Exhibit 10.59
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 29, 2000, is by and
between WTC INDUSTRIES, INC., a Delaware corporation, PENTAPURE INCORPORATED, a
Minnesota corporation, XXXXXX X. XXXX, XX. (collectively, the "Borrower" and
each a "Borrower", WTC Industries, Inc. and Pentapure Incorporated are each a
"Corporate Borrower" and Xxxxxx X. Xxxx, Xx. is "Klas"), and U.S. BANK NATIONAL
ASSOCIATION, a national banking association (the "Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the
following terms shall have the following respective meanings:
"Adjusted Eurodollar Rate": With respect to each day, the rate
(rounded upward, if necessary, to the next higher one hundredth of one percent)
determined by dividing the Eurodollar Rate for such date by 1.00 minus
Eurodollar Reserve Percentage.
"Advance": Any portion of the outstanding Revolving Loan, the
Klas Revolving Loan, and, during the Advancing Period (and thereafter unless the
Borrower elects to fix the rate of interest on the Term Loan), the Term Loan, as
to which one of the available interest rate options is applicable. An Advance
may be a Eurodollar Rate Advance or a Reference Rate Advance subject to the
other provisions of this Agreement.
"Advancing Period": As defined in Section 2.1(c).
"Applicable Margin": With respect to:
(a) Reference Rate Advances : -0.5%.
(b) Eurodollar Rate Advances: 2.0%.
(c) Eurodollar Rate Advances on the Term Loan: 2.50%.
"Board": The Board of Governors of the Federal Reserve System
or any successor thereto.
"Borrowing Base": As defined in Section 2.6.
"Borrowing Base Certificate": As defined in Section 2.6.
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which national banks are permitted
to be open at the location of the Lender.
"Closing Date": March __, 2000.
"Commitment Fees": As defined in Section 2.10.
"Commitments": The Revolving Commitment, the Klas Revolving
Commitment and the Term Loan Commitment.
"Debt Service Coverage Ratio": For any period of determination
with respect to the Corporate Borrower and the Subsidiaries, the ratio of
(a) EBITDA,
to
(b) the sum of interest expense and all required principal
payments with respect to Total Liabilities (including but not
limited to all payments with respect to capitalized lease
obligations of the Borrower),
in each case determined for said period in accordance with GAAP.
"Default": Any event which, with the giving of notice (whether
such notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"EBITDA": For any period of determination, the consolidated
net income of the Borrower before deductions for income taxes, interest expense,
depreciation and amortization, all as determined in accordance with GAAP.
"Eurodollar Business Day": A Business Day which is also a day
for trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"Eurodollar Rate": With respect to each day, the rate per
annum at which United States dollar deposits having a maturity of thirty days
are offered to the Lender in the interbank Eurodollar market on such date for
delivery in immediately available funds on such date; provided, that in lieu of
determining the rate in the foregoing manner, the Lender may substitute the per
annum rate for United States dollars displayed on the Reuters screen, LIBO page,
at 10:00 A.M. (Minneapolis time) on such date or, if such date is not a
Eurodollar Business Day, the most recent Eurodollar Business
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Day. "Reuters Screen LIBO page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rate Screen (or such other page as may replace the
LIBO page on such service for the purpose of displaying London interbank offered
rates of major banks for United States dollar deposits).
"Eurodollar Rate Advance": An Advance with respect to which
the interest rate is determined by reference to the Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board for determining the maximum reserve requirement
(including any basic, supplemental or emergency reserves) for a member Lender of
the Federal Reserve System, with deposits comparable in amount to those held by
the Lender, in respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Board. The rate of interest applicable to any outstanding
Eurodollar Rate Advances shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default": Any event described in Section 7.1.
"GAAP": Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of any
date of determination.
"Klas Revolving Commitment": The obligation of the Lender to
make Advances to Klas on the Klas Revolving Loan in an aggregate principal
amount outstanding at any time not to exceed the Klas Revolving Commitment
Amount upon the terms and subject to the conditions and limitations of this
Agreement.
"Klas Revolving Commitment Amount": As defined in Section
2.1(b).
"Klas Revolving Loan": As defined in Section 2.1(b).
"Klas Revolving Maturity Date": As defined in Section 2.1(b).
"Klas Revolving Note": As defined in Section 2.3.
"Letter of Credit": An irrevocable letter of credit issued by
the Lender for the account of a Corporate Borrower pursuant to this Agreement.
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"Lien": With respect to any Person, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"Loan Documents": This Agreement, the Notes, and any documents
described in Section 3.1(a)(vii).
"Notes": The Revolving Note, the Klas Revolving Note and the
Term Note.
"Person": Any natural person, corporation, partnership,
limited partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.
"Reference Rate": The rate of interest from time to time
publicly announced by the Lender as its "reference rate." The Lender may lend to
its customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate hereunder or under the Revolving Note
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate changes.
"Regulatory Change": Any change after the date of this
Agreement in federal, state or foreign laws or regulations or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including the Lender under any federal, state or foreign
laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Revolving Commitment": The obligation of the Lender to make
Advances to the Corporate Borrower on the Revolving Loan in an aggregate
principal amount outstanding at any time not to exceed the Revolving Commitment
Amount upon the terms and subject to the conditions and limitations of this
Agreement.
"Revolving Commitment Amount": As defined in Section 2.1(a).
"Revolving Commitment Fees": As defined in Section 2.10.
"Revolving Loan": As defined in Section 2.1(a).
"Revolving Maturity Date": As defined in Section 2.1(a).
"Revolving Note": As defined in Section 2.3.
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"Subsidiary": Any corporation or other entity of which
securities or other ownership interests having ordinary voting power for the
election of a majority of the board of directors or other Persons performing
similar functions are owned by the Borrower either directly or through one or
more Subsidiaries.
"Term Loan": As defined in Section 2.1(c).
"Term Loan Commitment": The obligation of the Lender to make a
term loan to the Corporate Borrower in the Term Loan Commitment Amount upon the
terms and subject to the conditions and limitations of this Agreement.
"Term Loan Commitment Amount": As defined in Section 2.1(c).
"Term Note": As defined in Section 2.3.
"Total Liabilities": At the time of any determination, the
amount, on a consolidated basis of all items of Indebtedness of the Corporate
Borrower and the Subsidiaries that would constitute "liabilities" for balance
sheet purposes in accordance with GAAP.
"Total Revolving Outstandings": As of any date of
determination, the sum of (a) the aggregate unpaid principal balance of
Revolving Loans outstanding on such date, (b) the aggregate maximum amount
available to be drawn under Letters of Credit outstanding on such date and (c)
the aggregate amount of Unpaid Drawings on such date.
"Unpaid Drawing": As defined in Section 2.23.
"Warrant Agreement": That certain warrant agreement of even
date herewith between the Borrower WTC Industries, Inc. and the Lender.
Section 1.2 Accounting Terms and Calculations. Except as may
be expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP.
Section 1.3 Other Definitional Terms, Terms of Construction.
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections, Exhibits,
Schedules and the like references are to Sections, Exhibits, Schedules and the
like of this Agreement unless otherwise expressly provided. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or." All
incorporations by reference of covenants, terms, definitions or other provisions
from other agreements
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are incorporated into this Agreement as if such provisions were fully set forth
herein, and include all necessary definitions and related provisions from such
other agreements. All covenants, terms, definitions and other provisions from
other agreements incorporated into this Agreement by reference shall survive any
termination of such other agreements until the obligations of the Borrower under
this Agreement and the Notes are irrevocably paid in full and the Revolving
Commitment is terminated.
ARTICLE II
TERMS OF LENDING
Section 2.1 The Commitments. On the terms and subject to the
conditions hereof, the Lender agrees to make the following lending facilities
available to the Borrower or Klas, as indicated:
2.1 (a) Revolving Credit. A revolving loan (the "Revolving
Loan") to a Corporate Borrower available as Advances at any time and
from time to time from the Closing Date to April 1, 2001 (the
"Revolving Maturity Date"), during which period a Corporate Borrower
may borrow, repay and reborrow in accordance with the provisions
hereof, provided, that the unpaid principal amount of revolving
Advances shall not at any time exceed $700,000 (the "Revolving
Commitment Amount"); and provided, further, that no revolving Advance
will be made if, after giving effect thereto, Total Revolving
Outstandings would exceed the Borrowing Base.
2.1(b) Revolving Credit. A revolving loan (the "Klas Revolving
Loan") to Klas available as Advances at any time and from time to time
from the Closing Date to April 1, 2001 (the "Klas Revolving Maturity
Date"), during which period Klas may borrow, repay and reborrow in
accordance with the provisions hereof, provided, that the unpaid
principal amount of revolving Advances shall not at any time exceed
$750,000 (the "Klas Revolving Commitment Amount");
2.1(c) Term Loan. A term loan (the "Term Loan") to the
Corporate Borrower, available in multiple Advances from the Closing
Date through the first anniversary of the Closing Date (such period,
the "Advancing Period") in an aggregate amount not to exceed $750,000
(the "Term Loan Commitment Amount").
2.1(d) Joint and Several Liability. Except with respect to the
Klas Revolving Note and the Klas Revolving Loan for which Klas alone is
liable, the obligations of each Borrower hereunder and under the
Revolving Note, the Term Note and any other documents executed by it in
connection with loans made under this Agreement shall be joint and
several; provided that in no event shall the amount payable by any such
Borrower exceed an aggregate amount equal to the largest amount that
would not render such Borrower's obligations subject
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to avoidance under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code or
any applicable provision of comparable state law.
Section 2.2 Procedure for Advances and the Term Loan. Any
request by the Borrower for an Advance on the Revolving Loan or the Term Loan,
or by Klas for an Advance on the Klas Revolving Loan, shall be in writing or by
telephone and must be given so as to be received by the Lender not later than
2:00 (St. Xxxx, Minnesota time) on the requested Advance date. Each request for
an Advance shall be irrevocable and shall be deemed a representation by the
Borrower or Klas, as applicable, that on the requested Advance date and after
giving effect to such Advance the applicable conditions specified in Article III
have been and will continue to be satisfied. Each request for an Advance shall
specify (i) the requested Advance date (which must be a Business Day or, in the
case of a Eurodollar Rate Advance, a Eurodollar Business Day), (ii) the amount
of such Advance which shall be in a minimum amount of $10,000 or, if more, an
integral multiple thereof, and (iii) whether such Advance is to be funded as a
Reference Rate Advance or a or a Eurodollar Rate Advance, provided that unless
the notice required under Section 2.4 has been given, all Advances shall be
Eurodollar Rate Advances. Unless the Lender determines that any applicable
condition specified in Article III has not been satisfied, the Lender will make
available to the Borrower at the Lender's principal office in St. Xxxx,
Minnesota in immediately available funds not later than 3:00 PM (St. Xxxx time)
on the requested Advance date the amount of the requested Advance.
Section 2.3 The Notes. The Advances on the Revolving Loan
shall be evidenced by a single promissory note of the Borrower (the "Revolving
Note"), substantially in the form of Exhibit 2.3 (a) hereto, in the amount of
the Revolving Commitment Amount originally in effect. The Advances on the Klas
Revolving Loan shall be evidenced by a single promissory note of Klas (the "Klas
Revolving Note"), substantially in the form of Exhibit 2.3(b) hereto, in the
amount of the Klas Revolving Commitment originally in effect. The Term Loan
shall be evidenced by a promissory note (the "Term Note"), substantially in the
form of Exhibit 2.3 (c) hereto, in an amount equal to the Term Loan Commitment
Amount. The Lender shall enter in its ledgers and records the amount of each
Advance made and the payments made thereon, and the Lender is authorized by the
Borrower to enter on a schedule attached to the Notes a record of such Advances
and payments.
Section 2.4 Conversions and Continuations. On the terms and
subject to the limitations hereof, the Borrower shall have the option at any
time and from time to time to convert all of the Advances into Reference Rate
Advances on thirty (30) days prior notice to the Lender. Unless otherwise
specified by the Borrower or Klas, as applicable, all Advances will be
Eurodollar Rate Advances.
Section 2.5 Interest Rates, Interest Payments and Default
Interest. Interest shall accrue and be payable on the Advances as follows:
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2.5 (a) Each Eurodollar Rate Advance shall bear interest on
the unpaid principal amount thereof at a rate per annum equal to the
sum of (i) the Adjusted Eurodollar Rate for such Interest Period, plus
(ii) the Applicable Margin.
2.5 (b) Each Reference Rate Advance shall bear interest on the
unpaid principal amount thereof at a varying rate per annum equal to
the sum of (i) the Reference Rate, plus (ii) the Applicable Margin.
2.5 (c) Upon the happening of any Event of Default and during
the continuance thereof, each Advance, and after the Advancing Period,
the Term Loan, shall, at the option of the Lender, bear interest at the
rate otherwise applicable thereto, plus 2.0%.
2.5 (d) On or before the end of the Advancing Period, the
Borrower shall have the option to fix the rate of interest on the Term
Loan from the end of the Advancing Period through the maturity of the
Term Loan. The interest rate applicable thereto shall be determined by
the Lender and disclosed to the Borrower before the end of the
Advancing Period. If the Borrower elects to fix the interest rate, any
prepayment of the Term Loan after the end of the Advancing Period shall
be subject to the provisions of Section 2.18.
2.5 (e) Interest shall be payable on all Advances on the first
day of each month commencing April 1, 2000 and on the first day of each
month thereafter and on the Revolving Maturity Date for Revolving
Loans, the Klas Revolving Maturity Date for the Klas Revolving Loans,
and on the first day of each month following the end of the Advancing
Period on the Term Loan and on maturity of the Term Loan; provided that
interest under clause (c) shall be payable on demand.
Section 2.6 Borrowing Base and Mandatory Prepayment. The
Borrowing Base shall be equal to the sum of (1) the lesser of (x) 40% of the
lower of cost (determined on a first-in, first-out basis) or market value of
Eligible Inventory or (y) $200,000, plus (2) 70% of the face value of Eligible
Receivables. "Eligible Inventory" and "Eligible Receivables" are defined on
Schedule 1 hereto. The Corporate Borrowers shall deliver borrowing base
certificates in the form attached hereto (a "Borrowing Base Certificate") to the
Lender (i) dated as of the last day of each month, by the 30th day of the next
month and (ii) dated as of the date the Lender requests such a certificate
within 10 days of the Lender's request for the certificate. Each such
certificate shall state the amount of Eligible Inventory, Eligible Receivables
and the Borrowing Base as of the end of the previous month or the date of the
Lender's request, as appropriate. Any limitations on Advances or required
prepayments relating to the Borrowing Base shall be based on the latest
Borrowing Base Certificate the Corporate Borrowers shall have delivered to the
Lender. If Total Revolving Outstandings at any time exceed the Borrowing Base,
the Borrower shall immediately prepay the Revolving Note by the amount of that
excess.
Section 2.7 Repayment and Prepayment.
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2.7 (a) Repayment of the Revolving Notes. Principal of the
Revolving Note shall be payable in full on the Revolving Maturity Date
and principal of the Klas Revolving Note shall be payable in full on
the Klas Revolving Maturity Date.
2.7 (b) Repayment of the Term Note. Principal of the Term Note
is payable as provided in the Term Note. Terms governing prepayment of
the Term Note are set forth therein and in Section 2.18.
Section 2.8 Optional Prepayments. The Borrower may prepay
Advances, in whole or in part, at any time, without premium or penalty, provided
however, that any prepayment of the Term Note after the Advancing Period is
subject to Section 2.18 if the Borrower has elected the fixed rate of interest.
Any such prepayment must be accompanied by accrued and unpaid interest on the
amount prepaid. Each partial prepayment shall be in a minimum amount of $10,000.
Amounts paid (unless following an acceleration or upon termination of the
Commitment in whole) or prepaid on Advances on the Revolving Loan or the Klas
Revolving Loan under this Section may be reborrowed upon the terms and subject
to the conditions and limitations elsewhere in this Agreement.
Section 2.9 Optional Reduction of Revolving Commitment Amounts
or Termination of Commitments. The Corporate Borrower or Klas, as appropriate,
may, at any time, upon not less than 5 Business Days prior written notice to the
Lender, reduce the Revolving Commitment Amount or the Klas Revolving Commitment
Amount, with any such reduction in a minimum amount of $100,000; provided,
however, the Corporate Borrower may not at any time reduce the Revolving
Commitment Amount below the then unpaid principal balance of the Revolving Note
and Klas may not at any time reduce the Klas Revolving Commitment Amount below
the then unpaid principal balance of the Klas Revolving Note. The Borrower may,
at any time, upon not less than 30 Business Days prior written notice to the
Lender, terminate the Revolving Commitment in its entirety. Upon termination of
the Revolving Commitment pursuant to this Section, the Borrower shall pay to the
Lender all unpaid obligations of the Borrower to the Lender hereunder. Klas may,
at any time, upon not less than 30 Business Days prior written notice to the
Lender, terminate the Klas Revolving Commitment in its entirety. Upon
termination of the Klas Revolving Commitment pursuant to this Section, Klas
shall pay to the Lender all unpaid obligations of Klas to the Lender hereunder.
Section 2.10 Revolving Commitment Fee. The Corporate Borrower
shall pay to the Lender fees (the "Revolving Commitment Fees") in an amount
determined by applying a rate of 0.25% per annum to the average daily unused
Revolving Commitment Amount for the period from the date of this Agreement to
the Revolving Maturity Date. Such Revolving Commitment Fees are payable in
arrears monthly on the last day of each month and on the Revolving Maturity
Date.
Section 2.11 Computation. Revolving Commitment Fees and
interest on the Notes shall be computed on the basis of actual days elapsed and
a year of 360 days.
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Section 2.12 Capital Adequacy. In the event that any
Regulatory Change reduces or shall have the effect of reducing the rate of
return on the Lender's capital or the capital of its parent corporation (by an
amount the Lender deems material) as a consequence of the Commitments and/or the
Advances to a level below that which the Lender or its parent corporation could
have achieved but for such Regulatory Change (taking into account the Lender's
policies and the policies of its parent corporation with respect to capital
adequacy), then the Borrower shall, within five days after written notice and
demand from the Lender, pay to the Lender additional amounts sufficient to
compensate the Lender or its parent corporation for such reduction. Any
determination by the Lender under this Section and any certificate as to the
amount of such reduction given to the Borrower by the Lender shall be final,
conclusive and binding for all purposes, absent error.
Section 2.13 Use of Proceeds. The proceeds of the initial
Advance on the Revolving Loan shall be used first for working capital. Any
remaining balance of the initial Advance on the Revolving Loan and the proceeds
of any subsequent Advance thereon shall be used for the Corporate Borrower's
general business purposes in a manner not in conflict with any of the Borrower's
covenants in this Agreement. The proceeds of the Term Loan shall be used for the
purchase of tooling and equipment. The proceeds of the Klas Revolving Loan shall
be used to refinance prior existing indebtedness of Klas and WTC Industries,
Inc. to the Lender, which indebtedness, as between the Lender and Klas, is, as
of the effective date of this Agreement, the sole responsibility of Klas.
Section 2.14 Interest Rate Not Ascertainable, Etc. If, on or
prior to the date for determining the adjusted Eurodollar Rate for any
Eurodollar Rate Advance, the Lender determines (which determination shall be
conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not
being made available to the Lender in the relevant market, or
(b) the Adjusted Eurodollar Rate will not adequately and
fairly reflect the cost to the Lender of funding or maintaining
Eurodollar Rate Advances,
the Lender shall forthwith give notice to the Borrower of such determination,
whereupon the obligation of the Lender to make or continue, or to convert any
Advances to, Eurodollar Rate Advances, as the case may be, shall be suspended
until the Lender notifies the Borrower that the circumstances giving rise to
such suspension no longer exist. While any such suspension continues, all
further Advances by the Lender shall be made as Reference Rate Advances and all
existing Eurodollar Rate Advances shall be converted to Reference Rate Advances.
Section 2.15 Increased Cost. If any Regulatory Change:
(a) shall subject the Lender to any tax, duty or other charge
with respect to its Eurodollar Rate Advances, the Notes, its obligation
to make Eurodollar Rate Advances or shall
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change the basis of taxation of payment to the Lender of the principal
of or interest on Eurodollar Rate Advances or any other amounts due
under this Agreement in respect of Eurodollar Rate Advances or its
obligation to make Eurodollar Rate Advances (except for changes in the
rate of tax on the overall net income of the Lender imposed by the
jurisdiction in which the Lender's principal office is located); or
(b) shall impose, modify or deem applicable any reserve,
special deposit, capital requirement or similar requirement (including,
without limitation, any such requirement imposed by the Board, but
excluding with respect to any Eurodollar Rate Advance any such
requirement to the extent included in calculating the applicable
Adjusted Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, the Lender or shall impose on the
Lender or on the interbank Eurodollar market any other condition
affecting its Eurodollar Rate Advances, the Notes or its obligation to
make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to the Lender of
making or maintaining any Eurodollar Rate Advance, or to reduce the amount of
any sum received or receivable by the Lender under this Agreement or under the
Notes, then, within 30 days after demand by the Lender, the Borrower shall pay
to the Lender such additional amount or amounts as will compensate the Lender
for such increased cost or reduction. The Lender will promptly notify the
Borrower of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Lender to compensation pursuant to this Section.
A certificate of the Lender claiming compensation under this Section, setting
forth the additional amount or amounts to be paid to it hereunder and stating in
reasonable detail the basis for the charge and the method of computation, shall
be conclusive in the absence of error. In determining such amount, the Lender
may use any reasonable averaging and attribution methods.
Section 2.16 Illegality. If any Regulatory Change shall make
it unlawful or impossible for the Lender to make, maintain or fund any
Eurodollar Rate Advances, the Lender shall notify the Borrower, whereupon the
obligation of the Lender to make or continue, or to convert any Advances to,
Eurodollar Rate Advances shall be suspended until the Lender notifies the
Borrower that the circumstances giving rise to such suspension no longer exist.
If the Lender determines that it may not lawfully continue to maintain any
Eurodollar Rate Advances all of the affected Advances shall be automatically
converted to Reference Rate Advances as of the date of the Lender's notice, and
upon such conversion the Borrower shall indemnify the Lender.
Section 2.17. Discretion of Lender as to Manner of Funding.
The Lender shall be entitled to fund and maintain its funding of Eurodollar Rate
Advances in any manner it may elect.
Section 2.18 Prepayment Premium on Term Note. The Borrower
acknowledges and agrees as follows: (i) it has no right to prepay the principal
of the Term Note if the Borrower elects the fixed rate of interest without the
Lender's consent, which the Lender will grant only on the terms and subject to
the conditions hereinafter provided; (ii) the Lender will be harmed by reason of
any
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prepayment of the principal of the Term Note at a time when interest rates have
declined below the levels prevailing at the time the fixed interest rate was
established, because any reinvestment of the prepaid funds at the lower rates
prevailing at the time of prepayment will produce a lower return to the Lender;
(iii) there is no readily available index of rates payable on loans such as that
from the Lender to the Borrower under the Term Note, nor any assurance that the
Lender could replace the loan with a similar loan; and (iv) changes in the
yields on U.S. government securities provide a reasonable approximation for
changes in interest rates generally.
To induce the Lender to agree to accept voluntary prepayment, to the extent
permitted by applicable law, the Borrower agrees to pay the Lender a prepayment
indemnity as described herein upon any prepayment, whether voluntary, mandatory
or upon acceleration of the principal of the Term Note at any time the Term Note
bears interest at a fixed rate, and agrees to all of the other terms of
prepayment herein.
As used herein, the following terms have the meanings assigned to them:
"Average Initial Maturity Period" means, as of any Base Date, the
weighted average time computed by multiplying the dollar amount of each
installment or payment of principal payable on Term Note at any time following
such Base Date by the number of days from such Base Date until the scheduled
maturity of that installment or payment, adding together the resulting products
and dividing the resulting sum by the total principal balance of Term Note as of
such Base Date.
"Average Remaining Maturity Period" means, as of any prepayment date,
the weighted average time period computed by multiplying the dollar amount of
each installment or payment of principal prepaid by the number of days from such
prepayment date until the scheduled maturity of that installment, adding
together the resulting products and dividing the resulting sum by the total
dollar amount of the principal being prepaid.
"Base Date" means the date on which the interest rate on the Term Note,
as in effect on the date of prepayment, was established.
"Government Yield" means the annual yield (converted as necessary to
the equivalent semi- annual compound rate) on a U.S. Treasury security having a
maturity date closest to the date computed by adding (i) for the Government
Yield as of the Base Date, the Average Initial Maturity Period to the Base Date,
or (ii) for the Government Yield as of the prepayment date, the Average
Remaining Maturity Period to the date of prepayment, as published in THE WALL
STREET JOURNAL (or, if not so published, as determined by the Lender based on
quotations by secondary market dealers selected by the Lender). "U.S. Treasury
securities" means actively traded U.S. Treasury bonds, bills and notes. If more
than one issue of U.S. Treasury securities is scheduled to mature at or about
the time of such computed date, then to the extent possible the U.S. Treasury
security trading closest to its par value will be chosen as the basis of the
Government Yield.
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"Interest Differential" means the Government Yield as of the Base Date
minus the Government Yield as of the prepayment date.
Any voluntary prepayment under the Term Note at a time when it bears interest at
a fixed rate shall be either in the full amount of the outstanding loans under
the Term Note or, if a partial prepayment, in the amount of $10,000 or an
integral multiple thereof, and partial prepayments shall be applied to
installments or payments due under the Term Note in the inverse order of their
maturities. If, at the time of any prepayment (whether voluntary, mandatory or
upon acceleration of the principal of the Term Note), the Interest Differential
shall exceed zero, such prepayment shall be accompanied, to the extent permitted
by applicable law, by payment of a prepayment indemnity. The amount of the
prepayment indemnity shall equal the present value (determined by the Lender
using the Government Yield as of the date of prepayment as the discount factor)
on the prepayment date of a stream of equal monthly payments in number equal to
the number of whole months (using a thirty-day month) in the Average Maturity
Period. The amount of each such monthly payment shall equal the quotient
obtained by dividing (a) the product of the amount prepaid, times the Interest
Differential, times a fraction, the numerator of which is the number of days in
the Average Remaining Maturity Period and the denominator of which is 360, by
(b) the number of whole months (using a thirty-day month) in the Average
Remaining Maturity Period.
Section 2.19 Structuring Fee. On the Closing Date, Borrower
WTC Industries, Inc. shall grant to the Lender, pursuant to the Warrant
Agreement, warrants for 15,000 shares of such Borrower's common stock with a
strike price of $5.00 per share and an exercise period of four years.
Section 2.20 Letters of Credit. Upon the terms and subject to
the conditions of this Agreement, the Lender agrees to issue Letters of Credit
for the account of a Corporate Borrower from time to time between the Closing
Date and the Revolving Maturity Date in such amounts as a Corporate Borrower
shall request up to an aggregate amount at any time outstanding not exceeding
the Revolving Commitment Amount; provided that no Letter of Credit will be
issued in any amount which, after giving effect to such issuance, would cause
Total Revolving Outstandings to exceed the lesser of the Revolving Commitment
Amount or the Borrowing Base.
Section 2.21 Procedures for Letters of Credit. Each request
for a Letter of Credit shall be made by a Corporate Borrower in writing, by
telex, facsimile transmission or electronic conveyance received by the Lender by
2:00 p.m., Minneapolis time, on a Business Day which is not less than one
Business Day preceding the requested date of issuance (which shall also be a
Business Day). Each request for a Letter of Credit shall be deemed a
representation by the Borrower that on the date of issuance of such Letter of
Credit and after giving effect thereto the applicable conditions specified in
Article III have been and will be satisfied. The Lender may require that such
request be made on such letter of credit application and reimbursement agreement
form as the Lender may from time to time specify, along with satisfactory
evidence of the authority and incumbency of the officials of the Borrower making
such request.
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Section 2.22 Terms of Letters of Credit. Letters of Credit
shall be issued in support of obligations of a Corporate Borrower. All Letters
of Credit must expire not later than the Business Day preceding the Revolving
Commitment Maturity Date. No Letter of Credit may have a term longer than 12
months.
Section 2.23 Agreement to Repay Letter of Credit Drawings. If
the Lender has received documents purporting to draw under a Letter of Credit
that the Lender believes conform to the requirements of the Letter of Credit, or
if the Lender has decided that it will comply with the Borrower's written or
oral request or authorization to pay a drawing on any Letter of Credit that the
Lender does not believe conforms to the requirements of the Letter of Credit, it
will notify the Borrower of that fact. The Borrower shall reimburse the Lender
by 9:30 a.m. (Minneapolis time) on the day on which such drawing is to be paid
in immediately available funds in an amount equal to the amount of such drawing.
Any amount by which the Borrower have failed to reimburse the Lender for the
full amount of such drawing by 10:00 a.m. on the date on which the Lender in its
notice indicated that it would pay such drawing, until reimbursed from the
proceeds of Loans pursuant to Section 2.25 is an "Unpaid Drawing."
Section 2.24 Obligations Absolute. The obligation of the
Borrower under Section 2.23 to repay the Bank for any amount drawn on any Letter
of Credit and to repay the Bank for any Revolving Loans made under Section 2.25
to cover Unpaid Drawings shall be absolute, unconditional and irrevocable, shall
continue for so long as any Letter of Credit is outstanding notwithstanding any
termination of this Agreement, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of
Credit;
(b) The existence of any claim, setoff, defense or other right
which a Borrower may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom
any such beneficiary, transferee or holder may be acting), the Lender
or any other Person, whether in connection with a Letter of Credit,
this Agreement, the transactions contemplated hereby, or any unrelated
transaction; or
(c) Any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever.
Neither the Lender nor its officers, directors or employees shall be liable or
responsible for, and the obligations of the Borrower to the Lender shall not be
impaired by:
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(i) The use which may be made of any Letter of Credit or
for any acts or omissions of any beneficiary,
transferee or holder thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of
documents, or of any endorsements thereon, even if
such documents or endorsements should, in fact, prove
to be in any or all respects invalid, insufficient,
fraudulent or forged;
(iii) The acceptance by the Lender of documents that appear
on their face to be in order, without responsibility
for further investigation, regardless of any notice
or information to the contrary; or
(iv) Any other action of the Lender in making or failing
to make payment under any Letter of Credit if in good
faith and in conformity with U.S. or foreign laws,
regulations or customs applicable thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against the
Lender, and the Lender shall be liable to the Borrower, to the extent, but only
to the extent, of any direct, as opposed to consequential, damages suffered by a
Borrower which the Borrower proves were caused by the Lender's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms thereof.
Section 2.25 Loans to Cover Unpaid Drawings. Whenever any
Unpaid Drawing exists, the Lender is authorized (and each Borrower here so
authorize the Lender) to, and shall, make a Revolving Loan (as a Eurodollar Rate
Advance) to the Borrower in an amount equal to the amount of the Unpaid Drawing.
The Lender shall apply the proceeds of such Revolving Loan directly to reimburse
itself for such Unpaid Drawing. If at the time the Lender makes a Revolving Loan
pursuant to the provisions of this Section, the applicable conditions precedent
specified in Article III shall not have been satisfied, the Borrower shall pay
to the Lender interest on the funds so advanced at a floating rate per annum
equal to the sum of the Adjusted Eurodollar Rate plus the Applicable Margin for
Eurodollar Rate Advances plus two percent (2.00%).
Section 2.26 Letter of Credit Fees. For each Letter of Credit
issued, the Borrower shall pay to the Lender, in advance payable on the date of
issuance, a fee (a "Letter of Credit Fee") in an amount determined by applying a
per annum rate of two percent (2.0%) to the original face amount of the Letter
of Credit for the period from the date of issuance to the scheduled expiration
date of such Letter of Credit, and for any renewal thereof, if any. In addition
to the Letter of Credit Fee, the Borrower shall pay to the Lender, on demand,
all issuance, amendment, drawing and other fees regularly charged by the Lender
to its letter of credit customers and all out-of-pocket expenses incurred by the
Lender in connection with the issuance, amendment, administration or payment of
any Letter of Credit.
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ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions of Initial Revolving Advance and Term
Loan. The obligation of the Lender to make the initial Advance on the Revolving
Loan, the initial Advance on the Klas Revolving Loan and the Term Loan hereunder
shall be subject to the prior or simultaneous fulfillment of each of the
following conditions:
3.1 (a) Documents. The Lender shall have received the
following:
(i) The Notes executed by a duly authorized officer
(or officers) of the Borrower and Klas, and dated the Closing
Date.
(ii) A copy of the corporate resolutions of each
Corporate Borrower authorizing the execution, delivery and
performance of this Agreement and the Notes and containing an
incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of such Borrower
authorized to execute this Agreement and the Notes, certified
as of the Closing Date by the Secretary or an Assistant
Secretary of each Corporate Borrower.
(iii) A copy of the Certificate of Incorporation of
each Corporate Borrower with all amendments thereto, certified
by the appropriate governmental official of the jurisdiction
of its incorporation as of a date not more than 30 days prior
to the Closing Date.
(iv) A certificate of good standing for each
Corporate Borrower in the jurisdiction of its incorporation
and in Minnesota, certified by the appropriate governmental
officials as of a date not more than 30 days prior to the
Closing Date.
(v) A copy of the bylaws of each Corporate Borrower,
certified as of the Closing Date by the Secretary or an
Assistant Secretary of such Borrower.
(vi) The opinion of counsel to the Borrowers covering
such matters as the Lender may request.
(vii) A Security Agreement in form and substance
satisfactory to the Lender and duly executed by each Corporate
Borrower.
(viii) The initial Borrowing Base Certificate
required under Section 2.6.
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(ix) The Warrant Agreement duly executed by Borrower
WTC Industries, Inc.
(x) A subordination agreement in form and substance
satisfactory to the Lender duly executed by Borrower WTC
Industries, Inc. and Klas.
3.1 (b) Other Matters. All organizational and legal
proceedings relating to the Borrower and all instruments and agreements
in connection with the transactions contemplated by this Agreement
shall be satisfactory in scope, form and substance to the Lender and
its counsel, and the Lender shall have received all information and
copies of all documents, including records of corporate proceedings,
which it may reasonably have requested in connection therewith, such
documents where appropriate to be certified by proper Borrower or
governmental authorities.
3.1 (c) Fees and Expenses. The Lender shall have received all
fees and other amounts due and payable by the Borrower on or prior to
the Closing Date, including the reasonable fees and expenses of counsel
to the Lender payable pursuant to Section 8.2.
3.1 (d) Perfection. The Security Agreement (or financing
statements with respect thereto) shall have been appropriately filed to
the satisfaction of the Lender and the priority and perfection of the
Lien created thereby shall have been established to the satisfaction of
the Lender.
Section 3.2 Conditions Precedent to all Advances. The Lender
shall not have any obligation to make any Advances (including Advances after the
initial Advance) hereunder unless all representations and warranties of the
Borrower made in this Agreement remain true and correct and no Default or Event
of Default exists.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Lender:
Section 4.1 Organization, Standing, Etc. Each Corporate
Borrower is a corporation duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted, to enter into this Agreement and to issue the Notes issued by it and
to perform its obligations hereunder and thereunder. This Agreement and the
Notes have been duly authorized by all necessary corporate action and when
executed and delivered will be the legal and binding obligations of the
Borrower. The execution and delivery of this Agreement and the Notes will not
violate any Corporate Borrower's Articles of Incorporation or bylaws or any law
applicable to such Corporate
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Borrower. No governmental consent or exemption is required in connection with
any Borrower's execution and delivery of this Agreement and the Notes.
Section 4.2 Financial Statements and No Material Adverse
Change. The Corporate Borrower's audited financial statements for WTC
Industries, Inc. as at December 31, 1998 and its unaudited financial statements
for WTC Industries, Inc. as at December 31, 1999, as heretofore furnished to the
Lender, have been prepared in accordance with GAAP. Neither Corporate Borrower
has any material obligation or liability not disclosed in such financial
statements, and there has been no material adverse change in the condition of
either Corporate Borrower since the dates of such financial statements.
Section 4.3 Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of any Borrower, threatened against or
affecting any Borrower which, if determined adversely to such Borrower, would
have, a material adverse effect on the condition of any Borrower. No Borrower is
in violation of any law or regulation (including environmental laws and
regulations and laws relating to employee benefit plans) where such violation
could reasonably be expected to impose a material liability on any Borrower.
Section 4.4 Taxes. Each Borrower has filed all federal, state
and local tax returns required to be filed and has paid or made provision for
the payment of all taxes due and payable pursuant to such returns and pursuant
to any assessments made against it or any of its property (other than taxes,
fees or charges the amount or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of such Borrower).
Section 4.5 Subsidiaries. WTC Industries, Inc. has no
Subsidiaries other than PentaPure Incorporated. PentaPure Incorporated has no
Subsidiaries.
Section 4.6 Year 2000 Each Corporate Borrower has reviewed and
assessed its business operations and computer systems and applications to
address the "year 2000 problem" (that is, that computer applications and
equipment used by such Corporate Borrower may have been or may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000). Each Corporate Borrower represents and warrants that the year 2000
problem has not resulted in and will not result in a material adverse change in
such Corporate Borrower's business condition (financial or otherwise),
operations, properties or prospects or ability to repay the Lender. Each
Corporate Borrower agrees that this representation and warranty will be true and
correct on and shall be deemed made by each Corporate Borrower on each date a
Corporate Borrower requests any Advance under this Agreement or the Notes or
delivers any information to the Lender. Each Corporate Borrower will promptly
deliver to the Lender such information relating to this representation and
warranty as the Lender requests from time to time.
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ARTICLE V
AFFIRMATIVE COVENANTS
Until the Revolving Commitment shall have expired or been
terminated and the Notes evidencing the Revolving Loan and the Term Loan and all
of the Corporate Borrower's other obligations to the Lender under this Agreement
shall have been paid in full, and, in addition, with respect to Section 5.11,
until all obligations of Klas under this Agreement shall have been paid in full,
unless the Lender shall otherwise consent in writing:
Section 5.1 Financial Statements and Reports. The Borrower
will furnish to the Lender:
5.1 (a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, audited consolidated
financial statements of the Corporate Borrowers consisting of at least
statements of income, cash flow and changes in stockholders' equity,
and a balance sheet as at the end of such year, setting forth in each
case in comparative form corresponding figures from the previous annual
audit, certified, subject only to a qualification regarding ongoing
concern, by independent certified public accountants selected by the
Borrower and acceptable to the Lender.
5.1 (b) As soon as available and in any event within 45 days
after the end of each fiscal quarter, unaudited consolidated financial
statements for the Corporate Borrowers for such quarter and for the
period from the beginning of such fiscal year to the end of such fiscal
quarter, substantially similar to the annual audited statements.
5.1 (c) As soon as practicable and in any event within 30 days
after the end of each fiscal quarter, a statement signed by the chief
financial officer of the Corporate Borrowers stating that as at the end
of such fiscal quarter there did not exist any Default or Event of
Default or, if such Default or Event of Default existed, specifying the
nature and period of existence thereof and what action the Borrower
proposes to take with respect thereto.
5.1 (d) Immediately upon any officer of a Corporate Borrower
or Klas becoming aware of any Default or Event of Default, a notice
describing the nature thereof and what action the Borrower proposes to
take with respect thereto.
5.1(e) As soon as practicable and in any event within 30 days
after the end of each month an accounts receivable aging for the
Corporate Borrowers.
5.1(f) From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the
Lender may reasonably request.
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5.1(g) The updated personal financial statement of Klas as of
December 31 of each year no later than April 30 of each year, and,
promptly upon filing, a copy of the federal tax return of Klas for each
year.
Section 5.2 Corporate Existence. Each Corporate Borrower will
maintain its corporate existence in good standing under the laws of its
jurisdiction of incorporation and its qualification to transact business in each
jurisdiction where failure so to qualify would permanently preclude such
Borrower from enforcing its rights with respect to any material asset or would
expose such Borrower to any material liability.
Section 5.3 Insurance. Each Corporate Borrower will maintain
with financially sound and reputable insurance companies such insurance as may
be required by law and such other insurance in such amounts and against such
hazards as is customary in the case of reputable corporations engaged in the
same or similar business and similarly situated.
Section 5.4 Payment of Taxes and Claims. Each Borrower will
file all tax returns and reports which are required by law to be filed by it and
will pay before they become delinquent, all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including those of suppliers, mechanics, carriers, warehousemen,
landlords and other like Persons) which, if unpaid, might result in the creation
of a Lien upon its property.
Section 5.5 Inspection. Each Borrower will permit any Person
designated by the Lender to visit and inspect any of the properties, books and
financial records of such Borrower, to examine and to make copies of the books
of accounts and other financial records of such Borrower, and to discuss the
affairs, finances and accounts of such Borrower with its officers at such
reasonable times and intervals as the Lender may designate. Each Corporate
Borrower shall also allow the Lender and its agents to conduct periodic
collateral audits of such Borrower's accounts and inventory at such intervals as
the Lender may choose, and the Borrower shall pay the Lender's costs of such
audits.
Section 5.6 Maintenance of Properties. Each Corporate Borrower
will maintain its properties in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 Books and Records. Each Corporate Borrower will
keep adequate and proper records and books of account in which full and correct
entries will be made of its dealings, business and affairs.
Section 5.8 Compliance. Each Borrower will comply in all
material respects with all laws, rules and regulations to which it may be
subject.
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Section 5.9 Notice of Litigation. Each Borrower will give
prompt written notice to the Lender of the commencement of any action, suit or
proceeding affecting such Borrower.
Section 5.10 Plans. Each Corporate Borrower will maintain any
employee benefit plans in compliance with all material requirements of
applicable laws and regulations.
Section 5.11 Liquid Assets. Klas will maintain unencumbered
liquid assets (cash, cash equivalents and marketable securities) of no less than
$3,000,000 in market value at all times.
ARTICLE VI
NEGATIVE COVENANTS
Until the Revolving Commitment shall have expired or been
terminated and the Notes evidencing the Revolving Loan and the Term Loan and all
of each Corporate Borrower's other obligations to the Lender under this
Agreement shall have been paid in full, unless the Lender shall otherwise
consent in writing:
Section 6.1 Merger. Each Corporate Borrower will not merge or
consolidate or enter into any analogous reorganization or transaction with any
Person or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) or permit any Subsidiary to do any of the foregoing; provided,
however, any Subsidiary may be merged with or liquidated into a Borrower or any
wholly-owned Subsidiary (if the Borrower or such wholly-owned Subsidiary is the
surviving corporation)
Section 6.2 Sale of Assets. Each Corporate Borrower will not,
and will not permit any Subsidiary to, sell, transfer, lease or otherwise convey
all or any substantial part of its assets except for sales and leases of
inventory in the ordinary course of business.
Section 6.3 Investments. Each Corporate Borrower will not, and
will not permit any Subsidiary to, make any loans, advances or extensions of
credit to any other Person (except for trade and customer accounts receivable
for inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms) or purchase or acquire any
stock or other debt or equity securities of or any interest in any other Person
or any integral part of any business or the assets comprising such business or
part thereof, except for:
6.3 (a) Investments in readily marketable direct obligations
issued or unconditionally guaranteed by the United States government or
any agency thereof and supported by the full faith and credit of the
United States.
6.3 (b) Certificates of deposit or bankers' acceptances issued
by any commercial Bank organized under the laws of the United States or
any State thereof which has (i)
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combined capital and surplus of at least $100,000,000, and (ii) a
credit rating with respect to its unsecured indebtedness from a
nationally recognized rating service that is satisfactory to the
Lender.
6.3 (c) Commercial paper given the highest rating by a
nationally recognized rating service.
6.3 (d) Repurchase agreements relating to securities of the
kind described in subsection (a) of this Section.
6.3 (e) Other readily marketable investments in debt
securities which are reasonably acceptable to the Lender.
6.3 (f) Travel advances to officers and employees in the
ordinary course of business.
Any investments under clauses (a), (b), (c) or (d) above must mature within one
year of the acquisition thereof by the Borrower.
Section 6.4 Indebtedness. Each Corporate Borrower will not,
and will not permit any Subsidiary to, borrow any money or issue any bonds,
debentures or other debt securities or otherwise become obligated on any
interest-bearing indebtedness except for the Term Loan and Advances on the
Revolving Loan under this Agreement, and except for unsecured indebtedness to
Klas and The Tapemark Company.
Section 6.5 Liens. Each Corporate Borrower will not, and will
not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien,
or enter into any arrangement for the acquisition of any property through
conditional sale, lease-purchase or other title retention agreements except:
6.5 (a) Liens granted to the Lender.
6.5 (b) Liens existing on the date of this Agreement and
disclosed on Exhibit 6.5 hereto.
6.5 (c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations arising in the ordinary course of business of the
Borrower.
6.5 (d) Liens for taxes, fees, assessments and governmental
charges not delinquent.
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6.5 (e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due.
6.5 (f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or
other similar bonds.
6.5 (g) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real
property and landlord's Liens under leases on the premises rented,
which do not materially detract from the value of such property or
impair the use thereof in the business of the Borrower.
Section 6.6 Contingent Obligations. Each Corporate Borrower
will not, and will not permit any Subsidiary to, guarantee or otherwise become
liable on the indebtedness of any other Person.
Section 6.7 Debt Service Coverage Ratio. The Corporate
Borrower will not permit the Debt Service Coverage Ratio, as of the last day of
any fiscal year for the four consecutive fiscal quarters ending on that date, to
be less than 1.15 to 1.
Section 6.8 Net Loss. The Corporate Borrowers will not incur a
year to date net loss on a combined basis greater than $300,000 at any time.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of Default:
7.1 (a) A Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on
the Notes or any other obligations of a Borrower, or any of them, to
the Lender pursuant to this Agreement.
7.1 (b) Any representation or warranty made by or on behalf of
any Borrower in this Agreement or by or on behalf of any Borrower in
any certificate, statement, report or document herewith or hereafter
furnished to the Lender pursuant to this Agreement shall prove to have
been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified.
7.1 (c) The Borrower shall fail to comply with Sections 5.2,
5.3, 6.1, 6.2, 6.7 or 6.8.
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7.1 (d) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement (other than those hereinabove set forth in this Section 7.1)
and such failure to comply shall continue for 20 calendar days after
whichever of the following dates is the earliest: (i) the date the
Borrower gives notice of such failure to the Lender, (ii) the date the
Borrower should have given notice of such failure to the Lender
pursuant to Section 5.1, or (iii) the date the Lender gives notice of
such failure to the Borrower.
7.1 (e) Any Borrower or any Subsidiary shall become insolvent
or shall generally not pay its debts as they mature or shall apply for,
shall consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of a Borrower or such Subsidiary or for a
substantial part of the property thereof or, in the absence of such
application, consent or acquiescence, a custodian, trustee or receiver
shall be appointed for a Borrower or such Subsidiary or for a
substantial part of the property thereof and shall not be discharged
within 60 days, or a Borrower shall make an assignment for the benefit
of creditors.
7.1 (f) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be
instituted by or against a Borrower or any Subsidiary and, if
instituted against a Borrower or any Subsidiary, shall have been
consented to or acquiesced in by a Borrower or such Subsidiary or shall
remain undismissed for 60 days, or an order for relief shall have been
entered against a Borrower or such Subsidiary.
7.1 (g) Any dissolution or liquidation proceeding shall be
instituted by or against a Borrower or any Subsidiary and, if
instituted against a Borrower or such Subsidiary, shall be consented to
or acquiesced in by a Borrower or such Subsidiary or shall remain for
60 days undismissed.
7.1 (h) A judgment or judgments for the payment of money in
excess of the sum of $50,000 in the aggregate shall be rendered against
a Borrower or any Subsidiary and either (i) the judgment creditor
executes on such judgment or (ii) such judgment remains unpaid or
undischarged for more than 60 days from the date of entry thereof or
such longer period during which execution of such judgment shall be
stayed during an appeal from such judgment.
7.1 (i) The maturity of any material indebtedness for borrowed
money or capitalized lease obligations of a Borrower or any Subsidiary
(other than indebtedness under this Agreement) shall be accelerated, or
a Borrower or any Subsidiary shall fail to pay any such material
indebtedness when due (after the lapse of any applicable grace period)
or any event shall occur or condition shall exist and shall continue
for more than the period of grace, if any, applicable thereto and shall
have the effect of causing, or permitting the holder of any such
indebtedness to cause, such material indebtedness to become due prior
to its stated maturity or to realize upon any collateral given as
security therefor. For purposes of this Section, indebtedness of the
Borrower shall be deemed "material" if it
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exceeds $50,000 as to any item of indebtedness or in the aggregate for
all items of indebtedness with respect to which any of the events
described in this Section has occurred.
7.1 (j) Any execution or attachment shall be issued whereby
any substantial part of the property of a Borrower or any Subsidiary
shall be taken or attempted to be taken and the same shall not have
been vacated or stayed within 60 days after the issuance thereof.
7.1 (k) Any default not otherwise described above shall occur
under any other Loan Document and remain unremedied for 30 calendar
days.
Section 7.2 Remedies. If (a) any Event of Default described in
Sections 7.1 (e), (f) or (g) shall occur with respect to a Borrower, the
Revolving Commitment, the Klas Revolving Commitment and the Advancing Period
shall automatically terminate and the Notes and all other obligations of the
Borrower to the Lender under this Agreement shall automatically become
immediately due and payable, or (b) any other Event of Default shall occur and
be continuing, then the Lender may (i) declare the Revolving Commitment and the
Klas Revolving Commitment and the Advancing Period terminated, whereupon the
Commitments shall terminate, and (ii) declare the Notes and all other
obligations of the Borrower to the Lender under this Agreement to be forthwith
due and payable, whereupon the same shall immediately become due and payable, in
each case without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, anything in this Agreement or in the Notes
to the contrary notwithstanding. Upon the occurrence of any of the events
described in clauses (a) or (b) of the preceding sentence the Lender may
exercise all rights and remedies under this Agreement, the Notes and any related
agreements and under any applicable law.
Section 7.3 Offset. In addition to the remedies set forth in
Section 7.2, upon the occurrence of any Event of Default and thereafter while
the same be continuing, each Borrower hereby irrevocably authorizes the Lender
to set off all sums owing by a Borrower to the Lender against all deposits and
credits of any Borrower with, and any and all claims of any Borrower against,
the Lender.
Section 7.4 Release of Security Interest. Upon payment in full
of the obligations of the Corporate Borrower under the Notes evidencing the
Revolving Loan and the Term Loan, the Lender shall release its security interest
in the property of each Corporate Borrower.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to
the contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by
- 25 -
the Borrower therefrom shall in any event be effective unless the same shall be
in writing and signed by the Lender, and then such amendment, modifications,
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
Section 8.2 Costs and Expenses. Whether or not the
transactions contemplated hereby are consummated, the Borrower agrees to
reimburse the Lender upon demand for all reasonable out-of-pocket expenses paid
or incurred by the Lender (including filing and recording costs and fees and
expenses of Xxxxxx & Xxxxxxx LLP, counsel to the Lender) in connection with the
negotiation, preparation, approval, review, execution, delivery, amendment,
modification, interpretation, collection and enforcement of this Agreement and
the Notes. The obligations of the Borrower under this Section shall survive any
termination of this Agreement.
Section 8.3 Waivers, etc. No failure on the part of the Lender
or the holder of either Note to exercise and no delay in exercising any power or
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The rights and remedies of
the Lender hereunder are cumulative and not exclusive of any right or remedy the
Lender otherwise has.
Section 8.4 Notices. Except when telephonic notice is
expressly authorized by this Agreement, any notice or other communication to any
party in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of notice
shall be measured from the date of delivery thereof if manually delivered, from
the date of sending thereof if sent by telegram, telex or facsimile
transmission, from the first Business Day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed;
provided, however, that any notice to the Lender under Article II hereof shall
be deemed to have been given only when received by the Lender.
Section 8.5 Successors and Assigns; Disposition of Loans. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign its rights or delegate its obligations hereunder without the prior
written consent of the Lender. The Lender may at any time sell, assign,
transfer, grant participations in, or otherwise dispose of any portion of the
Revolving Commitment and the Term Loan and/or Advances to banks or other
financial institutions. The Lender may disclose any information regarding the
Borrower in the Lender's possession to any prospective buyer or participant.
SECTION 8.6 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
- 26 -
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS.
SECTION 8.7 CONSENT TO JURISDICTION. AT THE OPTION OF THE
LENDER, THIS AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN OR XXXXXX COUNTY; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 8.8 WAIVER OF JURY TRIAL. EACH BORROWER AND THE LENDER
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.9 Captions. The captions or headings herein and any
table of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 8.10 Entire Agreement. This Agreement and the other
Loan Documents embody the entire agreement and understanding between the
Borrower and the Lender with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof. The Klas Revolving Note is issued in substitution and
extension of a revolving note from Klas and WTC Ecomaster Corporation to the
Lender in the original amount of $500,000 dated as of June 24, 1996, as to which
the current outstanding principal balance is $750,000 (as amended and previously
extended, the "Prior Note"). All amounts outstanding under the Prior Note on the
date hereof shall be deemed outstanding under the Klas Revolving Note and shall
bear interest and be repaid in accordance therewith.
Section 8.11 Waiver of Suretyship Defenses. The obligations of
each Borrower hereunder are absolute, unconditional, complete and continuing and
shall not be released in whole or in part by any action or thing which might,
but for this provision, be deemed a legal or equitable discharge of a surety or
guarantor, other than irrevocable payment and performance in full of the
obligations
- 27 -
hereunder. No notice of such obligations or of any renewal or extension thereof
need be given to a Borrower and none of the foregoing acts shall release any
Borrower from liability hereunder. Each Borrower hereby expressly waives (a)
demand of payment, presentment, protest, notice of dishonor, nonpayment or
nonperformance on any and all forms of such obligations; (b) notice of
acceptance of this Agreement and any Note hereunder, and any notice of any
liability to which it may apply; (c) all other notices and demands of any kind
and description relating to such obligations now or hereafter provided for by
any agreement, statute, law, rule or regulation. No Borrower shall be exonerated
with respect to its liabilities hereunder by any act or thing except irrevocable
payment and performance of such obligations. The liabilities of each Borrower
hereunder shall not be affected or impaired by any failure, delay, neglect or
omission on the part of the Lender to realize upon any of the obligations
hereunder of any Borrower to the Lender. No act or omission of the Lender,
whether or not such action or failure to act varies or increases the risk of, or
affects the rights or remedies of a Borrower, shall affect or impair the
obligations of any other Borrower hereunder. Each Borrower hereby waives any and
all right to cause a marshaling of the assets of any Borrower or any other
action by any court or other governmental body with respect thereto and further
waives any and all requirements that the Lender institute any action or
proceeding at law or in equity, or obtain any judgment, against any other
Borrower or any other Person as a condition precedent to making demand on or
bringing any action or obtaining and/or enforcing a judgment against, any
Borrower hereunder.
Section 8.12 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and either of the parties hereto may execute this Agreement
by signing any such counterpart.
- 28 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
WTC INDUSTRIES, INC.
By /s/ Xxxx Xxxxxx
-------------------------------------
Print Name Xxxx Xxxxxx
-----------------------------
Title Chief Financial Officer
----------------------------------
Borrower's Address:
000 Xxxxx Xxx. X.
Xxxx Xx. Xxxx, Xxxxxxxxx 00000
PENTAPURE INCORPORATED
By /s/ Xxxx Xxxxxx
-------------------------------------
Print Name Xxxx Xxxxxx
-----------------------------
Title Chief Financial Officer
----------------------------------
Borrower's Address:
000 Xxxxx Xxx. X.
Xxxx Xx. Xxxx, Xxxxxxxxx 00000
/s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx
----------------------------------------
U.S. BANK NATIONAL ASSOCIATION
By /s/ Xxxxx Xxxxx
-------------------------------------
Print Name Xxxxx Xxxxx
-----------------------------
Title Vice President
----------------------------------
Lender's Address:
U.S. Bank National Association
000 Xxxxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Fax (000) 000-0000
- 29 -
EXHIBIT 2.3 (a) TO
CREDIT AGREEMENT
REVOLVING NOTE
$700,000 March 29, 0000
Xx. Xxxx, Xxxxxxxxx
FOR VALUE RECEIVED, WTC INDUSTRIES, INC., a Delaware
corporation PENTAPURE INCORPORATED, a Minnesota corporation, and Xxxxxx X. Xxxx,
Xx. hereby jointly and severally promise to pay to the order of U.S. BANK
NATIONAL ASSOCIATION (the "Lender") at its office in St. Xxxx, Minnesota, in
lawful money of the United States of America in immediately available funds on
the Revolving Maturity Date (as such term and each other capitalized term used
herein are defined in the Credit Agreement hereinafter referred to) the
principal amount of SEVEN HUNDRED THOUSAND DOLLARS AND NO CENTS ($700,000) or,
if less, the aggregate unpaid principal amount of all Revolving Advances made by
the Lender under the Credit Agreement, and to pay interest (computed on the
basis of actual days elapsed and a year of 360 days) in like funds on the unpaid
principal amount hereof from time to time outstanding at the rates and times set
forth in the Credit Agreement.
This note is the Revolving Note referred to in the Credit
Agreement dated as of March 29, 2000 (as the same may be hereafter from time to
time amended, restated or modified, the "Credit Agreement") between the
undersigned and the Lender. This note is secured, it is subject to certain
permissive and mandatory prepayments and its maturity is subject to
acceleration, in each case upon the terms provided in said Credit Agreement.
In the event of default hereunder, the undersigned agrees to
pay all costs and expenses of collection, including reasonable attorneys' fees.
The undersigned waives demand, presentment, notice of nonpayment, protest,
notice of protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL
LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
WTC INDUSTRIES, INC.
By /s/ Xxxx Xxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
PENATPURE INCORPORATED
By /s/ Xxxx Xxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
/s/ Xxxxxx X. Xxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxx, Xx.
EXHIBIT 2.3(b) TO
CREDIT AGREEMENT
KLAS REVOLVING NOTE
$750,000 March 29, 0000
Xx. Xxxx, Xxxxxxxxx
FOR VALUE RECEIVED, Xxxxxx X. Xxxx, Xx. hereby promises to pay
to the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its office in
St. Xxxx, Minnesota, in lawful money of the United States of America in
immediately available funds on the Klas Revolving Maturity Date (as such term
and each other capitalized term used herein are defined in the Credit Agreement
hereinafter referred to) the principal amount of SEVEN HUNDRED FIFTY THOUSAND
DOLLARS AND NO CENTS ($750,000) or, if less, the aggregate unpaid principal
amount of all Klas Revolving Advances made by the Lender under the Credit
Agreement, and to pay interest (computed on the basis of actual days elapsed and
a year of 360 days) in like funds on the unpaid principal amount hereof from
time to time outstanding at the rates and times set forth in the Credit
Agreement.
This note is the Klas Revolving Note referred to in the Credit
Agreement dated as of March 29, 2000 (as the same may be hereafter from time to
time amended, restated or modified, the "Credit Agreement") between the
undersigned and related entities and the Lender. This note is subject to certain
permissive and mandatory prepayments and its maturity is subject to
acceleration, in each case upon the terms provided in said Credit Agreement.
In the event of default hereunder, the undersigned agrees to
pay all costs and expenses of collection, including reasonable attorneys' fees.
The undersigned waives demand, presentment, notice of nonpayment, protest,
notice of protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL
LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
/s/ Xxxxxx X. Xxxx, Xx.
----------------------------
Xxxxxx X. Xxxx, Xx.
EXHIBIT 2.3 (c) TO
CREDIT AGREEMENT
TERM NOTE
$750,000 March 29, 0000
Xx. Xxxx, Xxxxxxxxx
FOR VALUE RECEIVED, WTC INDUSTRIES, INC., a Delaware
corporation, PENTAPURE INCORPORATED, a Minnesota corporation, and Xxxxxx X.
Xxxx, Xx. hereby jointly and severally promise to pay to the order of U.S. BANK
NATIONAL ASSOCIATION (the "Lender") at its office in St. Xxxx, Minnesota, in
lawful money of the United States of America in immediately available funds, the
principal amount of SEVEN HUNDRED FIFTY THOUSAND DOLLAR AND NO CENTS ($750,000)
or if less, the full amount of Advances made under the Term Loan (as such term
and each capitalized term used herein are defined in the Credit Agreement
hereinafter defined) during the Advancing Period, and to pay interest (computed
on the basis of actual days elapsed and a year of 360 days) in like funds on the
unpaid principal amount hereof from time to time outstanding at the rate set
forth in the Credit Agreement. The Borrower may elect to fix the interest rate
on this Note as described in the Credit Agreement. If the Borrower elects to fix
the interest rate, a prepayment premium may apply as described in the Credit
Agreement if the Borrower elects to prepay the principal.
Interest shall be payable on the first day of each month
following the end of the Advancing Period. Commencing April 1, 2001, principal
and interest shall be paid in equal installments of $34,000 commencing and
continuing on the first day of each month through May 1, 2002, with one final
installment equal to the entire remaining unpaid principal balance and all
accrued and unpaid interest on May 31, 2002.
This note is the Term Note referred to in the Credit Agreement
dated as of March 29, 2000 (as the same may hereafter be from time to time
amended, restated or otherwise modified, the "Credit Agreement") between the
undersigned and the Lender. This note is secured and its maturity is subject to
acceleration, in each case upon the terms provided in said Credit Agreement.
In the event of default hereunder, the undersigned agrees to
pay all costs and expenses of collection, including reasonable attorneys' fees.
The undersigned waives demand, presentment, notice of nonpayment, protest,
notice of protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL
LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
WTC INDUSTRIES, INC.
By /s/ Xxxx Xxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
PENATPURE INCORPORATED
By /s/ Xxxx Xxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
/s/ Xxxxxx X. Xxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxx, Xx.
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated as of March 29, 2000, is
made and given by XXXXXX X. XXXX, XX., an individual residing in Minnesota, (the
"Junior Creditor") in favor of U.S. BANK NATIONAL ASSOCIATION, a national
banking association (the "Senior Creditor").
RECITALS:
A. WTC Industries, Inc., a Delaware corporation (the
"Borrower"), is or may become indebted to the Junior Creditor by reason of loans
or other extensions of credit made or to be made by the Junior Creditor to the
Borrower.
B. The Borrower is now, or may hereafter be, indebted to the
Senior Creditor as a result of the advance of monies and other extensions of
credit by the Senior Creditor to the Borrower under agreements or arrangements
for the extension of financial accommodations now, heretofore or hereafter in
effect.
C. The Junior Creditor acknowledges that the loan or advance
of monies or other extensions of any financial accommodation or credit to the
Borrower by the Senior Creditor is of value to the Junior Creditor.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged by the Junior Creditor, and in order to induce
the Senior Creditor to make loans or extend credit or any other financial
accommodation to or for the benefit of the Borrower, or to grant such renewals
or extension thereof as the Senior Creditor may deem advisable, and to better
secure the Senior Creditor in respect of the foregoing, the Junior Creditor
hereby agrees as follows:
Section 1. Definitions, Rules of Constructions.
1(a) For purpose of this Agreement, the following terms shall
have the following meanings:
"Bankruptcy Code" shall mean 11 U.S.C.ss.101 et seq., as
amended from time to time.
"Borrower" shall mean WTC Industries, Inc. and any successor
(including a debtor-in- possession under the Bankruptcy Code),
assignee, receiver, trustee or estate thereof.
"Default" shall mean any event which with the giving of notice
or lapse of time, or both, would become an Event of Default.
"Event of Default" shall mean (i) any failure of the Borrower
to pay when due (whether at the date scheduled therefor or earlier upon
acceleration) or when demanded (with respect to
any obligation payable on demand) any item constituting Senior Debt,
(ii) the occurrence of any other event constituting a default under the
terms of any of the Senior Debt, or (iii) any event shall occur or
condition shall exist and shall continue for more than the period of
grace, if any, applicable thereto and shall have the effect of causing
any item of Senior Debt to become due prior to its stated maturity or
to realize upon any collateral given as security therefor.
"Junior Creditor" shall mean Xxxxxx X. Xxxx, Xx. and any
successor thereto (including a debtor-in-possession under the
Bankruptcy Code), assignee, receiver, trustee or estate thereof.
"Permitted Payments" shall have the meaning given in Section 3
below.
"Person" shall mean an individual, corporation, association,
partnership, limited partnership, trust, organization, individual or
government or any governmental agency or any political subdivision
thereof.
"Senior Creditor" shall mean U.S. Bank National Association,
its successors and its assignees with respect to any of the Senior
Debt.
"Senior Debt" shall mean all liabilities and obligations of
the Borrower to the Senior Creditor howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, joint,
several or joint and several, due or to become due, now existing or
hereafter arising or incurred, including, without limitation, any and
all interest accruing on any of the Senior Debt after the commencement
of any proceedings referred to in Section 5 hereof, notwithstanding any
provision or rule of law which might restrict the rights of the Senior
Creditor, as against the Borrower or anyone else, to collect such
interest.
"Subordinated Debt" shall mean all liabilities and obligations
of the Borrower to the Junior Creditor (except for wages earned for
services rendered at the rate in effect on the date of this Agreement),
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising or incurred, under any written or unwritten agreement.
1(b) In this Agreement, in the computation of a period of time
from a specified date to a later specified date, unless otherwise stated the
word "from" means "from and including" and the word "to" or "until" each means
"to but excluding."
1(c) Other terms may be defined in other parts of this
Agreement. All references to agreements and other contractual instruments shall
be deemed to include all subsequent amendments thereto or changes therein
entered into in accordance with their respective terms, and all references to
Persons shall be deemed to include their permitted successors and assigns.
Unless the context in which used herein otherwise clearly requires, "or" has the
inclusive meaning represented by the phrase
- 2 -
"and/or." All incorporations by reference of covenants, terms, definitions or
other provisions from other agreements are incorporated into this Agreement as
if such provisions were fully set forth herein, and include all necessary
information and related provisions from such other agreements, and all such
covenants, terms, definitions or other provisions from other agreements
incorporated into this Agreement by reference shall survive any termination of
such other agreements until the Senior Debt has been paid in full and all
financing arrangements between the Borrower and the Senior Creditor shall have
been terminated.
Section 2. Standby; Subordination. The payment and performance
of the Subordinated Debt is hereby subordinated to the payment and performance
of the Senior Debt, and, except as set forth in Section 3 below, the Junior
Creditor will not ask, demand, xxx for, take or receive from the Borrower or any
other Person liable for all or any part of the Senior Debt, by setoff or in any
other manner, the whole or any part of the Subordinated Debt, or any monies
which may now or hereafter be owing in respect of the Subordinated Debt (whether
such amounts represent principal or interest, or obligations which are due or
not due, direct or indirect, absolute or contingent), including, without
limitation, taking any security for any of the foregoing, or the taking of any
negotiable instrument therefor, unless and until all of the Senior Debt shall
have been fully paid and satisfied and all financing arrangements between the
Borrower and Senior Creditor have been terminated. The Junior Creditor warrants
and represents that the Subordinated Debt is unsecured and agrees that (a) the
Junior Creditor hereafter will not accept any security therefor from the
Borrower, or from any third Person for the benefit of the Borrower; and (b) in
the event the Junior Creditor does obtain any security for the Subordinated
Debt, (i) all liens and security interests of the Junior Creditor in any assets
of the Borrower or any assets securing the Senior Debt shall be and hereby are
subordinated to the rights and interests of the Senior Creditor, if any, in
those assets, (ii) the Junior Creditor shall have no right to possession of any
such assets or to foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all the Senior Debt shall have been fully paid and
satisfied and all financing arrangements between the Borrower and Senior
Creditor have been terminated, and (iii) at the request of the Senior Creditor,
the Junior Creditor shall execute and deliver to the Senior Creditor such
termination statements and releases as the Senior Creditor shall reasonably
request to release the Junior Creditor's security interest in or lien against
such property. The Junior Creditor, prior to the payment in full and discharge
of the Senior Debt and the termination of all financing arrangements between the
Borrower and the Senior Creditor, shall have no right to enforce any claim with
respect to the Subordinated Debt, or to take any action against the Borrower or
the property of the Borrower or of any other Person liable for all or any part
of the Senior Debt for the benefit of the Borrower. The Junior Creditor
acknowledges and agrees that, to the extent the terms and provisions of this
Agreement are inconsistent with any agreement or understanding between the
Junior Creditor and the Borrower, such agreement or understanding shall be
subject to this Agreement.
Section 3. Permitted Payments. Notwithstanding the provisions
of Section 2 of this Agreement, until the Senior Creditor gives the Junior
Creditor written notice (in the manner set forth below) of the occurrence of an
Event of Default, and provided that:
- 3 -
(i) there shall not then exist any breach of this
Agreement by the Junior Creditor which has not been
waived, in writing, by the Senior Creditor,
(ii) at the time of the payment described below no Event
of Default exists and is continuing,
(iii) the payment described below, if made, would not give
rise to the occurrence of any Event of Default, and
(iv) none of the events described in Section 5 has
occurred,
the Borrower may pay to the Junior Creditor, and the Junior Creditor may accept
from the Borrower interest payments when due (without acceleration) on any of
the Subordinated Debt (the "Permitted Payments").
Section 4. Subordinated Debt Owed Only to the Junior Creditor.
The Junior Creditor warrants and represents that the Junior Creditor has not
previously assigned any interest in the Subordinated Debt, that no other Person
owns an interest in the Subordinated Debt (whether as joint holders of
Subordinated Debt, participants or otherwise) and that the entire Subordinated
Debt is owing only to the Junior Creditor. The Junior Creditor further covenants
that the entire Subordinated Debt shall continue to be owing only to the Junior
Creditor unless it is assigned with the prior written consent of the Senior
Creditor to a Person who agrees with the Senior Creditor to be bound by the
subordination provisions set forth herein.
Section 5. Priority. In the event of (a) any distribution,
division, or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of the Borrower
or the proceeds thereof to the creditors of the Borrower or to their claims
against the Borrower, or (b) any readjustment of the debt or obligations of the
Borrower; whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding involving the readjustment of all or any part of the Senior Debt or
Subordinated Debt, or the application of the assets of the Borrower to the
payment or liquidation thereof, or (c) the dissolution or other winding up of
the business of the Borrower, or (d) the sale of all or substantially all of the
assets of the Borrower, then, and in any such event, the Senior Creditor shall
be entitled to receive payment in full of all of the Senior Debt prior to the
payment of all or any part of the Subordinated Debt.
Section 6. Grant of Authority to Senior Creditor. In order to
enable the Senior Creditor to enforce its rights hereunder in any of the actions
or proceedings described in Section 5, the Senior Creditor is hereby irrevocably
authorized and empowered, in its discretion, to file and present for and on
behalf of the Junior Creditor such proofs of claims or other motions or
pleadings as the
- 4 -
Senior Creditor may deem expedient or proper to establish the Senior Creditor's
entitlement of payment from, or on behalf of, the Junior Creditor with respect
to the Subordinated Debt and to vote such proofs of claims in any such
proceeding and to demand, xxx for, receive and collect any and all dividends or
other payments or disbursements made thereon in whatever form the same may be
paid or issued and to apply the same on account of any of the Senior Debt. The
Junior Creditor irrevocably authorizes and empowers the Senior Creditor to
demand, xxx for, collect and receive each of the payments and distributions
described in Section 5 above and give acquittance therefor and to file claims
and take such other actions, in the Senior Creditor's own name or in the name of
the Junior Creditor or otherwise, as the Senior Creditor may deem necessary or
advisable for the enforcement of this Agreement. To the extent that payments of
distributions are made in property other than cash, the Junior Creditor
authorizes the Senior Creditor to sell such property to such buyers and on such
terms as the Senior Creditor, in its sole discretion, shall determine. The
Junior Creditor will execute and deliver to the Senior Creditor such powers of
attorney, assignments and other instruments or documents, including debentures
(together with such assignments or endorsements as the Senior Creditor shall
deem necessary), as may be reasonably requested by the Senior Creditor in order
to enable the Senior Creditor to enforce any and all claims upon or with respect
to any or all of the Subordinated Debt and to collect and receive any and all
payments and distributions which may be payable or deliverable at any time upon
or with respect to the Subordinated Debt, all for the Senior Creditor's own
benefit.
Section 7. Payments Received by the Junior Creditor. Except
for Permitted Payments, if the Junior Creditor receives any payment or
distribution or security or instrument or proceeds thereof upon or with respect
to the Subordinated Debt prior to the payment in full of the Senior Debt and
termination of all financing arrangements between the Borrower and the Senior
Creditor, the Junior Creditor shall receive and hold the same in trust, as
trustee, for the benefit of the Senior Creditor and shall forthwith deliver the
same to the Senior Creditor in precisely the form received (except for the
endorsement or assignment by the Junior Creditor where necessary), for
application on any of the Senior Debt, due or not due and, until so delivered,
the same shall be held in trust by the Junior Creditor as the property of the
Senior Creditor. In the event of the failure of the Junior Creditor to make any
such endorsement or assignment to the Senior Creditor, the Senior Creditor, or
any of its officers or employees, is hereby irrevocably authorized to make the
same.
Section 8. Continuing Nature of Subordination. This Agreement
shall be effective and may not be terminated or otherwise revoked by the Junior
Creditor until the Senior Debt shall have been fully paid and discharged and all
financing arrangements between the Borrower and the Senior Creditor have been
terminated. This is a continuing agreement of subordination and the Senior
Creditor may continue, at any time and without notice to the Junior Creditor, to
extend credit or other financial accommodations and loan monies to or for the
benefit of the Borrower in reliance hereon. No obligation of the Junior Creditor
hereunder shall be affected by the death or incapacity of, or written revocation
by, the Junior Creditor or any other subordinated party, pledgor, endorser, or
guarantor, if any.
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Section 9. Additional Agreements Between Senior Creditor and
Borrower. The Senior Creditor, at any time and from time to time, may enter into
such agreement or agreements with the Borrower as the Senior Creditor may deem
proper, increasing the amount of, extending the time of payment of or renewing
or otherwise altering the terms of all or any of the Senior Debt or affecting
any security underlying any or all of the Senior Debt, and may exchange, sell,
release, surrender or otherwise deal with any such security, without in any way
thereby impairing or affecting this Agreement.
Section 10. Bankruptcy Issues. If the Borrower becomes the
subject of proceedings under the Bankruptcy Code and if the Senior Creditor
desires to permit the use of cash collateral or to provide financing to the
Borrower under either Section 363 or Section 364 of the Bankruptcy Code, the
Junior Creditor agrees that adequate notice of such financing to the Junior
Creditor, if required under applicable law, shall have been provided if the
Junior Creditor receives notice two (2) business days prior to entry of any
order approving such cash collateral usage or financing. Notice of a proposed
financing or use of cash collateral shall be deemed given upon the sending of
such notice to the Junior Creditor in the manner specified in Section 16. All
allocations of payments between the Senior Creditor and the Junior Creditor
shall continue to be made after the filing of a petition under the Bankruptcy
Code on the basis provided in this Agreement. In the event that the Junior
Creditor at any time acquires any security for the Subordinated Debt, the Junior
Creditor agrees not to assert any right he may have to "adequate protection" of
his interest in such security in any Bankruptcy proceeding, or to seek to have
his claims in such Bankruptcy proceeding treated as "secured claims" under
Section 506(a) of the Bankruptcy Code, without the prior written consent of the
Senior Creditor. The Junior Creditor waives any claim the Junior Creditor may
now or hereafter have against the Senior Creditor arising out of the Senior
Creditor's election, in any proceeding instituted under Chapter 11 of the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, and/or any borrowing or grant of a security interest under Section 364 of
the Bankruptcy Code by the Borrower, as debtor in possession, or by a trustee.
To the extent that the Senior Creditor receives payments on, or proceeds of any
collateral for, the Senior Debt which are subsequently avoided, invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any Bankruptcy law, state
or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Senior Debt, or part thereof, intended to be
satisfied shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by the Senior Creditor.
Section 11. Instrument Legend; No Amendments to Subordinated
Instruments. Any agreement or instrument evidencing the Subordinated Debt, or
any portion thereof, which has been or is hereafter executed by the Borrower
will, on the date hereof or the date of execution, be inscribed with a legend
conspicuously indicating that payment thereof is subordinated to the claims of
the Senior Creditor pursuant to the terms of this Agreement and a copy of any
such instrument bearing such legend will be deposited with the Senior Creditor.
The original of any such agreement or instrument will be delivered to the Senior
Creditor within five (5) Business Days after the date such delivery is demanded
by the Senior Creditor. The Junior Creditor will not agree to any amendment,
restatement or other
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modification of any such instrument or agreement or any other agreement or
document evidencing the Subordinated Debt without the prior written consent of
the Senior Creditor.
Section 12. Waivers. The Senior Debt shall be deemed to have
been made or incurred in reliance upon this Agreement. The Junior Creditor
expressly waives all notice of the acceptance by the Senior Creditor of the
subordination and other provisions of this Agreement and all other notices not
specifically required pursuant to the terms of this Agreement whatsoever, and
the Junior Creditor expressly waives reliance by the Senior Creditor upon the
subordination and other agreements as herein provided. The Junior Creditor
agrees that the Senior Creditor has made no warranties or representations with
respect to the collectability of the Senior Debt, and that the Senior Creditor
shall be entitled to manage and supervise its loans and other financial
accommodations to the Borrower without regard to the existence of any rights
that the Junior Creditor may now or hereafter have in or to any of the assets of
the Borrower. The Junior Creditor agrees that the Senior Creditor shall have no
liability to the Junior Creditor for, and waives any claim which the Junior
Creditor may now or hereafter have against, the Senior Creditor arising out of
any and all actions which the Senior Creditor in good faith takes or omits to
take (including, without limitation, actions with respect to any security for
the Senior Debt, actions with respect to the occurrence of an Event of Default,
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any security for the Senior Debt and actions with
respect to the collection of any claim for all or any part of the Senior Debt
from any guarantor or other party) with respect to any agreement related to any
Senior Debt or to the collection of the Senior Debt or the valuation, use,
protection or release of any security for the Senior Debt.
Section 13. Senior Creditor's Waivers. No waiver shall be
deemed to be made by the Senior Creditor of any of its rights hereunder unless
the same shall be in writing signed on behalf of the Senior Creditor, and each
waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the Senior Creditor or the
obligations of the Junior Creditor to the Senior Creditor in any other respect
at any other time.
Section 14. Financial Condition of Borrower; Other Actions by
the Senior Creditor. The Junior Creditor hereby assumes responsibility for
keeping informed of the financial condition of the Borrower, any and all
endorsers and any and all guarantors of the Subordinated Debt and of all other
circumstances bearing upon the risk of nonpayment of the Senior Debt and/or the
Subordinated Debt that diligent inquiry would reveal. The Junior Creditor hereby
agrees that the Senior Creditor shall have no duty to advise the Junior Creditor
of information known to the Senior Creditor regarding such condition or any such
circumstances. In the event the Senior Creditor, in its sole discretion,
undertakes, at any time or from time to time, to provide any such information to
the Junior Creditor, the Senior Creditor shall be under no obligation (i) to
provide any such information to the Junior Creditor on any subsequent occasion,
(ii) to undertake any investigation not a part of its regular business routine,
or (iii) to disclose any information which, pursuant to its usual practices, the
Senior Creditor wishes to maintain confidential. The Junior Creditor hereby
agrees that all payments received by the Senior Creditor may
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be applied, in whole or in part, to any of the Senior Debt, as the Senior
Creditor, in its sole discretion, deems appropriate and assents to any extension
or postponement of the time of payment of the Senior Debt or to any other
indulgence with respect thereto, to any substitution, exchange or release of
collateral which may at any time secure the Senior Debt and to the addition or
release of any other Person primarily or secondarily liable therefor.
Section 15. Subrogation. When the Senior Debt shall have been
fully paid and discharged and all financing arrangements between the Borrower
and the Senior Creditor have been terminated, the Junior Creditor shall be
subrogated to the rights of the Senior Creditor to receive payments or
distribution of assets of the Borrower made on such Senior Debt until the
principal of and premium, if any, and interest on (and any other amounts due
with respect to) the Subordinated Debt shall be paid in full. For the purposes
of such subrogation, no payments or distributions to the Senior Creditor of any
cash, property or securities to which the Junior Creditor would be entitled
except for these provisions shall, as between the Borrower, its creditors other
than the Senior Creditor, and the Junior Creditor, be deemed to be a payment by
the Borrower to or on account of Senior Debt, it being understood that these
provisions in this Section are used, and are intended, solely for the purpose of
defining the relative rights of the Junior Creditor, on the one hand, and the
Senior Creditor, on the other hand.
Section 16. Notices. All communications and notices provided
under this Agreement to any party shall be given in writing by manual delivery,
facsimile transmission, overnight courier or United States first class mail to
such party's address shown on the signature page hereof, or to any party at such
other address as may be designated by such party in a notice to the other
parties. All periods of notice shall be measured from the date of deliver
thereof if manually delivered, from the date of sending if sent by facsimile
transmission, from the first business day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Section 17. Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF.
Section 18. Consent to Jurisdiction. AT THE OPTION OF THE
SENIOR CREDITOR, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN OR XXXXXX COUNTY, MINNESOTA; AND THE
JUNIOR CREDITOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE JUNIOR CREDITOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER
ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE SENIOR CREDITOR AT ITS
- 8 -
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 19. Waiver of Jury Trial. THE JUNIOR CREDITOR, AND THE
SENIOR CREDITOR BY ITS ACCEPTANCE HEREOF, IRREVOCABLY WAIVE ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY CREDIT
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 20. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Section 21. Miscellaneous.
21(a) This Agreement and the terms, covenants and
conditions hereof shall inure to the benefit of the Senior Creditor and its
successors and assigns. Nothing contained in this Agreement, expressed or
implied, is intended to confer upon any Person other than the parties hereto and
thereto any rights, remedies, obligations or liabilities hereunder or
thereunder.
21(b) This Agreement sets forth the entire
understanding of the parties hereto relating to the subject matter hereof, and
all prior understandings and negotiations, written or oral, are merged into and
superseded by this Agreement. Any modification, amendment or waiver of this
Agreement or any provision herein shall be binding upon the Senior Creditor only
if contained in a writing signed by or on behalf of the Senior Creditor. No
failure on the part of the Senior Creditor to exercise and no delay in
exercising any power or right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any power or right preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
21(c) The Junior Creditor hereby acknowledges that
(a) he has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents,
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(b) the Senior Creditor has no fiduciary relationship to the Junior Creditor,
and (c) no joint venture exists between the Junior Creditor and the Senior
Creditor.
21(d) The section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
21(e) All covenants, agreements, representations and
warranties made in this Agreement and in any certificates or other papers
delivered by or on behalf of the Junior Creditor pursuant hereto shall be deemed
to have been relied upon by the Senior Creditor and shall survive the execution
and delivery of this Agreement, and shall continue in full force and effect so
long as any Senior Debt remains outstanding and unpaid or any financing
arrangement between the Borrower and the Senior Creditor remains in effect. All
statements of fact relating to the Junior Creditor contained in any certificate
or other paper delivered to the Senior Creditor at any time after the date
hereof by or on behalf of the Junior Creditor pursuant hereto or in connection
with the transactions contemplated hereby shall constitute representations and
warranties by the undersigned hereunder.
21(f) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, this Agreement has been executed on the
date first set forth above.
THE JUNIOR CREDITOR:
-----------------------------
Xxxxxx X. Xxxx, Xx.
Address for Notice:
000 Xxxxx Xxx. X
Xxxx Xx. Xxxx, XX 00000
Fax: [ ]
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Accepted:
U.S. BANK NATIONAL ASSOCIATION
By /s/ Xxxxx Xxxxx
----------------------------------
Title Vice President
-------------------------------
Address for Notice:
000 Xxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
ACCEPTANCE AND ACKNOWLEDGMENT
The Borrower named above hereby accepts, and acknowledges receipt of a
copy of, the foregoing Subordination Agreement and agrees that it will not pay
any of the "Subordinated Debt" (as defined in the foregoing Agreement) or grant
any security therefor, except as the foregoing Agreement provides.
WTC INDUSTRIES, INC.
By /s/ Xxxx Xxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
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Warrant to purchase Common Stock, par value
$.10 per share, of the Company for an
exercise price of $5.00 per share
WARRANT TO PURCHASE COMMON STOCK
OF
WTC INDUSTRIES, INC.
This certifies that U.S. Bank National Association, a national banking
association, or its permitted successors or assigns (the "HOLDER"), is entitled,
subject to the terms set forth below, at any time or from time to time to
purchase from WTC Industries, Inc., a Delaware corporation (the "COMPANY"),
15,000 fully paid and non-assessable shares (the "WARRANT SHARES") of the
Company's Common Stock, par value $.10 per share (the "COMMON STOCK"), at the
exercise price per share of $5.00 (the "EXERCISE PRICE"). This Warrant, dated
March 29, 2000, is issued pursuant to Section 2.19 of the Credit Agreement,
dated as of March 29, 2000, by and between the Company, its affiliates
PentaPure, Inc., Xxxxxx X. Xxxx, Xx., and the initial Holder (the "Credit
Agreement").
SECTION 1. This Warrant. This Warrant does not entitle the Holder to
any rights as a stockholder of the Company, except as set forth herein or in the
Company's Certificate of Incorporation, as amended from time to time.
SECTION 2. Exercise. This Warrant may be exercised on any Business Day,
in full or in part, at any time or from time to time, during the Exercise Period
(as defined below) by surrendering this Warrant at the principal office of the
Company, 000 Xxxxx Xxxxxx Xxxxx, Xx. Xxxx, Xxxxxxxxx 00000 (or at such other
office of the Company in the United States as the Company may designate from
time to time by notice in writing to the Holder), with the subscription form
attached hereto fully executed, together with payment of the Exercise Price in
cash or immediately available funds. The Exercise Period shall begin on the date
of the Credit Agreement and shall end on March 29, 2004. As used herein, the
term "BUSINESS DAY" shall mean any day, except a Saturday, Sunday or legal
holiday, on which commercial banking institutions are open for business in the
State of Minnesota.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the Warrant Shares issuable upon
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As soon as practicable on or
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the Warrant Shares a certificate or certificates for the
full number of Warrant Shares issuable upon such exercise.
SECTION 3. Partial Exercise. This Warrant may, in accordance with the
provisions of Section 2, be exercised for less than the full number of Warrant
Shares available at any particular time. Upon any partial exercise, this Warrant
shall be surrendered and a new Warrant representing the number of shares if any,
with respect to which this Warrant has not been exercised shall be promptly
delivered to the Holder.
SECTION 4. Registration Rights.
4.1 Demand Registration.
(a) Subject to the conditions of this Section 4.1, if the
Company shall receive at any time after the Exercise Period begins, a written
request from the Holder that the Company file a registration statement on Form
S-3 under the Securities Act covering the registration of the Warrant Shares,
then the Company shall effect, as soon as practicable, the registration under
the Securities Act of all Warrant Shares that the Holder requests to be
registered; provided that the Company is then eligible to use Form S-3 to effect
such registration.
(b) The Company shall not be obligated to effect more than one
(1) registration pursuant to this Section 4.1.
4.2 Piggyback Registrations.
(a) The Company shall notify the Holder in writing at least
thirty (30) days prior to the filing, after the Exercise Period begins, of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford the Holder an opportunity
to include in such registration statement all or part of such Warrant Shares. If
the Holder of Warrant Shares decides not to include all of its Warrant Shares in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Warrant Shares in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(b) Underwriting. If the registration statement under which
the Company gives notice under this Section 4.2 is for an underwritten offering,
the Company shall so advise the Holders. In such event, the right of the Holder
to be included in a registration pursuant to this Section 4.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Warrant Shares in the underwriting to the extent
provided herein. Notwithstanding any other provisions of this Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of Warrant Shares that
may be included in the underwriting may be reduced.
4.3 Expenses of Registration. All registration expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 4.1 or 4.2 shall be borne by the Company except for registration
expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 4.1 at the request of the Holder when such
request is made within 12 months of the commencement of the Exercise Period,
which registration expenses shall be borne by the Holder. Fees and disbursements
of special counsel and accountants for the selling Holders, underwriting
discounts and commissions, and transfer taxes for selling Holders shall be borne
by the selling Holders.
4.4 Indemnification. In the event any Warrant Shares are included in a
registration statement under Sections 4.1 or 4.2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder and each person, if any, who controls such Holder within the meaning of
the Securities Act or the Exchange Act, against any losses, claims,
-2-
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director, or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 4.4(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, or controlling person of such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 4.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further that in no event shall any indemnity under this Section 4.4(b)
exceed the gross proceeds from the offering received by such Holder unless the
Violation is the result of fraud on the part of such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 4.4 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall
-3-
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party
provided however, that if there is more than one indemnified party, the
indemnifying party shall pay for the fees and expenses of one counsel for any
and all indemnified parties to be mutually agreed upon by such indemnified
parties, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 4.4, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 4.4.
(d) If the indemnification provided for in this Section 4.4 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this
Section 4.4 shall survive the completion of any offering of Warrant Shares in a
registration statement.
4.5 Assignment of Registration Rights. The rights to cause the Company
to register Warrant Shares pursuant to this Article 4 may be assigned by a
Holder to a transferee or assignee of the Warrant or the Warrant Shares
SECTION 5. No Impairment. The Company will not avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, and will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares.
SECTION 6. Notices of Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of:
(a) entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any securities, or to receive any other right, or
-4-
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, except for mergers into
the Company of subsidiaries whose assets are less than fifty percent (50%) of
the total assets of the Company and its consolidated subsidiaries, or any
conveyance of all or substantially all of the assets of the Company to another
corporation, or
c) any voluntary dissolution, liquidation or winding-up of the
Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Holder a notice specifying the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any,
to be fixed as of which the holders of record of the Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least fifteen (15) days prior to the date therein specified. The
rights to notice provided in this Section 9 are in addition to the rights
provided elsewhere herein.
SECTION 7. Notices. All notices and other communications from the
Company to the Holder shall be mailed by first class registered or certified
mail, postage prepaid, or sent by express overnight courier service or
electronic facsimile transmission (with a copy by mail) at the address or
facsimile number furnished to the Company in writing by the last Holder of this
Warrant who shall have furnished an address or facsimile number to the Company
in writing.
SECTION 8. Loss or Mutilation. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or a replacement hereof and, in the case of any such loss, theft or
destruction, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant or a replacement, the
Company at its expense will execute and deliver, in lieu thereof, a new warrant
of like tenor.
SECTION 9. Reservation of Stock, etc. Issuable on Exercise of Warrant.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all Warrant Shares from time to
time issuable upon the exercise of this Warrant.
SECTION 10. Change. Waiver. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
SECTION 11. Assignment. The Holder may transfer its rights, interests
and obligations under this Warrant, by execution of the form of assignment
attached hereto. The rights, interests and obligations of the Company under this
Warrant may not be assigned without the prior written consent of the Holder.
SECTION 12. Headings. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
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SECTION 13. Law Governing. This Warrant is delivered in the State of
Minnesota and shall be construed and enforced in accordance with and governed by
the internal laws of such State, without giving effect to its conflicts of laws
provisions.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
ATTEST: WTC INDUSTRIES, INC.
/s/ Xxxx Xxxxxx By: /s/ Xxxxxx X. Xxxx, Xx.
----------------------------- ----------------------------
Secretary Its: Chief Executive Officer
-------------------------
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ALL RIGHTS TO RECEIVE PAYMENTS UNDER THIS NOTE ARE SUBJECT TO A SUBORDINATION
AGREEMENT AMONG WTC INDUSTRIES, INC., XXXXXX X. XXXX, XX. AND U.S. BANK NATIONAL
ASSOCIATION.
THIS NOTE AND THE CAPITAL STOCK THAT MAY BE ISSUED UPON ITS CONVERSION HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD, TRANSFERRED, OR PLEDGED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND STATUTES OR, UNLESS PRIOR TO
ANY SALE, TRANSFER, OR PLEDGE, THE ISSUER RECEIVES AN OPINION OF COUNSEL, IN
FORM AND SUBSTANCE SATISFACTORY TO IT, THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT AND STATUTES AND THE RULES PROMULGATED THEREUNDER.
CONVERTIBLE PROMISSORY NOTE
PRINCIPAL AMOUNT: $750,000 DATE: MARCH 29, 2000
FOR VALUE RECEIVED, the undersigned, WTC Industries, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of Xxxxxx X.
Xxxx, Xx. (the "Lender") the principal sum of Seven Hundred Fifty Thousand
Dollars ($750,000), together with interest on the unpaid principal balance from
the date hereof at a per annum rate of two percent (2%) plus the 30-day LIBOR
rate.
1. Payments.
1.1 Principal hereunder shall be due and payable on March 29,
2001. Interest shall be payable monthly on the last day of each month. All
payments of principal and/or interest under this Note will be made in lawful
money of the United States in immediately available funds or the equivalent at
the following address: 000 Xxxxx Xxxxxx Xxxx, Xxxx Xx. Xxxx, Xxxxxxxxx
00000-0000, or at such other address as the Lender may designate in writing.
1.2 The Company may prepay all or any part of the principal
amount hereof at any time or from time to time, without penalty or premium. All
payments made hereunder shall be applied first to accrued but unpaid interest,
and then to reduce the principal balance owing on this Note. The acceptance by
the Lender of any payment under this Note which is less than payment in full of
all amounts due and payable at the time of such payment shall not constitute a
waiver of or impair, reduce, release or extinguish any remedy of the Lender, at
that time or at any subsequent time.
1.3 Notwithstanding anything herein to the contrary, in no
event shall the interest paid hereunder exceed the maximum amount permissible
under applicable law. If interest would otherwise be payable to the Lender in
excess of the maximum lawful amount, the interest payable to the Lender shall be
reduced to the maximum amount permitted under
applicable law; and in the event that the Lender shall ever receive anything of
value deemed interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall be applied to the reduction of
the principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof such excess shall be
refunded to the Company.
2. Subordination.
The indebtedness evidenced by this Note shall be junior and subordinate
to any indebtedness now existing or hereafter incurred by the Company to any
bank or financial institution. The Holder agrees that if a financial institution
extends credit to the Company, the Holder will execute and deliver for the
benefit of that financial institution any subordination agreement which is
requested by such financial institution that is acceptable to the Company to
evidence the subordination of the indebtedness under this Note to the Company's
obligations to the financial institution.
3. Conversion Rights.
All or any part of the principal and interest due under this Note may
be converted into shares of the Company's common stock, at a rate of $3.00 per
share (to be adjusted equitably for stock splits, share combinations and similar
events) at any time prior to payment in full of this Note in accordance with the
terms and conditions of this Note. The Note may only be converted into full
shares of the Company's common stock. To convert this Note, the Lender must: (i)
notify the Company of the intent to convert this Note stating the principal
and/or interest amount to be converted and the name, address, and tax
identification number of the person to whom the certificate for the shares of
the Company's common stock is to be issued; (ii) surrender the Note to the
Company; (iii) furnish appropriate endorsements and transfer documents if
required by the Company and/or its transfer agent, if any; and (iv) pay any
transfer tax if required. The Company shall promptly issue to the Lender or the
person designated by Lender in the conversion notice the shares of the Company's
common stock acquired upon conversion of the Note and, if less than the entire
principal and interest due hereunder is converted into shares of the Company's
common stock, a note in the unconverted amount with terms and conditions
identical to those set forth in this Note shall also be issued to the Lender. No
fractional shares of common stock are to be issued upon conversion of this Note,
but the Company shall pay a cash adjustment in respect of any fraction of a
share which would otherwise be issuable in an amount equal to the same fraction
of the market price per share (determined in accordance with Section 8 of the
Common Stock Warrant issued to the Lender by Company of even date herewith) of
common stock of the Company on the day of conversion.
4. Non-Waiver. The failure of the Lender to enforce or exercise any
right or remedy provided in this Note or at law or in equity upon any default or
breach shall not be construed as waiving the rights to enforce or exercise such
or any other right or remedy at any later date. No exercise of the rights and
powers granted in or held pursuant to this Note by the Lender, and no delays or
omission in the exercise of such rights and powers shall be held to exhaust the
same or
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be construed as a waiver thereof, and every such right and power may be
exercised at any time and from time to time.
5. Collection Fees. In the event that any amount payable hereunder is
not paid when due, the Company shall pay all of the unpaid principal and
interest as well as all fees and expenses incurred by the Lender, including
without limitation, all counsel and expert fees and expenses.
6. Default. The following shall constitute default under this Note:
6.1 Failure of the Company to make any payments when due of
principal, interest or other costs, expenses or charges required under this
Note; or
6.2 Failure of the Company to comply with any other provisions
of this Note, including without limitation the conversion rights granted to the
Lender in Paragraph 2.
7. Remedies Upon Default. Upon the occurrence of default under this
Note, the entire principal balance of this Note and all interest and other
costs, expenses and charges thereon automatically shall immediately become due
and payable without notice or demand. This right shall be in addition to, and
not in limitation of, any and all other rights and remedies available to the
Lender at law or in equity.
8. Waiver.
8.1 The Company hereby waives presentment, protest, notice of
protest, notice of nonpayment, notice of dishonor and any and all other notices
or demands relative to this Note and the benefit of any statute of limitations
with respect to any action to enforce this Note.
8.2 The Lender acknowledges that the capitalization of the
Company is minimal and waives any claim whatever against the officers, directors
and shareholders of the Company which might arise on account of such limited
capital. This Note is solely a corporate obligation of the Company and is in no
way a personal obligation of the Company's officers, directors or shareholders,
9. WAIVER OF TRIAL BY JURY. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN ANY MATTER RELATING, DIRECTLY OR
INDIRECTLY, TO THIS NOTE.
10. Amendment. The terms and conditions of this Note shall not be
waived, altered, modified, amended, supplemented or terminated in any matter
whatsoever except by a written instrument, duly executed by the Lender and the
Company.
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11. Binding Effect. This Note shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Lender, its
successors, endorsees and assigns, except that the Company may not assign or
transfer any of its rights or obligations hereunder.
12. Invalidity. Any provision of this Note which may be determined by a
court of competent authority to be prohibited or unenforceable in jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
13. Section and Paragraph Headings. The section and paragraph headings
contained herein are for convenience only and shall not be construed as part of
this Agreement.
14. Governing Law. This Note shall be governed and construed in
accordance with the laws of the State of Minnesota (without regard to principles
of conflicts of laws).
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
the day and year first above written.
WTC INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Print Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
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