower and the Servicer, or the Servicer shall accelerate
or demand payment of any obligations owed to it by the Borrower, or the
Servicer shall begin exercising its remedies against the Borrower;
(e) Ex-Im Bank shall repudiate, purport to revoke or fail to
perform its obligations under the Master Guaranty;
(f) Any material litigation is commenced against the Borrower
and is not withdrawn within thirty (30) calendar days of filing or any
levy, assessment, attachment, seizure or Lien, other than a Permitted
Lien, exists against any of the Collateral which is not stayed or
lifted within thirty (30) calendar days;
(g) The Borrower (i) applies for, consents to or suffers the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property or calls a meeting of its creditors,
(ii) admits in writing its inability, or is generally unable, to pay
its debts as they become due or ceases operations of its present
business, (iii) makes a general assignment for the benefit of
creditors, (vi) commences a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as
bankrupt or insolvent, (vi) files a petition seeking to take advantage
of any other law providing for the relief of debtors, (vii) acquiesces
to, or fails to have dismissed within thirty (30) days, any petition
filed against it in any involuntary case under such bankruptcy laws,
(viii) dissolves or (ix) takes any action for the purpose of effecting
any of the foregoing;
(h) any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its
terms;
(i) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in any Loan Document not
specifically addressed in this Section 7.1, which shall remain uncured
for 30 days after notice from the Lender.
Section 7.2 Rights and Remedies During any Default Period, the
Lender may exercise any or all of the following rights and remedies:
(a) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby
expressly waives) and the right to sell, lease or otherwise dispose of
any or all of the Collateral, and in connection therewith, the Borrower
will on demand assemble the Collateral and make it available to the
Lender at a place to be designated by the Lender which is reasonably
convenient to both parties;
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(b) the Lender may make demand upon the Borrower and,
forthwith upon such demand, the Borrower will pay to the Lender in
immediately available funds for deposit in the Special Account pursuant
to Section 2.5 an amount equal to the maximum aggregate amount
available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing thereunder; and
(c) The Lender may exercise any other rights and remedies
available to it by law or agreement.
The remedies provided hereunder are cumulative.
Section 7.3 Certain Notices. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8.1) at least 10
calendar days before the date of intended disposition or other action.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be (i)
personally delivered, (ii) sent by first class US mail, (iii) sent by overnight
courier of national reputation, or (iv) transmitted by telecopy, in each case
addressed or telecopied to the party to whom notice is being given at its
address or telecopy number as set forth below its signature to this Agreement.
Section 8.2 Servicing of Credit Facility.
(a) The Lender has requested that the Servicer service and
enforce the Loan Documents, make all Advances, cause all Letters of
Credit to be issued, and collect all Obligations on the Lender's behalf
and the Servicer has agreed to do so. The Borrower acknowledges and
accepts the Servicer's appointment as such.
(b) The Servicer shall have no duties or responsibilities to
the Borrower hereunder, but only to the Lender. Neither the Servicer
nor any of its officers, directors, employees or agents shall be liable
for any action taken or omitted by them hereunder or in connection
herewith, unless caused by its or their willful misconduct. The
Servicer's duties shall be mechanical and administrative in nature;
nothing in this Agreement, express or implied, is intended to or shall
be so construed as to impose upon the Servicer any obligations with
respect to the Loan Documents except as expressly set forth herein.
Neither the Borrower nor any Guarantor shall in any way
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be construed to be a third party beneficiary of any relationship
between the Servicer and the Lender.
(c) The Servicer shall be entitled to rely, and shall be fully
protected in relying, upon any communication whether written or oral
believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and, with respect to all legal matters
pertaining to this Agreement and its duties hereunder, upon advice of
counsel selected by it.
(d) The Borrower shall be entitled to rely upon any
communication whether written or oral sent or made by the Servicer for
and on behalf of the Lender with respect to all matters pertaining to
the Loan Documents and the Borrower's duties and obligations hereunder,
unless and until the Borrower receives written notice from the Lender
that the Servicer is no longer servicing this credit facility.
(e) The Servicer shall hold and be the custodian of the Loan
Documents on the Lender's behalf for so long as the Servicer is
servicing the Credit Facility.
Section 8.3 Costs and Expenses. The Borrower agrees to pay on
demand all costs and expenses (including legal fees) incurred by the Lender in
connection with the Loan Documents, any Letters of Credit, and any other
document or agreement related thereto, and the transactions contemplated hereby,
including wire transfer and ACH charges, the cost of credit reports, overadvance
fees, the expense of any auditors and fees and expenses in enforcing this
Agreement.
Section 8.4 Indemnity. In addition to the payment of expenses
pursuant to Section 8.3, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement and the
other Loan Documents or the making of the Advances;
(ii) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with any investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred
by or asserted against any such Indemnitee, in any manner
related to or arising out of or in connection with the making
of the
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Advances, this Agreement and the other Loan Documents or the
use or intended use of the proceeds of the Advances; and
(iii) any claim, loss or damage to which any
Indemnitee may be subjected as a result of any violation of
any federal, state, local or other governmental statute,
regulation, law, or ordinance dealing with the protection of
human health and the environment.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, then the Borrower or counsel
designated by the Borrower and satisfactory to the Indemnitee, will resist and
defend such action, suit or proceeding to the extent and in the manner directed
by the Indemnitee. Each Indemnitee will use its best efforts to cooperate in the
defense of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.4 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder. If Ex-Im Bank makes
payment of a claim to the Lender under the Master Guaranty in connection with
the Credit Facility, Ex-Im Bank may assume all rights and remedies of the Lender
under the Loan Documents and may enforce any such rights or remedies against the
Borrower, the Collateral and any Guarantors. the Borrower shall hold Ex-Im Bank
and the Lender harmless from and indemnify them against any and all liabilities,
damages, claims, costs and losses incurred or suffered by either of them
resulting from (a) any materially incorrect certification or statement knowingly
made by the Borrower or its agent to Ex-Im Bank or the Lender in connection with
the Loan Facility, this Agreement, the Loan Authorization Agreement or any other
Loan Documents or (b) any material breach by the Borrower of the terms and
conditions of this Agreement, the Loan Authorization Agreement or any of the
other Loan Documents. the Borrower also acknowledges that any statement,
certification or representation made by the Borrower in connection with the Loan
Facility is subject to the penalties provided in Article 19 U.S.C. Section 1001.
Section 8.5 Binding Effect; Assignment; Counterparts;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the prior written consent of the
Lender. This Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors, the Lender, Norwest
Corporation, and all direct and indirect subsidiaries of Norwest Corporation,
may exchange any and all information they may have in their possession regarding
the Borrower and its Affiliates, and the Borrower
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waives any right of confidentiality it may have with respect to such exchange of
such information.
Section 8.7 Governing Law; Jurisdiction, Venue; Waiver of Jury
Trial. This Agreement and the Note shall be governed by and construed in
accordance with the laws (other than conflict laws) of the State of Minnesota.
Each party consents to the personal jurisdiction of the state and federal courts
located in the State of Minnesota in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with this Agreement shall be venued in either the District Court of Hennepin
County, Minnesota, or the United States District Court, District of Minnesota,
Fourth Division. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the date first above written.
XXXXX FARGO BANK MINNESOTA, LECTEC CORPORATION
NATIONAL ASSOCIATION
By /s/ Xxxxx X. Xxxxxx By /s/ Xxxxxxx Xxxxxx
------------------- ------------------
Xxxxx X. Xxxxxx Xxxxxxx Xxxxxx
Its Assistant Vice President Its Chief Financial Officer
Address: Address:
Sixth Street and Marquette Avenue 00000 Xxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxx, XX 00000
Telecopy No. 000-000-0000 Telecopy No. 000-000-0000
Federal Employer Identification No. Federal Employer Identification No.
00-0000000 00-0000000
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Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$800,000.00 Minneapolis, Minnesota
September 28, 2000
For value received, the undersigned, LECTEC CORPORATION, a Minnesota
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below) to the order of XXXXX FARGO BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "Lender"),
at its main office in Minneapolis, Minnesota, or at any other place designated
at any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of Eight Hundred
Thousand Dollars and No Cents ($800,000) or, if less, the aggregate unpaid
principal amount of all Advances made by the Lender to the Borrower under the
Credit And Security Agreement of even date herewith by and between the Lender
and the Borrower (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") together with interest on the
principal amount hereunder remaining unpaid from time to time (computed on the
basis of actual days elapsed in a 360-day year) from the date of the initial
Advance until this Note is fully paid at the rate from time to time in effect
under the Credit Agreement.
This Note is the Note as defined in the Credit Agreement and is subject
to the Credit Agreement.
LecTec Corporation
By
--------------------------
Xxxxxxx Xxxxxx
Its Chief Financial Officer
