Norwest Bank Minnesota, Term Loan and
National Association Credit Agreement
This Term Loan and Credit Agreement (the "Agreement") dated as of June 1, 1995
(the "Effective Date") is between Norwest Bank Minnesota, National Association
(the "Bank") and Aequitron Medical, Inc. (the "Borrower").
BACKGROUND
The Borrower has requested that the Bank renew its existing revolving line of
credit in the amount of $2,000,000.00, which line of credit will be used for
short term working capital purposes. Borrowings under this line of credit are
currently evidenced by a promissory note dated October 1, 1994 (the "October 1,
1994 Revolving Note").
The Borrower has also requested that the Bank extend to the Borrower a
$2,500,000.00 term loan for purposes of partially financing the Borrower's
purchase of the assets of CNS, Inc.
The Bank is agreeable to meeting the Borrower's requests provided that each
credit facility extended is subject to the terms and conditions of this
Agreement.
The Revolving Note and the Term Note (all as defined below) will collectively be
referred to as the "Notes". The Revolving Note, the Term Note, this Agreement,
and all "Security Documents" described in Exhibit B may collectively be referred
to as the "Documents."
In consideration of the promises contained in this Agreement, the Borrower and
the Bank agree as follows:
1. LINE OF CREDIT
1.1 Line of Credit Amount. During the availability period described below,
the Bank agrees to provide a revolving line of credit (the "Line") to
the Borrower. Outstandings under the Line will not, at any one time,
exceed the lesser of Two Million and 00/100 Dollars ($2,000,000.00) or
the Borrowing Base less the outstanding balance of the Term Note. The
Borrowing Base is defined and calculated in accordance with Exhibit A
to this Agreement.
1.2 Line Availability Period. The Line Availability Period will mean the
period from the Effective Date to October 31, 1996 (the "Line
Expiration Date").
1.3 Advances. The Borrower's obligation to repay all advances made under
the Line will be evidenced by a single promissory note (the "Revolving
Note") dated as of the Effective Date and in form and content
acceptable to the Bank. The Revolving Note shall replace, but shall not
satisfy, the October 1, 1994 Revolving Note. Reference is made to the
Revolving Note for terms relating to interest rate, repayment and other
conditions governing the Line.
1.4 Mandatory Prepayment. If at any time the principal outstanding under
the Revolving Note exceeds the lesser of $2,000,000.00 or the Borrowing
Base less the outstanding balance of the Term Note, the Borrower must
immediately prepay the Revolving Note to the extent necessary to
eliminate the excess.
2. TERM LOAN
2.1 Term Loan Amount. The Bank agrees to provide a term loan to the
Borrower in the amount of Two Million Five Hundred and 00/100 Dollars
($2,500,000.00) (the "Term Loan"). The Borrower's obligation to repay
outstandings under the Term Loan will be evidenced by a promissory note
(the "Term Note") dated as of the Effective Date, and in form and
content acceptable to the Bank. Reference is made to the Term Note for
terms relating to interest rate, repayment and other conditions
governing the Term Loan.
2.2 Term Loan Availability Period. The Term Loan is available in one
disbursement which may be requested by the Borrower on or after the
Effective Date but no later than July 18, 1995.
2.3 Mandatory Prepayment. If at any time the principal outstanding under
the Term Note exceeds the lesser of $2,000,000.00 or the Borrowing Base
less the outstanding balance of the Revolving Note, the Borrower must
immediately prepay the Revolving Note to the extent necessary to
eliminate the excess, and if after prepaying the Revolving Note the
outstanding balance of the Term Note continues to exceed the Borrowing
Base, the Borrower will prepay the Term Note to the extent necessary to
eliminate the excess.
3. EXPENSES
3.1 Application Fee. The Borrower has fully paid, and the Bank has earned
and accepted, a one-time application fee of $5,000.00, which will be
applied to the loan fee payable by the Borrower as provided in Section
3.6.
3.2 Non-Usage Fee. During the Line Availability Period the Borrower will
pay the Bank a nonusage fee of 0.45% per annum on the average daily
unused amount of the Line The fee will be paid quarterly in arrears.
3.3 Documentation Expenses. The Borrower agrees to pay the Bank's
reasonable expenses relating to the preparation of the Documents. The
Borrower also agrees to pay the Bank's future expenses relating to any
amendments to the Documents that may be necessary in the future, and
any expenses relating to the collection of each promissory note given
by the Borrower. Expenses include, but are not limited to, reasonable
attorneys' fees, including the allocated costs of the Bank's in-house
counsel.
3.4 Collection Expenses. The Borrower agrees to pay all costs of
collection, including reasonable attorneys' fees and legal expenses
incurred by the Bank in the event the Borrower fails to pay the Bank
any amounts due under any promissory note or the Documents.
3.5 Audit Expense. The Borrower agrees to reimburse the Bank for the cost
of its initial prefunding collateral survey and the cost of periodic
audits of all collateral pledged to the Bank which may be conducted at
such intervals as the Bank may reasonably require. The audits may be
performed by employees of the Bank or independent contractors retained
by the Bank.
3.6 Loan Fee. The Borrower will pay a $25,000.00 loan fee in consideration
of the Term Loan, which is due on the Effective Date.
3.7 Miscellaneous Expense. The Borrower agrees to reimburse the Bank for
all expenses paid to third parties relating to the perfection of its
security interest in collateral pledged to the Bank.
4. DISBURSEMENTS AND PAYMENTS
4.1 Requests for Advances. Any advance permitted under this Agreement must
be requested in a writing in the form of Exhibit B transmitted to the
Bank via facsimile, with the original to be delivered to the Bank via
United States mail. The Bank will not consider any request for an
advance under the Line or consider disbursing the Term Loan if there is
an event which is, or with notice or the lapse of time would be, an
event of default under this Agreement. Proceeds from an advance under
the Line or a disbursement under the Term Loan will be deposited into
the Borrower's account at the Bank or disbursed in such other manner as
the Bank and the Borrower mutually agree.
4.2 Optional Cost of Funds Interest Rate Advances. According to the terms
of the Replacement Note, the Borrower may elect interest rates based on
the Bank's cost of funds index. To elect a Cost of Funds Rate Option,
as defined in the Term Note, the Borrower must, prior to funding,
request a quote from the Bank. This request must designate an amount
(the "Cost of Funds Rate Portion") and a period (the "Cost of Funds
Interest Period"). The Cost of Funds Interest Period will be any period
of time mutually agreed to by the Bank and the Borrower. The Borrower
must orally accept a quote at the time of receipt or it will be deemed
rejected. If accepted, the Cost of Funds Rate Option will remain in
effect for the Cost of Funds Interest Period specified in the quote. At
the end of each Cost of Funds Interest Period the principal amount
subject to the Cost of Funds Rate Portion shall bear interest at the
Base Rate Option (as defined in the Replacement Note).
4.3 Performance Based Rate Reductions / Premiums. The Borrower, depending
on its financial performance as measured under the performance
standards set forth in Sections 4.3(a) or (c), may be entitled to a
reduced rate of interest on its borrowings under the Replacement Note
and the Term Note, or may be subject to the payment of a rate premium
on such borrowings.
(a) Rate Reduction. The Bank shall discount the otherwise applicable rate
of interest in effect at any time under the Replacement Note or under
the Term Note by 0.29% at any time after August 1, 1996 if the
Borrower's performance meets or exceeds all of the following criteria
as certified annually by the Borrower's certified public accountants in
a certificate addressed to the Bank:
1) the Borrower's net income after taxes exceeds $575,000.00
for each quarter of the fiscal year preceding the year in which net
income is measured, for each fiscal quarter of the current fiscal year,
and for each fiscal quarter of the following fiscal year as projected
under the financial projection provided to the Bank to Section 8.1(e)
of this Agreement;
2) the Borrower remains in compliance with all covenants set
forth in this Agreement regardless of whether any default is waived or
cured by the Bank, with the exception of Section 8.1(d);
3) the Borrower's "B Score", or ratio of after tax net income
plus depreciation plus amortization to total liabilities, is greater
than 0.40 to 1.0. (this ratio shall be calculated on a rolling basis at
the end of each month using the results of that month and each of the
eleven immediately preceding months).
(b) Effective Date or Cancellation Date of Rate Reduction: Any rate
reduction shall become effective on either August 1st or the date on
which the Bank receives from the Borrower's certified public
accountants the certificate of compliance described in Section 4.3(a),
whichever is later. The rate reduction shall be canceled by the Bank,
based on its review of
the Borrower's interim financial statements effective on the first day
of the quarterly reporting period following the quarterly period in
which the Borrower fails to meet the rate reduction performance
criteria.
(c) Rate Increase. The Bank shall increase the otherwise applicable rate of
interest in effect at any time under the Replacement Note or under the
Term Note by 0.63% whenever the Bank determines from its review of the
Borrower's interim financial statements that the Borrower has failed to
comply with the following minimum performance criteria in any fiscal
quarter:
1) the Borrower's after tax net income is less than
$250,000.00;
2) the Borrower's B Score is less than 0.25 to 1.0.
(d) Effective Date or Cancellation Date of Rate Increase. Any rate increase
shall become effective on the first day of the quarterly reporting
period following the quarterly period in which the Borrower fails to
meet the minimum performance criteria set forth in Section 4.3(c). The
rate increase shall be canceled on the first day of the quarterly
reporting period following the quarterly period in which the Borrower
exceeds such minimum performance criteria.
4.4 Payments. All principal, interest and fees due under the Documents will
be paid to the Bank by the direct debit of available funds on deposit
in the Borrower's account with the Bank. The Bank will debit the
account on the dates the payments become due. If a due date does not
fall on a day on which the Bank is open for substantially all of its
business (a "Banking Day"), the Bank will debit the account on the next
Banking Day and interest will continue to accrue during the extended
period. If there are insufficient funds in the account on the day the
Bank enters any debit authorized by this Agreement, the debit will be
reversed and the payment will be due immediately without necessity of
demand by direct remittance of immediately available funds.
5. SECURITY
All amounts due under this Agreement and the Documents will be secured
as provided in Exhibit C. The Borrower also hereby grants the Bank a
security interest (independent of the Bank's right of set-off) in its
deposit accounts at the Bank and in any other debt obligations of the
Bank to the Borrower.
6. CONDITIONS PRECEDENT
Prior to each request for an advance under this Agreement, the Borrower
must also deliver to the Bank any additional documents that are
described in Exhibit C as a condition precedent to any such advance.
7. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower makes the
representations and warranties contained in Exhibit D. Each request for
an advance under this Agreement constitutes a reaffirmation of these
representations and warranties.
8. COVENANTS
During the time period that credit is available under this Agreement,
and thereafter until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to:
8.1 Financial Information
Annual Reporting Information
(a) Annual Financial Statements, CPA Management Letter and CPA Compliance
Certificate. Provide the Bank on or before July 31 of each calendar
year the Borrower's annual financial statements. The statements must be
audited with an unqualified opinion by a certified public accountant
acceptable to the Bank. The Borrower shall also deliver to the Bank the
letter to management provided by its accountants with respect to the
annual financial statements, together with a compliance certificate
prepared by the Borrower's certified public accountants in form
acceptable to the Bank, which demonstrates and certifies that the
Borrower remains in compliance with the requirements of this Agreement.
(b) Financial Projections. Provide the Bank on or before July 31st of each
year, the financial projections for the succeeding three fiscal years
of the Borrower in form acceptable to the Bank.
(c) High Performance Certification. Provide the Bank on or before July 31st
of each year, a certification from its Certified Public Accountants as
to the Borrower's compliance with the performance criteria set forth in
Section 4.3 of this Agreement, in form acceptable to the Bank.
Monthly Reporting Information
(d) Interim Financial Statements. Provide the Bank within 45 days of each
month end, the Borrower's interim financial statements certified as
correct and in form acceptable to the Bank.
(e) Borrower Prepared Compliance Certificate. Provide the Bank concurrently
with the interim financial statements required above, a compliance
certificate in the form of Exhibit E, signed by an officer of the
Borrower, which certifies that: 1) the statements have been accurately
prepared in accordance with generally accepted accounting principles
applied consistently with the Borrower's annual financial statements;
2) the Borrower remains in compliance with the covenants required by
this Agreement; and 3) if the Borrower is benefiting from a Section 4.3
rate reduction, a certification stating that the Borrower remains in
compliance with the performance criteria of Section 4.3 of the
Agreement, and information in support of such certification.
(f) Borrowing Base Certificate. Provide the Bank within 45 days of each
month end, a Borrowing Base Certificate in form acceptable to the Bank.
(g) Lawsuit Status Report. Provide the Bank within 30 days of each month
end, a status report regarding all lawsuits pending against the
Borrower in form acceptable to the Bank.
(h) Financial Performance Trending Report. Provide the Bank within 30 days
of each month end, graphs showing the trends of the Borrower's
financial performance and covenant compliance.
(i) Analysis of Significant Financial Items. Provide the Bank within 30
days of each month end, a detailed internal analysis of significant
financial and operating items affecting the Borrower's financial and
operating performance.
(j) Accounts Receivable Aging. Provide the Bank within 45 days of each
month end, an accounts receivable aging report certified as correct and
in form acceptable to the Bank.
(k) Accounts Payable Aging. Provide the Bank within 45 days of each month
end, an accounts payable aging report certified as correct and in form
acceptable to the Bank.
Other Reporting Information
(l) SEC Reporting. Provide the Bank within 30 days of filing with the
Securities and Exchange Commission, copies of its Form 10-K Annual
Report, Form 10-Q Quarterly Report and 8-K Current Report.
(m) Notices. Provide the Bank prompt written notice of: 1) any event which
has or might after the passage of time or the giving of notice, or
both, constitute an event of default under the Documents, or 2) any
event that would cause the representations and warranties contained in
this Agreement to be untrue.
(n) Additional Information. Provide the Bank with such other information as
it may reasonably request, and permit the Bank to visit and inspect its
properties and examine its books and records.
8.2 Financial Measures
(a) Cash Flow Coverage Ratio. Maintain at all times a ratio of after-tax
profit plus depreciation and amortization to Current Maturities of Long
Term Debt of at least 2.25 to 1.0.
"Current Maturities of Long Term Debt" means that portion of the
Borrower's long term debt and capital leases payable within 12 months
of the determination date.
(b) Tangible Net Worth. Maintain at all times a minimum Tangible Net Worth
of at least $9,000,000.00, plus 50% of all positive monthly net income,
beginning May 1, 1995.
"Tangible Net Worth" means total assets less total liabilities and less
the following types of assets: (1) leasehold improvements; (2)
receivables and other investments in or amounts due from any
shareholder, director, officer, employee or other person or entity
related to or affiliated with the Borrower; (3) goodwill, patents,
copyrights, mailing lists, trade names, trademarks, servicing rights,
organizational and franchise costs, bond underwriting costs and other
like assets properly classified as intangible.
(c) Total Liabilities to Tangible Net Worth Ratio. Maintain at all times a
ratio of total liabilities to Tangible Net Worth of less than 0.85 to
1.0.
(d) Current Ratio. Maintain at all times a ratio of Current Assets to
Current Liabilities of at least 2.5 to 1.0.
"Current Assets" means current assets less receivables and investments
in or other amounts due from any shareholder, director, officer,
employee or any person or entity related to or affiliated with the
Borrower.
"Current Liabilities" means current liabilities less any portion of
such current liabilities that constitute Subordinated Debt.
(e) Interest Coverage Ratio. Maintain at all times after November 1, 1995,
a ratio of net income plus income taxes plus interest expense to
interest expense of at least 2.0 to 1.0, as calculated on a rolling 12
month basis as of each month end and phased in by using the results of
November, 1995 and of each succeeding month.
(f) Debt Service Coverage Ratio. Maintain at all times after November 1,
1995, a ratio of Traditional Cash Flow plus interest expense to Current
Maturities of Long Term Debt plus interest expense of at least 1.75 to
1.0, calculated on a rolling 12 month basis as of each month end and
phased in by using the results of November, 1995 and of each succeeding
month.
"Traditional Cash Flow" means the aggregate amount of the following:
(1) net income after taxes; (2) amortization expense; (3) depreciation
and depletion expense; (4) deferred tax expense and (5) similar
non-cash charges against income which the Bank determines in its
discretion to be appropriate "add-backs".
8.3 Other Covenants
(a) Insurance. Cause its properties to be adequately insured by a reputable
insurance company against loss or damage and to carry such other
insurance (including business interruption, flood, or environmental
risk insurance) as is required of or usually carried by persons engaged
in the same or similar business. Such insurance must, with respect to
the Bank's collateral security, include a lender's loss payable
endorsement in favor of the Bank in form acceptable to the Bank. The
Borrower shall additionally maintain product liability insurance in an
amount not less than $5,000,000.00.
(b) Additional Borrowing. Refrain from incurring any indebtedness except:
(i) Trade credit incurred in the ordinary course of
business.
(ii) Purchase money indebtedness (including capitalized
leases) for the acquisition of fixed assets, provided that the
total principal amount outstanding at any one time does not
exceed $500,000.00.
(c) Other Liens. Refrain from allowing any security interest or lien on
property it owns now or in the future, except:
(i) Liens in favor of the Bank.
(ii) Liens for taxes not delinquent or which the Borrower is
contesting in good faith.
(iii) Liens which secure purchase money indebtedness allowed
under this Agreement.
(d) Sale of Assets. Refrain from selling or leasing during any fiscal year
assets with a cumulative value in excess of $500,000.00, other than
sales of inventory in the ordinary course of business.
(e) Business Acquisition. Refrain from purchasing or otherwise acquiring
during any fiscal year, all or substantially all, of the assets of any
other person, firm, corporation or other entity with a cumulative value
in excess of $500,000.00.
(f) Change of Ownership. Refrain from permitting or suffering any change,
direct or indirect in its capital ownership in excess of 15%.
(g) Nature of Business. Refrain from engaging in any line of business
materially different from that presently engaged in by the Borrower.
(h) Guaranties. Refrain from assuming, guaranteeing, endorsing, or
otherwise becoming contingently liable for any obligations of any other
person, except for those guaranties outstanding as of the Effective
Date and disclosed to the Bank in writing.
(i) Deposit Accounts. Maintain its principal deposit accounts with the
Bank.
(j) Maintenance of Properties. Make all repairs, renewals or replacements
necessary to keep its plant, properties and equipment in good working
condition.
(k) Books and Records. Maintain adequate books and records and refrain from
making any material changes in its accounting procedures whether for
tax purposes or otherwise.
(l) Compliance with Laws. Comply in all material respects with all laws
applicable to its business and the ownership of its property.
(m) Preservation of Rights. Maintain and preserve all rights, privileges,
charters and franchises it now has.
These covenants were negotiated by the Bank and Borrower based on
information provided to the Bank by the Borrower. A breach of a
covenant is an indication that the risk of the transaction has
increased. As consideration for any waiver or modification of these
covenants, the Bank may require: additional collateral, guaranties or
other credit support; higher fees or interest rates; and possible
modifications to the Documents and the monitoring of the Agreement. The
waiver or modification of any covenant that has been violated by the
Borrower will be made in the sole discretion of the Bank. These options
do not limit the Bank's right to exercise its rights under Section 9 of
this Agreement.
9. EVENTS OF DEFAULT AND REMEDIES
9.1 Default
Upon the occurrence of any one or more of the following events of
default, or at any time afterward unless the default has been cured,
the Bank may declare the Line to be terminated and in its discretion
accelerate and declare the unpaid principal, accrued interest and all
other amounts payable under the Revolving Note, the Term Note, and the
Documents to be immediately due and payable:
(a) Default by the Borrower in the payment when due of any principal or
interest due under the Revolving Note and the Term Note and continuance
for 10 days.
(b) Default by the Borrower in the observance or performance of any
covenant or agreement contained in the Documents, including this
Agreement, and continuance for more than 30 days.
(c) Default by the Borrower in the observance or performance of any
covenant or agreement contained in the Documents, or any of them,
excluding this Agreement, after giving effect to any applicable grace
period.
(d) Default by the Borrower in any agreement with the Bank or any other
lender that relates to indebtedness or contingent liabilities which
would allow the maturity of such indebtedness to be accelerated.
(e) Any representation or warranty made by the Borrower to the Bank is
untrue in any material respect.
(f) Any litigation or governmental proceeding against the Borrower seeking
an amount in excess of $500,000.00 either 1) results in an uninsured
final judgment equal to or in excess of that amount against the
Borrower or 2) remains unresolved on the 270th day following its
commencement, unless as of the 270th day no judgment or award has been
entered and the contingent liability arising as a result is classified
as "remote" by the Borrower's counsel as defined in FASB 5 in a signed
opinion addressed to the Bank.
(g) A garnishment, levy or writ of attachment, or any local, state, or
federal notice of tax lien or levy is served upon the Bank for the
attachment of property of the Borrower in the Bank's possession or
indebtedness owed to the Borrower by the Bank.
(h) Any Guarantor dissolves or becomes insolvent or is the subject of a
voluntary or involuntary petition under the United States Bankruptcy
Code.
(i) A material adverse change occurs in the Borrower's financial condition
or ability to repay its obligations to the Bank.
9.2 Immediate Default
If, with or without the Borrower's consent, a custodian, trustee or
receiver is appointed for any of the Borrower's properties, or if a
petition is filed by or against the Borrower under the United States
Bankruptcy Code, then the Line shall immediately terminate and the
unpaid principal, accrued interest and all other amounts payable under
the Revolving Note, the Term Note, and the Documents will become
immediately due and payable without notice or demand.
10. MISCELLANEOUS.
(a) 360 Day Year. All interest and fees due under this Agreement will be
calculated on the basis of actual days elapsed in a 360 day year.
(b) GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all calculations for compliance
with financial covenants will be made using generally accepted
accounting principles consistently applied ("GAAP").
(c) No Waiver; Cumulative Remedies. No failure or delay by the Bank in
exercising any rights under this Agreement shall be deemed a waiver of
those rights. The remedies provided for in the Agreement are cumulative
and not exclusive of any remedies provided by law.
(d) Amendments or Modifications. Any amendment or modification of this
Agreement must be in writing and signed by the Bank and Borrower. Any
waiver of any provision in this Agreement must be in writing and signed
by the Bank.
(e) Binding Effect: Assignment. This Agreement and the Documents are
binding on the successors and assigns of the Borrower and Bank. The
Borrower may not assign its rights under this Agreement and the
Documents without the Bank's prior written consent. The Bank may sell
participations in or assign this Agreement and the Documents and
exchange financial information about the Borrower with actual or
potential participants or assignees.
(f) Minnesota Law. This Agreement and the Documents will be governed by the
substantive laws of the State of Minnesota.
(g) Severability of Provisions. If any part of this Agreement or the
Documents are unenforceable, the rest of this Agreement or the
Documents may still be enforced.
(h) Integration. This Agreement and the Documents contains the entire
understanding between the parties and supersedes all prior agreements
between the Bank and the Borrower relating to each credit facility
subject to this Agreement, whether verbal or in writing.
Address for notices to Bank: Address for notices to Borrower:
Norwest Bank Minnesota Aequitron Medical, Inc.
National Association 14800 28th Avenue North
55 East Fifth Street Plymouth, Minnesota 55447
St. Paul, Minnesota 55101
Attention: William M. Milne
Attention: Thomas L. Falck Chief Financial Officer
Vice President
Norwest Bank Minnesota Aequitron Medical, Inc.
National Association
By: /s/ Thomas L. Falck By: /s/ William M. Milne
Its: Vice President Its: Chief Financial Officer
EXHIBIT A
BORROWING BASE DEFINITION
Borrowing Base means the sum of 75% of Eligible Accounts Receivable (as defined
below) plus 20% of Eligible Inventory (as defined below), plus 90% of Eligible
Investments (as defined below) plus 50% of Eligible Crow River Industries,
Incorporated Inventory (as defined below).
Eligible Accounts Receivable means all accounts receivable except those which
are:
1) Greater Than 90 days past the invoice date.
2) Due from an account debtor, 10% or more of whose accounts owed to
the Borrower are more than 90 days past the invoice date.
3) Subject to offset or dispute.
4) Due from an account debtor who is subject to any bankruptcy
proceeding.
5) Owed by a shareholder, subsidiary, affiliate, officer or employee
of the Borrower.
6) Not subject to a perfected first lien security interest in favor of
the Bank.
7) Due from an account debtor located outside the United States and
not supported by a standby letter of credit acceptable to the Bank.
8) Due from a unit of government, whether foreign or domestic.
9) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
Eligible Inventory means all medical inventory of the Borrower, including the
purchased inventory of CNS, Inc., at the lower of cost or market as determined
by generally accepted accounting principals, except inventory which is:
1) In transit; or located at any warehouse not approved by the Bank.
2) Covered by a warehouse receipt, bill of lading or other document of
title.
3) On consignment to or from any other person or subject to any
bailment.
4) Damaged, obsolete or not salable in the Borrower's ordinary course
of business.
5) Subject to a perfected first lien security interest in favor of
any third party.
6) Supplies or parts inventory.
7) Work-in-process inventory.
8) In the process of being returned.
9) Custom or non-standard parts.
10) Finished goods.
11) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
Eligible Crow River Industries, Incorporated Inventory means all inventory of
Crow River Industries, Incorporated, at the lower of cost or market as
determined by generally accepted accounting principals except inventory, which
is:
1) In transit; or located at any warehouse not approved by the Bank.
2) Covered by a warehouse receipt, bill of lading or other document of
title.
3) On consignment to or from any other person or subject to any
bailment.
4) Damaged, obsolete or not salable in the Borrower's ordinary course
of business.
5) Subject to a perfected first lien security interest in favor of
any third party.
6) Supplies or parts inventory.
7) Work-in-process inventory.
8) In the process of being returned.
9) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
Eligible Investments means any security issued by the United States government
with an initial maturity not in excess of one (1) year, or any money market
mutual fund rated A-1/P-1 provided that such investment are subject to a first
lien security interest in favor of the Bank.
Actual advance rates are to be determined on a reasonable basis by Norwest
Collateral Review staff prior to initial funding following its pre-funding
collateral survey and from time to time afterward.
EXHIBIT A
AEQUITRON MEDICAL, INC.
BORROWING BASE CERTIFICATE
TO: Norwest Bank Minnesota, National Association
55 East Fifth Street
St. Paul, Minnesota 55101
(the "Bank")
Aequitron Medical, Inc. (the "Borrower") certifies that the following
computation of the Borrowing Base was performed as of ___________________ in
accordance with the Borrowing Base definitions set forth in Exhibit A to the
Credit Agreement between the Bank and the Borrower dated --------------.
Total Accounts Receivable $_________________
Less: 1) Greater than 90 days in age $__________________
2) Other ineligibles $__________________
Eligible Accounts Receivable $__________________
75% of Eligible Accounts Receivable $_______________
Total Inventory $__________________
Less: Ineligible Inventory $__________________
Eligible Inventory $__________________
20% of Eligible Inventory $_______________
Total Crow River Industries,
Incorporated Inventory $__________________
Less: Ineligible
Crow River Inventory $__________________
Eligible Inventory $__________________
50% of Eligible Crow River Inventory $________________
Eligible Investments $__________________
90% of Eligible Investments* $________________
Total Borrowing Base $________________
Line Outstandings $________________
Term Outstandings $________________
Line Outstandings $________________
Excess (Deficit) $________________
Aequitron Medical, Inc.
By: _____________________________
Its: _____________________________
* NOTE: Additional documentation required to support reliance on Eligible
Investments. See Exhibit "C" of the Agreement.
EXHIBIT B
AEQUITRON MEDICAL, INC.
TO BE SENT VIA FAX (612) 291-2141 BY 11:00 A.M. DAILY
REQUEST FOR ADVANCE OR PAYDOWN
OF REVOLVING LINE
To: Norwest Bank Minnesota, From: Aequitron Medical, Inc.
National Association 14800 - 28th Avenue North
55 East Fifth Street Plymouth, Minnesota 55447
St. Paul, Minnesota 55101 (the "Borrower")
(the "Bank")
Pursuant to the terms of the conditional revolving line of credit
documented under the existing credit agreement (the "Agreement") entered into
between the Bank and the Borrower, the Borrower requests as follows:
___ REQUEST FOR LINE ADVANCE. The Borrower requests that the Bank advance to the
Borrower on ________________, 199__ , by direct deposit into demand deposit
account #_________, funds in the amount of U.S.$ ____________ .
The advance should bear interest as follows: ___ Base Rate, floating; or ___
Fixed Rate Cost of Funds plus ________%, maturing _______________ .
In making this request, the Borrower hereby certifies as follows:
1. This request is not in excess of the Borrowing Base reflected in the
Borrower's last Borrowing Base Certificate dated ______________
2. As of this date, the Borrower's availability under the Line is as
follows:
Borrowing Base $ ____________________
Term Loan Balance ($____________________)
Revolving Line Balance ($____________________)
Current Borrowing Base Availability $_____________________
___ REQUEST FOR PAYDOWN OF LINE. The Borrower requests that the Bank debit the
Borrowers demand deposit account #_______________, on ___________________ in the
amount of U.S.$ ________________________ and apply the proceeds to the payment
of the outstanding balance of the Revolving Note that evidences its borrowings
under the Line.
I personally certify that I am authorized to sign on behalf of the Borrower,
that I have read and am familiar with the terms of the Agreement and have no
knowledge of an existing event of default or event which after the lapse of time
or the delivery of notice would constitute an event of default under the
Agreement. If this request includes reliance on Eligible Investments, the
required documentation for the specific investments is attached.
AEQUITRON MEDICAL, INC.
By:_______________________________
Its:_______________________________
EXHIBIT C
CONDITIONS PRECEDENT TO INITIAL ADVANCE OR DISBURSEMENT
The Replacement Note and the Term Note
Security Documents
Security Agreement. A Security Agreement signed by the Borrower granting the
Bank a first lien security interest in the Borrower's accounts, inventory,
equipment and general intangibles. The Borrower will also execute financing
statements sufficient to perfect the security interest granted to the Bank.
Collateral Pledge Agreement. A Collateral Pledge Agreement signed by the
Borrower and pledging to the Bank a first lien security interest in the
securities described in it. The Borrower will also execute any other documents
required by the Bank to perfect the pledge.
Guaranty by Corporation. The unlimited, unconditional Guaranty by Corporation
(the "Guaranty") of Crow River Industries, Incorporated (the "Guarantor"),
together with a Certificate of Authority for Guaranty by Corporation.
Authorization
Corporate Certificate of Authority. A certificate of the Borrower's corporate
secretary as to the incumbency and signatures of the officers of the Borrower
signing the Documents and containing a copy of resolutions of the Borrower's
board of directors authorizing execution of the Documents and performance in
accordance with the terms of the Agreement.
Organization
Articles of Incorporation And By - Laws. A certified copy of the Borrower's
Articles of Incorporation and By-Laws and any amendments, if applicable.
Certificate of Good Standing. A copy of the Borrower's Certificate of Good
Standing, certified within 30 days of the Effective Date by the Minnesota
Secretary of State.
Other
Arbitration Agreement. The Bank's standard form of arbitration agreement (the
"Arbitration Agreement") signed by the Bank and Borrower, subjecting to binding
arbitration potential controversies between the Bank and Borrower relating to
the Documents and the Agreement, as more fully described in the Arbitration
Agreement.
Legal Opinion. A signed opinion of counsel for the Borrower, addressed to the
Bank, and in form and substance satisfactory to the Bank, opining that: (1) the
Borrower is duly organized and in good standing in its state of organization;
(2) the Borrower is qualified in each state in which it does business and is
legally required to be qualified; (3) the Borrower has the power to execute and
deliver the Documents and to borrow money and perform in accordance with the
terms of the Documents; (4) all corporate action and consent necessary to the
validity of the Documents has been obtained; (5) the Documents have been duly
signed and are the valid and binding obligation of the Borrower and enforceable
in accordance with their terms; and (6) to the best of counsel's knowledge, the
Documents and the transactions contemplated thereunder do not conflict with any
provision of the articles of incorporation or by-laws of Borrower or any
agreement binding upon the Borrower or its properties.
Pre-Funding Collateral Survey. A collateral survey conducted by the Bank or its
agents
substantiating the Borrower's inventory and the inventory of Crow River
Industries, Incorporated and confirming or adjusting the Bank's advance rate
with respect to such collateral.
CONDITIONS PRECEDENT TO ALL ADVANCES
Request for Advance. Concurrent with each request for an advance under the Line
or a disbursement under the Term Loan, the Borrower will deliver a Request for
Advance certificate to the Bank in the form set froth at Exhibit B.
CONDITIONS PRECEDENT TO ADVANCES SECURED BY INVESTMENT SECURITIES
Notice of Pledge. Concurrent with each request for an advance under the Line or
a disbursement under the Term Loan that will be supported in part by investment
securities permitted under the Borrowing Base definition set forth in the
Agreement, the Borrower will deliver to the Bank a Notice of Pledge form
identifying those investment securities to be included in the Borrowing Base,
together with such other documents as the Bank may deem necessary to secure the
pledge.
EXHIBIT D
REPRESENTATIONS AND WARRANTIES
Organizational Status. The Borrower is a corporation duly formed and in good
standing under the laws of the State of Minnesota.
Authorization. This Agreement, and the execution and delivery of the Documents
required hereunder, is within the Borrower's powers, and has been duly
authorized, and does not conflict with any of its organizational papers or any
other agreement by which the Borrower is bound.
Financial Reports. The Borrower has provided the Bank with its annual audited
financial statement dated April 30, 1994 and its unaudited interim financial
statement dated April 30 1995, and these statements fairly represent the
financial condition of the Borrower as of their respective dates and were
prepared in accordance with GAAP.
Litigation. There is no litigation or governmental proceeding pending or
threatened against the Borrower which could have a material adverse effect on
the Borrower's financial condition or business.
Taxes. The Borrower has paid when due all federal, state and local taxes.
No Default. There is no event which is, or with notice or the lapse of time
would be, an event of default under this Agreement.
ERISA. The Borrower is in compliance in all material respects with ERISA and has
received no notice to the contrary from the PBGC or other governmental area.
Environmental Matters. To the best of the Borrower's knowledge following
diligent inquiry: 1) the Borrower is in compliance in all material respects with
all applicable environmental, health, and safety statutes and regulations, 2)
the Borrower is not the subject of any "Superfund" evaluations, and 3) the
Borrower has not incurred, directly or indirectly, any material contingent
liability in connection with the release of any toxic or hazardous waste or
substance into the environment.