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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 3, 1997
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REUTER MANUFACTURING, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-1561 41-0780999
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(State or other jurisdiction of (Commission (IRS Employer Identification No.)
incorporation or organization) File Number)
410 - 11th Avenue South, Hopkins, Minnesota 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612)-935-6921
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Item 5. OTHER EVENTS.
On December 3, 1997, Reuter Manufacturing, Inc. (the "Company")
entered into a banking relationship with U.S. Bank National Association,
pursuant to which U.S. Bank National Association agrees to make available to the
Company credit facilities of up to $8,670,000. The credit facilities consist of
an asset-based line of credit with availability of up to $5,000,000 as defined,
and three term notes of $2,400,000, $1,000,000 and $270,000, respectively.
Although the term notes have scheduled repayment dates, the term notes may be
due on demand in the event U.S. Bank National Association requires demand
repayment on the revolving line of credit. The $2.4 million term note is
collateralized by a first mortgage on the Company's manufacturing facility
located in Hopkins, Minnesota. Each of the credit facilities are collateralized
by a security interest in substantially all of the Company's personal property,
including accounts receivable, inventory, equipment and intangibles. The credit
facilities were used to pay-off the Company's previous line of credit and the
remaining balance of the Company's previously restructured debt. The balance of
the facilities after the aforementioned pay-offs will be used for working
capital and other corporate purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not Applicable.
b. PRO FORMA FINANCIAL INFORMATION.
Not Applicable.
c. EXHIBITS.
10.1 Financing Agreement, dated December 3, 1997, between Reuter
Manufacturing, Inc. and U.S. Bank National Association.
10.2 Promissory Note for $270,000, dated December 3, 1997, between Reuter
Manufacturing, Inc. and U.S. Bank National Association.
10.3 Promissory Note for $1,000,000, dated December 3, 1997, between Reuter
Manufacturing, Inc. and U.S. Bank National Association.
10.4 Promissory Note for $2,400,000, dated December 3, 1997, between Reuter
Manufacturing, Inc. and U.S. Bank National Association.
10.5 Security Agreement, dated December 3, 1997, between Reuter
Manufacturing, Inc. and U.S. Bank National Association.
10.6 Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Financing Statement Security Agreement, dated
December 3, 1997, between Reuter Manufacturing, Inc. and U.S.
Bank National Association.
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10.7 Environmental and ADA Indemnification Agreement, dated December 3, 1997,
between Reuter Manufacturing, Inc. and U.S. Bank National Association.
10.8 Environmental Letter of Undertaking, dated December 3, 1997, between
Reuter Manufacturing, Inc. and U.S. Bank National Association.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Reuter Manufacturing, Inc.
Registrant
Date: December 18, 1997
By /s/ James W. Taylor
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James W. Taylor
President and Chief Executive Officer
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FINANCING AGREEMENT EXHIBIT 10.1
THIS FINANCING AGREEMENT, dated as of December 3, 1997, is by and
between REUTER MANUFACTURING, INC., a Minnesota corporation (the "Borrower"),
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:
"ACCOUNTS": Each and every right to payment of Borrower, whether such
right to payment arises out of a sale or lease of goods by Borrower, or other
disposition of goods or other property of Borrower, out of a rendering of
services by Borrower, out of a loan by Borrower, out of damage to or loss of
goods in the possession of a railroad or other carrier or any other bailee, out
of overpayment of taxes or other liabilities of Borrower, or which otherwise
arises under any contract or agreement, or from any other cause, whether such
right to payment now exists or hereafter arises and whether such right to
payment is or is not yet earned by performance and howsoever such right to
payment may be evidenced, together with all other rights and interest (including
all liens and security interests) which Borrower may at any time have by law or
agreement against any account debtor (as defined in the Uniform Commercial Code
in effect in the State of Minnesota) or other obligor obligated to make any such
payment or against any of the property of such account debtor or other obligor;
specifically (but without limitation), the term includes all present and future
instruments, documents, chattel papers, accounts and contract rights of
Borrower.
"ACCOUNTS ADVANCE": As defined in Section 2.1(a).
"ADVANCE": An Accounts Advance, an Inventory Advance, an Existing
Equipment Advance and/or an Over Advance, as the context may require.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent or
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by the Person referred to, and (d) each of such Person's
officers, directors, joint venturers and partners. The term control (including
the terms "controlled by" and "under common control with") means the possession,
directly, of the power to direct or cause the direction of the management and
policies of the Person in question.
"BORROWING BASE CERTIFICATE": As defined in Section 2.2.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of where the Lender is located).
"CHANGE IN CONTROL": The occurrence, after the Closing Date, of any
one entity owning, directly or indirectly, securities of the Borrower
representing 10% of the securities of the Borrower entitled to vote in the
election of directors.
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"CLOSING DATE": The date of this Agreement; PROVIDED that all the
conditions precedent to the making of the initial Advance, as set forth in
Article III, have been, or, on such Closing Date, will be, satisfied. The
Borrower shall give the Lender not less than one Business Day's prior notice of
the day selected as the Closing Date.
"ELIGIBLE ACCOUNTS": Accounts owned by the Borrower which the Lender,
in its sole and absolute discretion, deems eligible for Advances, but which, at
a minimum, are subject to a first priority perfected security interest in favor
of the Lender and not subject to any assignment, claim or Lien other than the
Lien in favor of the Lender and other Liens consented to by the Lender in
writing, but specifically excluding (a) Accounts which are not earned;
(b) Accounts which are unpaid more than ninety (90) days after the original
invoice date; (c) Accounts owed by debtors 25% or more of whose Accounts owed
are otherwise ineligible; (d) Accounts representing progress billings, or
retainages, or for work covered by any payment or performance bond; (e) Accounts
owed by any of the Borrower's Affiliates; (f) Accounts owed by debtors not
located in the United States, unless supported by a letter of credit issued by a
U.S. bank in favor of the Borrower which has been delivered to the Lender;
(g) Accounts as to which any warranty or representation contained in any
security agreement or other agreement of the Borrower with or given to the
Lender with respect to any such Receivable is untrue in any material respect;
(h) Accounts as to which the account debtor has disputed liability, or made any
claim with respect to any other Account due from such account debtor to the
Borrower; (i) Accounts subject to setoff; (j) Accounts as to which the account
debtor has filed a petition for bankruptcy or any other petition for relief
under the Bankruptcy Code, assigned any assets for the benefit of creditors, or
if any petition or other application for relief under the Bankruptcy Code has
been filed against the account debtor, or if the account debtor has failed,
suspended business, become insolvent, or has had or suffered a receiver or a
trustee to be appointed for all or a significant portion of its assets or
affairs; (k) Accounts owed by any government or government agency; (l) Accounts
evidenced by a promissory note or other instrument; and (m) Accounts as to which
the Lender reasonably believes that collection of any such Receivable is
insecure or that any such Receivable may not be paid by reason of the account
debtor's financial inability to pay.
"ELIGIBLE INVENTORY": Inventory of the Borrower which the Lender, in
its sole and absolute discretion, deems eligible for Advances, but which meets
the following minimum requirements: (a) it is owned by the Borrower, is subject
to a first priority perfected security interest in favor of the Lender, and is
not subject to any assignment, claim or Lien other than (i) a Lien in favor of
the Lender and (ii) Liens consented to by the Lender in writing; (b) it consists
of raw materials; (c) if held for sale or lease or furnishing under contracts of
service, it is (except as the Lender may otherwise consent in writing) new and
unused; (d) except as the Lender may otherwise consent, it is not stored with a
bailee, warehouseman or similar party; if so stored with the Lender's consent,
such bailee, warehouseman or similar party has issued and delivered to the
Lender, in form and substance acceptable to the Lender, such documents and
agreements as the Lender may require, including, without limitation, warehouse
receipts therefor in the Lender's name; (e) the Lender has determined, in its
sole and absolute discretion, that it is not unacceptable due to age, type,
category, quality and/or quantity; (f) it is not held by the Borrower on
consignment and is not subject to any other repurchase or return agreement; (g)
it is not held by a customer of the Borrower or any other Person on consignment;
(h) it complies in all material respects with all standards imposed by any
governmental agency having regulatory authority over such goods and/or their
use, manufacture or sale; and (i) the warranties, representations and covenants
contained in any security agreement or other agreement of the Borrower with or
given to the Lender relating directly or indirectly to the Borrower's Inventory
are applicable to it in all material respects without exception.
"EXISTING EQUIPMENT ADVANCE": As defined in Section 2.1(c).
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"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.
"INVENTORY": Any and all of the Borrower's goods, including, without
limitation, goods in transit, wherever located which are or may at any time be
leased by the Borrower to a lessee, held for sale or lease, furnished under any
contract of service or held as raw materials, work in process, or supplies or
materials used or consumed in the Borrower's business, or which are held for use
in connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, and all goods, the sale or other disposition of which
has given rise to a Receivable, which are returned to and/or repossessed and/or
stopped in transit by the Borrower or the Lender, or at any time hereafter in
the possession or under the control of the Borrower or the Lender, or any agent
or bailee of either thereof, and all documents of title or other documents
representing the same.
"INVENTORY ADVANCE": As defined in Section 2.1(b).
"LOAN DOCUMENTS": This Agreement, the Security Agreement, the
Mortgage, and any documents described in Section 3.1(a).
"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.
"OVER ADVANCE": As defined in Section 2.1(d).
"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 U.S. Bank National Association as its "reference rate"; U.S. Bank
National Association may lend to its customers at rates that are at, above or
below the Reference Rate. For purposes of determining any interest rate
hereunder which is based on the Reference Rate, such interest rate shall change
as and when the Reference Rate changes.
"SECURITY AGREEMENT": That Security Agreement to be executed by the
Borrower in form and substance satisfactory to 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
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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 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 are irrevocably paid in full.
ARTICLE II
TERMS OF LENDING
Section 2.1 THE ADVANCES. On the terms and subject to the conditions
hereof, at the Borrower's request, the Lender, in its absolute and sole
discretion and without any commitment to do so, may make the following Advances
available to the Borrower:
2.1(a) up to eighty-five percent (85%) of the net amount of
Eligible Accounts which are listed in the Borrower's most current Borrowing Base
Certificate and which are deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of $5,000,000 (the "Accounts Advances");
2.1(b) up to fifty percent (50%) of the net amount of Eligible
Inventory which is listed in the Borrower's most current Borrowing Base
Certificate and which is deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of $300,000 (the "Inventory Advances");
2.1(c) up to ninety percent (90%) of the appraised auction value
of the Borrower's existing equipment, and which is deemed eligible for advance
by the Lender, or any greater or lesser percentage at the Lender's absolute and
sole discretion, not to exceed a maximum amount of $1,700,000 (the "Existing
Equipment Advances").
2.1(d) from the date of this Agreement through June 30, 1999, up
to $500,000 or any greater or lesser amount at the Lender's absolute and sole
discretion (any such amounts to the extent not available under 2.1(a), 2.1(b),
2.1(c) the "Over Advances").
Notwithstanding the preceding clauses 2.1(a), 2.1(b), 2.1(c) and
2.1(d), the maximum aggregate amount advanced against all Eligible Accounts,
Eligible Inventory and Existing Equipment plus Over Advances shall not exceed
$5,000,000.
Loans for additional sums requested by the Borrower may be made at the Lender's
sole discretion based upon the Lender's valuation of the Borrower's collateral
or other factors. The Borrower acknowledges and agrees that the Lender may from
time to time, for the Lender's convenience, segregate or apportion the
Borrower's collateral for purposes of determining the amounts and maximum
amounts of Advances which may be made hereunder. Nevertheless, the Lender's
security interest in all such collateral, and any other collateral rights,
interests and properties which may now or hereafter be available to the Lender,
shall secure and may be applied to the payment of any and all Advances and other
indebtedness secured by the Lender's security interest, in any order or manner
of application and without regard to the method by which the Lender determines
to make Advances hereunder.
Section 2.2 PROCEDURE FOR ADVANCES; WIRE TRANSFER FEES. Any request
by the Borrower for an Advance shall be in writing and must be given so as to be
received by the Lender
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not later than 10:30 a.m. Central time on the requested Advance date, or such
later time as may be acceptable to the Lender in its sole discretion. Each
request for an Advance shall be irrevocable and shall be deemed a representation
by the Borrower 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 and the representations and warranties set forth
in Article IV will continue to be true. Each request for an Advance shall
specify the requested Advance date (which must be a Business Day) and the amount
of such Advance. Each request for an Advance shall be accompanied by a
Borrowing Base Certificate signed by a duly authorized officer of the Borrower
in form and substance satisfactory to the Lender (the "Borrowing Base
Certificate"). If the Lender determines, in its absolute and sole discretion,
to make the requested Advance, the Lender will wire transfer to the Borrower's
Account on the requested Advance date the amount of the requested Advance. The
Borrower will pay to the Lender a wire transfer fee of $15 per wire transfer of
any Advance to the Borrower's account.
Section 2.3 INTEREST RATES AND INTEREST PAYMENTS. Interest shall
accrue (i) on the unpaid balance of the Accounts Advances, Inventory Advances
and Existing Equipment Advances at a floating rate per annum equal to the sum of
the Reference Rate plus 1.35% (the "Blended Rate"); which Blended Rate Borrower
acknowledges to a combination of the interest rates charged by Lender (equal to
the sum of the Reference Rate plus .45%) and its participant, Republic
Acceptance Corporation ("RAC") (equal to the sum of the Reference Rate plus
2.25%), with both of Lender and RAC participating equally in the Accounts
Advances, Inventory Advances and Existing Equipment Advances, Borrower further
acknowledges and agrees that in the event that RAC's participation in the
Accounts Advances, Inventory Advances and Existing Equipment Advances exceeds
fifty percent (50%) of the total of the Accounts Advances, Inventory Advances
and Existing Equipment Advances outstanding then the Blended Rate shall increase
and be equal to RAC's percentage of the Accounts Advance, Inventory Advances and
Existing Equipment Advances multiplied by 2.25% PLUS Lender's percentage of the
Accounts Advance, Inventory Advances and Existing Equipment Advances multiplied
by .45% and (ii) on the unpaid balance of the Over Advances at a floating rate
equal to the sum of the Reference Rate plus 2.5% (the "Over Advance Rate") and
shall be due and payable monthly in arrears on the last day of each calendar
month; PROVIDED, HOWEVER, that in the event that Borrower's performance for
fiscal year end December 31, 1998 (as reported in the Borrower's audited
financial statements for fiscal year end December 31, 1998 as required by and
prepared in accordance with, Section 5.1 (a)), exceeds 75% of the projections
dated October 13, 1997 provided to Lender by Borrower, as determined by Lender
in its sole discretion, based on a review by Lender of Borrower's financial
statements, the projections dated October 13, 1997 and other factors determined
relevant by Lender, then Interest shall accrue on the Accounts Advances,
Inventory Advances and Existing Equipment Advances at a floating rate per annum
equal to the sum of the Reference Rate plus .50% from and after the first day of
the first calendar month following the date of Lender's receipt of the December
31, 1998 audited financial statements; PROVIDED FURTHER, that upon the
occurrence and during the continuance of any failure by the Borrower to comply
with any agreement or covenant of the Borrower under any Loan Document, the
unpaid balance of the Advances shall thereafter bear interest at a floating rate
equal to the sum of (a) the Blended Rate or the Over Advance Rate, whichever is
applicable plus (b) 2% and shall be due and payable on demand; AND PROVIDED
FURTHER that the minimum amount of interest due and payable in any month shall
not be less than $25,000; AND PROVIDED FURTHER that any interest due and paid in
any month in excess of $25,000 may be used to reduce the minimum interest due
and payable in any future month within twelve months after such month if the
amount of interest due and payable in any such future month would be less than
$25,000 but for the inclusion of this provision; AND PROVIDED FURTHER that
minimum interest due and payable in any consecutive 12 month period during the
term hereof shall not be less than $300,000(or such lesser amount as corresponds
to the term hereof if less than 12 months).
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Section 2.4 REPAYMENT AND PREPAYMENT.
ALL ADVANCES SHALL BE DUE AND PAYABLE ON DEMAND; PROVIDED HOWEVER, that (y)
if demand for payment of the Existing Equipment Advances is not sooner made, the
outstanding amount of the Existing Equipment Advances shall be reduced in sixty
(60) equal monthly installments, commencing on January 1, 1998 and continuing on
the first day of each month thereafter until such time that the Existing
Equipment Advances are paid in full, and (z) if demand for payment of the Over
Advances is not sooner made, the outstanding amount of the Over Advances as of
June 30, 1999 shall be reduced in full in eighteen (18) equal monthly
installments, commencing on August 1, 1999 and continuing on the first day of
each month thereafter until such time that the Over Advances are paid in full,
AND PROVIDED FURTHER that the inclusion of the foregoing provisions for the
periodic reduction of the outstanding amounts of the Existing Equipment Advances
and the Over Advances is solely to provide terms for repayment in the absence of
actual demand and does not affect or impair the Lender's absolute right to
demand payment at any time for any reason. NOTHING SET FORTH IN THIS AGREEMENT,
THE SECURITY AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE BORROWER AND THE
LENDER SHALL IN ANY WAY LIMIT THE LENDER'S RIGHT TO DEMAND PAYMENT OF THE
ADVANCES IN WHOLE OR IN PART.
Section 2.5 COMPUTATION. Interest on the Advances shall be computed
on the basis of actual days elapsed and a year of 360 days.
Section 2.6 FACILITY FEE. The Borrower shall pay to the Lender a
facility fee in an amount equal to $25,000 (the "Facility Fee"). The Facility
Fee shall be payable on the Closing Date.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT. No Advances shall be made
hereunder except upon the prior or simultaneous fulfillment of each of the
following conditions:
3.1(a) DOCUMENTS. The Lender shall have received the following:
(i) This Agreement executed by a duly authorized officer (or
officers) of the Borrower and dated the Closing Date.
(ii) A copy of the corporate resolutions of the Borrower
authorizing the execution, delivery and performance of this Agreement
and containing an incumbency certificate showing the names and titles,
and bearing the signatures of, the officers of the Borrower authorized
to execute this Agreement, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Borrower.
(iii) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a recent date
acceptable to Lender and its counsel.
(iv) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation, certified by the appropriate
governmental officials as of a recent date acceptable to Lender and
its counsel.
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(v) A copy of the bylaws of the Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(vi) The Security Agreement, duly executed by the Borrower.
(vii) An initial Borrowing Base Certificate.
(viii) Evidence of insurance required to be maintained under
Section 5.3, naming the Lender as loss payee in form and substance
satisfactory to the Lender.
(ix) The opinion of counsel to the Borrower covering such
matters as the Lender may request.
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 (not to exceed $5,000) and expenses
of counsel to the Lender payable pursuant to Section 8.2.
3.1(d) PERFECTION. The Security Agreement and/or any and all
financing statements with respect thereto shall have been appropriately filed to
the satisfaction of the Lender; the Lender shall have received UCC searches
and/or other Lien searches satisfactory to the Lender; and the priority and
perfection of the Lien created thereby shall have been established to the
satisfaction of the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 4.1 ORGANIZATION, STANDING, ETC. The 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 perform its obligations hereunder and
thereunder. This Agreement has 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 will not violate
the Borrower's Articles of Incorporation or bylaws or any law applicable to the
Borrower. No governmental consent or exemption is required in connection with
the Borrower's execution and delivery of this Agreement.
Section 4.2 FINANCIAL STATEMENTS AND NO MATERIAL ADVERSE CHANGE. The
Borrower's audited financial statements as at December 31, 1996 and its
unaudited financial statements as at September 30, 1997, as heretofore furnished
to the Lender, have been prepared in accordance with GAAP (subject in the case
of the September 30, 1997 statements to year end adjustments and footnotes).
The Borrower has no material obligation or liability not disclosed in
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such financial statements, and there has been no material adverse change in the
condition of the Borrower since the date of the latest of such financial
statements.
Section 4.3 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which, if determined adversely to the Borrower, would have, a
material adverse effect on the condition of the Borrower. The Borrower is not
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 the Borrower.
Section 4.4 TAXES. The 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 the Borrower).
Section 4.5 SUBSIDIARIES. The Borrower has no subsidiaries except
for EPR, Inc. and Reuter Recycling of Florida, Inc.
ARTICLE V
AFFIRMATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
the 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 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, financial statements of the
Borrower 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 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 30 days
after the end of each fiscal month, unaudited financial statements for the
Borrower for such month and for the period from the beginning of such fiscal
year to the end of such month.
5.1(c) Concurrently with each request for an Advance, and in any
event not less than weekly, a Borrowing Base Certificate.
5.1(d) As soon as practicable and in any event within fifteen
days of the end of each month, (i) a listing of all Accounts, together with an
aging of all Accounts and a reconciliation of such Accounts against the listing
submitted pursuant hereto for the immediately preceding month, (ii) a
certificate of raw materials inventory levels, and (iii) a listing of all
accounts payable, together with an aging of all accounts payable all in form and
substance satisfactory to the Lender.
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5.1(e) Within five days after the due date, proof of payment or
deposit, when due, of all withholding and F.I.C.A. taxes owing by the Borrower
from time to time, in form and substance satisfactory to the Lender by a payroll
service satisfactory to the Lender and whose services the Borrower shall at all
times retain.
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.
Section 5.2 CORPORATE EXISTENCE. The 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 the Borrower from
enforcing its rights with respect to any material asset or would expose the
Borrower to any material liability.
Section 5.3 INSURANCE. The 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, including without limitation such insurance as
may be required under the Security Agreement.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The 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. The Borrower will permit any Person
designated by the Lender to visit and inspect any of the properties, books and
financial records of the Borrower, to examine and to make copies of the books of
accounts and other financial records of the Borrower, and to discuss the
affairs, finances and accounts of the Borrower with its officers at such
reasonable times and intervals as the Lender may designate. The Lender will
endeavor to give reasonable notice of such visits and inspections. The Borrower
shall also allow the Lender and its agents to conduct periodic collateral audits
of the Borrower's assets at such intervals as the Lender may choose, and the
Borrower shall pay to Lender a fee in the amount of $750 per day per collateral
audit, plus out-of-pocket costs and expenses incurred in connection with such
collateral audits, (provided that so long as no Event of Default (as that term
is defined in the Security Agreement) has occurred under the Security Agreement
and is continuing, the Borrower shall not be required to pay for more than two
(2) collateral audits in any calendar year).
Section 5.6 MAINTENANCE OF PROPERTIES. The 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. The 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. The 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. The Borrower will give prompt
written notice to the Lender of the commencement of any action, suit or
proceeding affecting the Borrower.
Section 5.10 PLANS. The Borrower will maintain any employee benefit
plans in compliance with all material requirements of applicable laws and
regulations.
Section 5.11 SPECIAL AGREEMENTS REGARDING ACCOUNTS.
5.11(a) Collection of Accounts and all other amounts due to the
Borrower shall be subject to the provisions of paragraphs 5 and 6 of the
Security Agreement concerning the Lockbox and Collateral Account (as those terms
are defined in the Security Agreement). The Borrower shall provide to the
Lender a daily collection report of all Accounts collected. All collections
received in the Collateral Account and reported to Lender before 8:00 a.m.
(Central time) on any Business Day that is a Monday through Thursday, or before
2:00 p.m. (Central time) on any Business Day that is a Friday, shall be applied
to the payment of the Advances (in such order of application as the Lender may
determine) on the day so received, or if received later, on the next Business
Day; PROVIDED HOWEVER, that for purposes of determining the interest due and
payable on the unpaid balance of the Advances under Section 2.3, all collections
received in the Collateral Account shall be applied to the unpaid balance of the
Advances when such collections become finally collected funds after allowing not
less than two (2) Business Days for collection. At Lender's request, the
Borrower will deliver all customer billing statements to the Lender for
examination and for mailing in the Borrower's stamped and addressed envelopes.
5.11(b) Subject to the rights granted to the Lender in paragraph
5 of the Security Agreement, all ledger sheets or cards, invoices, shipping
records, correspondence, and other writings relating to Accounts shall, until
delivered to the Lender or removed by the Lender from the Borrower's premises,
be kept on the Borrower's premises without cost to the Lender in appropriate
containers in safe places.
5.11(c) Upon the Lender's demand for payment, the Lender may
remove from the Borrower's premises all books and records, correspondence,
documents and files relating to Accounts; and the Lender may without cost or
expense to the Lender use such of the Borrower's personnel, supplies, space and
equipment at the Borrower's place of business as the Lender may reasonably
desire without undue disruption to the Borrower's business or operations, for
the handling of collections. The Borrower will pay any and all out of pocket
expenses and cost of collection (including reasonable attorney fees) incurred by
the Lender in the Lender's handling of or effort to enforce collections.
5.11(d) The Borrower warrants that, except as may be disclosed in the
lists of Accounts furnished to the Lender: each customer billing statement
correctly states the subject matter and terms of sale; the merchandise conforms
thereto and is in all respects acceptable to the customer; the date of the
billing statement is not prior to the date of shipment; the Account is not
subject to any dispute, defense, offset or counterclaim; the account debtor is
not a subsidiary or Affiliate of the Borrower; and the Borrower has no reason to
believe the Account will not be paid in the regular course of business. The
Borrower will notify the Lender promptly of any event, circumstance or
communication with respect to any Account that is inconsistent with the
foregoing representation.
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ARTICLE VI
NEGATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
the 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. The 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).
Section 6.2 SALE OF ASSETS. The Borrower will not 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 DIVIDENDS. The Borrower will not pay any dividends or
otherwise make any distributions on, or redemptions of, any of its outstanding
stock.
Section 6.4 INVESTMENTS. The Borrower will not 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:
6.4(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.
6.4(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) 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.
6.4(c) Commercial paper given the highest rating by a nationally
recognized rating service.
6.4(d) Repurchase agreements relating to securities of the kind
described in Section 6.4 (a).
6.4(e) Other readily marketable investments in debt securities
which are reasonably acceptable to the Lender.
6.4(f) Travel advances to officers and employees in the ordinary
course of business.
6.4(g) Advances or loans to Hill Bio Science, not to exceed an
aggregate amount of $75,000.
Any investments under clauses (a), (b), (c) or (d) above must mature within one
year of the acquisition thereof by the Borrower.
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Section 6.5 INDEBTEDNESS. The Borrower will not borrow any money or
issue any bonds, debentures or other debt securities or otherwise become
obligated on any interest-bearing indebtedness except, (i) for the Advances
under this Agreement; (ii) existing indebtedness as disclosed on the most recent
financial statement of the Borrower referred to in Section 4.1, and (iii) in
amounts not to exceed $250,000 in the aggregate in any calendar year for the
purchase of equipment secured by a purchase money security interest or for a
capitalized lease obligation. In addition, Borrower may purchase equipment
secured by a purchase money security interest or incur indebtedness for a
capitalized lease obligation in excess of $250,000 in the aggregate in any
calendar year with the written consent of Lender, which consent shall not be
unreasonably withheld.
Section 6.6 LIENS. The Borrower will not 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:
6.6(a) Liens granted to the Lender.
6.6(b) Liens existing on the date of this Agreement and
disclosed in those UCC or other Lien searches referred to in Section 3.1(d).
6.6(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.
6.6(d) Liens for taxes, fees, assessments and governmental
charges not delinquent.
6.6(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of business,
for sums not due.
6.6(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
6.6(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.
6.6(h) Purchase money Liens or capitalized lease obligations
not to exceed $250,000 in the aggregate in any calendar year. In addition,
Borrower may incur a purchase money security interest Lien or a capitalized
lease obligation in excess of $250,000 in the aggregate in any calendar year
with the written consent of Lender, which consent shall not be unreasonably
withheld.
Section 6.7 CONTINGENT OBLIGATIONS. The Borrower will not guarantee
or otherwise become liable on the indebtedness of any other Person.
Section 6.8 CHANGE IN CONTROL. The Borrower will not allow a Change
in Control to occur.
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ARTICLE VII
TERMINATION BY BORROWER
This agreement shall continue in effect until terminated upon not less
than 30 days' prior written notice delivered by the Borrower certified mail to
Lender by certified mail. Termination shall not impair or affect the Lender's
rights existing as of the time notice of Termination is given. Borrowers
obligations with respect to payment of any Termination fee shall be fixed and
owing as of date such notice is given and not when such notice becomes
effective.
In the event that the Borrower gives notice to the Lender of the
termination of this Agreement under Section VII hereof at any time prior to the
second anniversary of the date of this Agreement, the Borrower will pay to the
Lender a prepayment charge, as additional compensation for the Lender's costs of
entering into this Agreement, in the amount of (i) three percent (3%) of the
maximum aggregate amount of the Advances if the notice of termination occurs
prior to the first anniversary of the date of this Agreement; and (ii) two
percent (2%) of the maximum aggregate amount of the Advances if the notice of
termination occurs after the first anniversary, but prior to the second
anniversary, of the date of this Agreement unless the outstanding amount of our
obligations hereunder are refinanced in full by an affiliate of U.S. Bancorp.
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 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 Dorsey &
Whitney LLP, counsel to the Lender) in connection with the negotiation,
preparation, approval, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of this Agreement including all fees
due Lender incurred pursuant to this Agreement. For the purpose of this
Agreement the fees of Dorsey & Whitney LLP shall be limited to $ 5,000 not
including out of pocket fees and expenses. This limitation shall not be
applicable to any subsequent transaction, subsequent modification or the
exercise of any right or remedy under this or any related agreement.The
obligations of the Borrower under this Section shall survive any termination of
this Agreement. In the event such costs, fees or expenses are not promptly paid
by Borrower on demand Lender may set off the amount of any such costs, fees or
expenses from funds available to Borrower. If the Borrower elects, the Borrower
may treat the amount of any such costs, fees or expenses as an Advance
hereunder.
Section 8.3 WAIVERS, ETC. No failure on the part of the Lender 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.
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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
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 OFFSET. The Borrower hereby irrevocably authorizes the
Lender to set off all sums owing by the Borrower to the Lender against all
deposits and credits of the Borrower with, and any and all claims of the
Borrower against, the Lender. The Borrower further agrees that any bank
participating with the Lender in Advances hereunder may exercise any and all
rights of setoff with respect to such participation as fully as if such
participant had lent directly to the Borrower the amount of such participation.
SECTION 8.7 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 8.8 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY, MINNESOTA; 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 8.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ADVANCES AND ANY
OTHER
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LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.10 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Lender and its affiliates and the
directors, officers, employees, attorneys and agents of the Lender and its
affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise: (a) by reason
of, relating to or in connection with the execution, delivery, performance or
enforcement of any Loan Document, any commitments relating thereto, or any
transaction contemplated by any Loan Document; or (b) by reason of, relating to
or in connection with any credit extended or used under the Loan Documents or
any act done or omitted by any Person, or the exercise of any rights or remedies
thereunder, including the acquisition of any collateral by the Lender by way of
foreclosure of the Lien thereon, deed or bill of sale in lieu of such
foreclosure or otherwise; provided, however, that the Borrower shall not be
liable to any Indemnitee for any portion of such claims, damages, liabilities
and expenses resulting from such Indemnitee's negligence or willful misconduct.
In the event this indemnity is unenforceable as a matter of law as to a
particular matter or consequence referred to herein, it shall be enforceable to
the full extent permitted by law.
Section 8.11 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 8.12 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.
Section 8.13 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
REUTER MANUFACTURING, INC.
By /s/ James W. Taylor
------------------------
Print Name James W. Taylor
Title President
Borrower's Address:
410 11th Avenue South
Hopkins, MN 55343
U.S. BANK NATIONAL ASSN.
By /s/ David P. Peterson
Print Name David P. Peterson
------------------------
Title Vice President
Lender's Address:
2338 Central Avenue NE, Suite 200
Minneapolis, MN 55418
Fax: (612) 782-1801
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PROMISSORY NOTE EXHIBIT 10.2
$270,000 Minneapolis, Minnesota
December 3, 1997
FOR VALUE RECEIVED, the undersigned, REUTER MANUFACTURING, INC., a
Minnesota corporation, (the "Borrower"), hereby agrees and promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association, or
its assigns (the "Holder"), at its office at 2338 Central Avenue Northeast,
Suite 200, Minneapolis, Minnesota 55418, or such other place as the Holder may
from time to time designate, the principal sum of TWO HUNDRED SEVENTY THOUSAND
AND NO/100 DOLLARS ($270,000), and to pay interest on the unpaid principal
balance from the date hereof until this Note is fully paid at the rate of
interest hereinafter set forth. Both the principal amount of this Note and
interest accrued thereon shall be payable in coin or currency which at the time
of payment is legal tender for the payment of public or private debts in the
United States of America. The principal amount of and interest accrued on this
Note are payable in installments due as follows:
(1) From and after the date hereof, interest shall accrue on the
outstanding principal amount of this Note at a rate per annum equal to
the rate of interest from time to time publicly announced by U.S. Bank
National Association as its "Reference Rate" plus one and thirty-five
one hundredth percent (1.35%); PROVIDED, HOWEVER, that in the event
that Borrower's performance for fiscal year end December 31, 1998 (as
reported in the Borrower's audited financial statements for fiscal
year end December 31, 1998 as required by and prepared in accordance
with, Section 5.1 (a)), exceeds 75% of the projections dated October
13, 1997 provided to Lender by Borrower, as determined by Lender in
its sole discretion, based on a review by Lender of Borrower's
financial statements, the projections dated October 13, 1997 and other
factors determined relevant by Lender, then interest shall accrue at a
rate per annum equal to the Reference Rate plus one-half percent
(.50%) from and after the first day of the first calendar month
following the date of the Holder's receipt of the December 31, 1998
audited financial statements; "Reference Rate" shall mean the rate of
interest from time to time publicly announced by U.S. Bank National
Association as its reference rate. For purposes of determining the
interest rate hereunder, such interest rate shall change as and when
the Reference Rate shall change. Interest accrued on the outstanding
principal amount of this Note shall be payable in consecutive monthly
installments commencing on January 1, 1998 and continuing on the first
day of each month thereafter until the entire principal amount of this
Note is paid in full. Borrower also shall pay interest on any overdue
installment of principal from the due date thereof until paid at an
interest rate per annum equal at all times to two percent (2%) per
annum in excess of the interest rate set forth above, which interest
shall be payable upon demand.
(2) The principal amount of this Note shall be payable in sixty (60)
monthly installments, commencing on January 1, 1998 and continuing on
the first day of each month thereafter through and including December
1, 2002 in the amount of $4500 each.
(3) If not sooner paid in full, the entire remaining unpaid principal
balance of this Note, together with all accrued and unpaid interest
thereon, shall become due and payable on December 1, 2002.
<PAGE>
All payments made under this Note shall be applied first to interest
accrued and unpaid on, and then to the unpaid principal amount of, this Note.
Any prepayment of this Note shall be accompanied by accrued interest.
This Note is secured by and pursuant to the terms of that Security
Agreement of even date herewith by the Borrower in favor of the Holder (the
"Security Agreement").
The Borrower hereby waives presentment for payment, protest and notice of
non-payment and hereby consents without affecting its liability to any extension
or alteration of the time or terms of payment hereof, any renewal, any release
of any security which may be given for the payment hereof, and any release of,
or resort to any party liable for payment hereof.
REPORTING
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing, the
Borrower shall furnish to the Holder:
(a) all reports required to be delivered by the Borrower to the
Holder pursuant to the terms of that Financing Agreement of even date
herewith by and between the Borrower and the Holder, and
(b) from time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Holder may
reasonably request.
COVENANTS
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing:
(a) The Borrower will maintain its corporate existence in good
standing under the laws of Minnesota.
(b) The Borrower will timely file all tax returns and reports which
are required by law to be filed by it (except for tax returns and reports
for which the Borrower has received an extension) 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 except for such taxes, assessments,
and government charges and levies which are contested in good faith for
which adequate reserves have been established on the Borrower's books.
(c) The 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.
(d) The Borrower will comply in all material respects with all laws,
rules and regulations to which it may be subject.
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EVENTS OF DEFAULT; REMEDIES
The occurrence of any one or more of the following events shall constitute an
Event of Default under this Note:
(a) The Borrower shall fail to make when due, or within five
business days thereafter, whether by acceleration or otherwise, any payment
of principal of or interest on this Note;
(b) Any representation or warranty made by or on behalf of the
Borrower in this Note or by or on behalf of the Borrower in any
certificate, statement, report or document herewith or hereafter furnished
to the Holder pursuant to this Note 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.
(c) The Borrower 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 the Borrower 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 the
Borrower or for a substantial part of the property thereof and shall not be
discharged within 60 days, or the Borrower shall make an assignment for the
benefit of creditors.
(d) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, and, if instituted against the Borrower, shall
have been consented to or acquiesced in by the Borrower, or shall remain
undismissed for 60 days, or an order for relief shall have been entered
against the Borrower.
(e) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower, and, if instituted against the Borrower, shall be
consented to or acquiesced in by the Borrower or shall remain for 60 days
undismissed.
(f) A judgment or judgments for the payment of money in excess of the
sum of $75,000 in the aggregate shall be rendered against the Borrower and
the Borrower shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof, prior to
any execution on such judgment by such judgment creditor, within 60 days
from the date of entry thereof, and within said period of 60 days, or such
longer period during which execution of such judgment shall be stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal.
(g) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower 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.
(h) Any default or event of default shall occur and be continuing
under the Security Agreement.
(i) Any default or event of default shall occur and be continuing
under that Mortgage and Security Agreement, Assignment of Leases and Rents
and Fixture Financing Statement of even date herewith by the Borrower in
favor of the Holder.
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<PAGE>
(j) Any default or event of default shall occur and be continuing
under that Letter of Undertaking of even date herewith from the Borrower to
the Holder.
(k) Any demand for payment, in whole or in part, is made under that
Financing Agreement of even date herewith by and between the Borrower and
the Holder (as the same may be amended, modified, supplemented or
restated).
(l) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $1,000,000 (as same may be
amended, modified, supplemented or restated).
(m) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $2,400,000 (as same may be
amended, modified, supplemented or restated).
It is agreed that time is of the essence in the performance of this Note. Upon
the occurrence of any Event of Default, as defined in the terms of this Note,
the Holder hereof shall have the right and option to declare, without notice,
demand, presentment for payment and notice of non-payment all of which Borrower
hereby expressly waives, all the remaining unpaid principal and accrued interest
evidenced by this Note to be immediately due and payable and the Holder may,
without notice, immediately exercise any right of setoff and enforce any lien or
security interest securing payment hereof. Upon the occurrence of an Event of
Default hereunder the Borrower agrees to pay the costs of collection including
attorney's fees.
The remedies of the Holder, as provided herein, shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the Holder and may be exercised as often as the occasion therefor
shall arise. No delay or omission on the part of the Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other remedy
under this Note. A waiver on any one occasion shall not be construed as a bar
to or waiver of any such right or remedy on a future occasion.
GOVERNING LAW, JURISDICTION; WAIVER OF JURY TRIAL
This Note is made pursuant to and shall be construed in accordance with the
laws of the State of Minnesota.
The Borrower hereby consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Note, waives any argument that venue in such forums
is not convenient and agrees that any litigation instigated by the Borrower
against the Holder in connection with this Note shall be venued in either the
District Courts of Hennepin County, Minnesota, or the United States District
Court for the District of Minnesota, Fourth Division.
BY THE BORROWER'S EXECUTION AND DELIVERY HEREOF, AND BY THE HOLDER'S
ACCEPTANCE HEREOF, EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT OF A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE
OR ARISING FROM ANY CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREE
-4-
<PAGE>
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
IN WITNESS WHEREOF, the Borrower has executed this Note as of the day and
year first above written.
REUTER MANUFACTURING, INC.
By: /s/ James W. Taylor
-------------------------
Its: President
-5-
<PAGE>
PROMISSORY NOTE EXHIBIT 10.3
$1,000,000 Minneapolis, Minnesota
December 3, 1997
FOR VALUE RECEIVED, the undersigned, REUTER MANUFACTURING, INC., a
Minnesota corporation (the "Borrower"), hereby agrees and promises to pay to the
order of U.S. BANK NATIONAL ASSOCIATION, a national banking association, or its
assigns (the "Holder"), at its office at 2338 Central Avenue Northeast, Suite
200, Minneapolis, Minnesota 55418, or such other place as the Holder may from
time to time designate, the principal amount of all loans made by the Holder to
the Borrower under the terms of this Note (each an "Advance" and collectively
the "Advances") and to pay interest on the unpaid principal balance from the
date hereof until this Note is fully paid at the rate of interest hereinafter
set forth. The aggregate principal amount of all Advances outstanding hereunder
shall not exceed the principal sum of ONE MILLION AND NO/100 DOLLARS
($1,000,000). The amount and date of each Advance shall be entered by the Holder
into Holder's records, which records shall be conclusive evidence of the subject
matter thereof absent manifest error. Both the principal amount of this Note
and interest accrued thereon shall be payable in coin or currency which at the
time of payment is legal tender for the payment of public or private debts in
the United States of America.
The principal amount of this Note shall be payable in seventy-two (72)
monthly installments, commencing on the first day of the first month which is
thirty days or more from the day of the first Advance and continuing on the
first day of each month thereafter through and including December 1, 2003, in
amount sufficient to fully amortize the principal of this Note on December 1,
1997. If not sooner paid in full, the entire remaining unpaid principal balance
of this Note, together with all accrued and unpaid interest thereon, shall
become due and payable on December 1, 2003.
From and after the date hereof, interest shall accrue on the outstanding
principal amount of this Note at a rate per annum equal to the rate of interest
from time to time publicly announced by U.S. Bank National Association as its
"Reference Rate" plus one and thirty-five one hundredth percent (1.35%);
PROVIDED, HOWEVER, that in the event that Borrower's performance for fiscal year
end December 31, 1998 (as reported in the Borrower's audited financial
statements for fiscal year end December 31, 1998 as required by and prepared in
accordance with, Section 5.1 (a)), exceeds 75% of the projections dated October
13, 1997 provided to Lender by Borrower, as determined by Lender in its sole
discretion, based on a review by Lender of Borrower's financial statements, the
projections dated October 13, 1997 and other factors determined relevant by
Lender, then interest shall accrue at a rate per annum equal to the Reference
Rate plus one-half percent (.50%) from and after the first day of the first
calendar month following the date of the Holder's receipt of the December 31,
1998 audited financial statements; "Reference Rate" shall mean the rate of
interest from time to time publicly announced by U.S. Bank National Association
as its reference rate. For purposes of determining the interest rate hereunder,
such interest rate shall change as and when the Reference Rate shall change.
Interest accrued on the outstanding principal amount of this Note shall be
payable in consecutive monthly installments commencing on the first day of the
first month which is thirty days or more from the day of the first Advance and
continuing on the first day of each month thereafter until the entire principal
amount of this Note is paid in full. Borrower also shall pay interest on any
overdue installment of principal from the due date thereof until paid at an
interest rate per annum equal at all times to two percent (2%) per annum in
excess of the interest rate set forth above, which interest shall be payable
upon demand.
All payments made under this Note shall be applied first to interest
accrued and unpaid on, and then to the unpaid principal amount of, this Note.
<PAGE>
Any prepayment of this Note shall be accompanied by accrued interest.
Any officer of the Borrower who has been disclosed to the Holder in writing
as an authorized officer for such purposes (an "Authorized Person") may request
an Advance on any day other than a Saturday, Sunday or other day when commercial
banks located in Minnesota are not open for commercial banking business. Such
request shall be made in writing delivered to the Holder by not later than 10:30
a.m. the day of the requested Advance. Holder will advance up to
ninety percent (90%) of the purchase price of new equipment purchased by the
Borrower, as evidenced by invoices for the purchase price of such new equipment,
and which is deemed eligible for advance by the Holder, or any greater or lesser
amount at the Holder's absolute and sole discretion.
The Borrower hereby authorizes the Holder to rely upon the written
instructions of any person identifying himself or herself as an Authorized
Person and upon any signature which the Holder believes to be genuine, and the
Borrower shall be bound thereby in the same manner as if such person were
authorized or such signature were genuine.
It is expressly understood that the Holder is under no obligation to make
any Advance to the Borrower under this Note (whether by reason of any provision
hereof or otherwise) (i) if an Event of Default, as hereinafter defined, has
occurred and is continuing, or (ii) if such Advance or any part thereof would
cause the aggregate amount of all Advances made hereunder to exceed $1,000,000.
This Note is secured by and pursuant to the terms of that Security
Agreement of even date herewith by the Borrower in favor of the Holder (the
"Security Agreement").
The Borrower hereby waives presentment for payment, protest and notice of
non-payment and hereby consents without affecting its liability to any extension
or alteration of the time or terms of payment hereof, any renewal, any release
of any security which may be given for the payment hereof, and any release of,
or resort to any party liable for payment hereof.
REPORTING
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing, the
Borrower shall furnish to the Holder:
(a) all reports required to be delivered by the Borrower to the
Holder pursuant to the terms of that Financing Agreement of even date
herewith by and between the Borrower and the Holder, and
(b) from time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Holder may
reasonably request.
COVENANTS
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing:
(a) The Borrower will maintain its corporate existence in good
standing under the laws of the State of its incorporation.
-2-
<PAGE>
(b) The Borrower will timely file all tax returns and reports which
are required by law to be filed by it (except for tax returns and reports
for which the Borrower has received an extension) 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 except for such taxes, assessments,
and government charges and levies which are contested in good faith for
which adequate reserves have been established on the Borrower's books.
(c) The 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.
(d) The Borrower will comply in all material respects with all laws,
rules and regulations to which it may be subject.
EVENTS OF DEFAULT; REMEDIES
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note:
(a) The Borrower shall fail to make when due, or within five business
days thereafter, whether by acceleration or otherwise, any payment of
principal of or interest on this Note;
(b) Any representation or warranty made by or on behalf of the
Borrower in this Note or by or on behalf of the Borrower in any
certificate, statement, report or document herewith or hereafter furnished
to the Holder pursuant to this Note 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.
(c) The Borrower 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 the Borrower 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 the
Borrower or for a substantial part of the property thereof and shall not be
discharged within 60 days, or the Borrower shall make an assignment for the
benefit of creditors.
(d) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, and, if instituted against the Borrower, shall
have been consented to or acquiesced in by the Borrower, or shall remain
undismissed for 60 days, or an order for relief shall have been entered
against the Borrower.
(e) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower, and, if instituted against the Borrower, shall be
consented to or acquiesced in by the Borrower or shall remain for 60 days
undismissed.
(f) A judgment or judgments for the payment of money in excess of the
sum of $75,000 in the aggregate shall be rendered against the Borrower and
the Borrower shall not
-3-
<PAGE>
discharge the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereof, prior to any execution on such judgment by
such judgment creditor, within 60 days from the date of entry thereof, and
within said period of 60 days, or such longer period during which execution of
such judgment shall be stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal.
(g) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower 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.
(h) Any default or event of default shall occur and be continuing
under the Security Agreement.
(i) Any default or event of default shall occur and be continuing
under that Mortgage and Security Agreement, Assignment of Leases and Rents
and Fixture Financing Statement of even date herewith by the Borrower in
favor of the Holder.
(j) Any default or event of default shall occur and be continuing
under that Letter of Undertaking of even date herewith from the Borrower to
the Holder.
(k) Any demand for payment, in whole or in part, is made under that
Financing Agreement of even date herewith by and between the Borrower and
the Holder (as the same may be amended, modified, supplemented or
restated).
(l) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $270,000 (as same may be
amended, modified, supplemented or restated).
(m) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $2,400,000 (as same may be
amended, modified, supplemented or restated).
It is agreed that time is of the essence in the performance of this Note. Upon
the occurrence of any Event of Default, as defined in the terms of this Note,
the Holder hereof shall have the right and option to declare, without notice,
demand, presentment for payment and notice of non-payment all of which Borrower
hereby expressly waives, all the remaining unpaid principal and accrued interest
evidenced by this Note to be immediately due and payable and the Holder may,
without notice, immediately exercise any right of setoff and enforce any lien or
security interest securing payment hereof. Upon the occurrence of an Event of
Default hereunder the Borrower agrees to pay the costs of collection including
reasonable attorney's fees.
The remedies of the Holder, as provided herein, shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the Holder and may be exercised as often as the occasion therefor
shall arise. No delay or omission on the part of the Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other remedy
under this Note. A waiver on any one occasion shall not be construed as a bar
to or waiver of any such right or remedy on a future occasion.
-4-
<PAGE>
GOVERNING LAW, JURISDICTION; WAIVER OF JURY TRIAL
This Note is made pursuant to and shall be construed in accordance with the
laws of the State of Minnesota.
The Borrower hereby consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Note, waives any argument that venue in such forums
is not convenient and agrees that any litigation instigated by the Borrower
against the Holder in connection with this Note shall be venued in either the
District Courts of Hennepin County, Minnesota, or the United States District
Court for the District of Minnesota, Fourth Division.
BY THE BORROWER'S EXECUTION AND DELIVERY HEREOF, AND BY THE HOLDER'S
ACCEPTANCE HEREOF, EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT OF A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE
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.
IN WITNESS WHEREOF, the Borrower has executed this Note as of the day and
year first above written.
REUTER MANUFACTURING, INC.
By: /s/ James W. Taylor
--------------------
Its: President
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<PAGE>
PROMISSORY NOTE EXHIBIT 10.4
$2,400,000 Minneapolis, Minnesota
December 3, 1997
FOR VALUE RECEIVED, the undersigned, REUTER MANUFACTURING, INC., a
Minnesota corporation, (the "Borrower"), hereby agrees and promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association, or
its assigns (the "Holder"), at its office at 2338 Central Avenue Northeast,
Suite 200, Minneapolis, Minnesota 55418, or such other place as the Holder may
from time to time designate, the principal sum of TWO MILLION FOUR HUNDRED
THOUSAND AND NO/100 DOLLARS ($2,400,000), and to pay interest on the unpaid
principal balance from the date hereof until this Note is fully paid at the rate
of interest hereinafter set forth. Both the principal amount of this Note and
interest accrued thereon shall be payable in coin or currency which at the time
of payment is legal tender for the payment of public or private debts in the
United States of America. The principal amount of and interest accrued on this
Note are payable in installments due as follows:
(1) From and after the date hereof, interest shall accrue on the
outstanding principal amount of this Note at a rate per annum equal to
the rate of interest from time to time publicly announced by U.S. Bank
National Association as its "Reference Rate" plus one and thirty-five
one hundredth percent (1.35%). The Borrower, in a one-time election
provided at any time from and after the date of this Note, may request
that interest on the entire loan accrue and be payable, from and after
the date selected, at a fixed rate equal to the Government Yield (as
defined in Exhibit A hereto), plus three percent (3.0%) (the "Fixed
Rate Option"). The Loan shall accrue interest from and after such
effective date at the Fixed Rate Option. Such election shall be made
in a writing to the Holder delivered three Business Days prior to the
date of such election. "Reference Rate" shall mean the rate of
interest from time to time publicly announced by U.S. Bank National
Association as its reference rate. For purposes of determining the
interest rate hereunder, such interest rate shall change as and when
the Reference Rate shall change. Interest accrued on the outstanding
principal amount of this Note shall be payable in consecutive monthly
installments commencing on January 1, 1998 and continuing on the first
day of each month thereafter until the entire principal amount of this
Note is paid in full. Borrower also shall pay interest on any overdue
installment of principal from the due date thereof until paid at an
interest rate per annum equal at all times to two percent (2%) per
annum in excess of the interest rate set forth above, which interest
shall be payable upon demand.
(2) The principal amount of this Note shall be payable in fifty-nine (59)
monthly installments, commencing on January 1, 1998 and continuing on
the first day of each month thereafter through and including November
1, 2002 in the amount of $13,333 each, and one (1) payment on December
1, 2002 in the amount of $1,613,353.
(3) If not sooner paid in full, the entire remaining unpaid principal
balance of this Note, together with all accrued and unpaid interest
thereon, shall become due and payable on December 1, 2002 (the
"Maturity Date").
The Borrower acknowledges and agrees that the Holder shall make certain
arrangements to fund the principal of the Fixed Rate Option hereunder at a fixed
rate of interest, and that payment of
<PAGE>
the principal amount of the Fixed Rate Option, except upon the schedule of
installments set forth above, may result in costs to the Holder arising from
such arrangements. Due to the difficulty of calculating these exact costs at
all times, the Borrower agrees that upon any payment of the principal of the
Fixed Rate Option hereof, other than in accordance with the schedule of
installments, an additional amount shall be payable calculated in accordance
with Exhibit A attached hereto (the "Yield Prepayment Premium").
Any prepayment of this Note shall be accompanied by accrued interest. In
the event Borrower prepays this Note, Borrower shall pay the Holder a prepayment
premium of $18,000, which shall be in addition to amounts which may be due as
the Yield Prepayment Premium.
All payments made under this Note shall be applied first to interest
accrued and unpaid on, and then to the unpaid principal amount of, this Note.
This Note is secured by and pursuant to the terms of that Security
Agreement of even date herewith by the Borrower in favor of the Holder (the
"Security Agreements") and is also secured pursuant to the terms of that
Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture
Financing Statement of even date herewith by the Borrower in favor of the Holder
(the "Mortgage").
The Borrower hereby waives presentment for payment, protest and notice of
non-payment and hereby consents without affecting its liability to any extension
or alteration of the time or terms of payment hereof, any renewal, any release
of any security which may be given for the payment hereof, and any release of,
or resort to any party liable for payment hereof.
FACILITY FEE
The Borrower shall pay to the Lender on the date hereof a facility fee in
an amount equal to $13,000.
REPORTING
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing, the
Borrower shall furnish to the Holder:
(a) all reports required to be delivered by the Borrower to the
Holder pursuant to the terms of that Financing Agreement of even date
herewith by and between the Borrower and the Holder, and
(b) from time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Holder may
reasonably request.
COVENANTS
Until the principal amount of this Note and all interest accrued thereon
has been paid in full, unless the Holder shall otherwise consent in writing:
(a) The Borrower will maintain its corporate existence in good
standing under the laws of Minnesota.
-2-
<PAGE>
(b) The Borrower will timely file all tax returns and reports which
are required by law to be filed by it (except for tax returns and reports
for which the Borrower has received an extension) 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 except for such taxes, assessments,
and government charges and levies which are contested in good faith for
which adequate reserves have been established on the Borrower's books.
(c) The 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.
(d) The Borrower will comply in all material respects with all laws,
rules and regulations to which it may be subject.
EVENTS OF DEFAULT; REMEDIES
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note:
(a) The Borrower shall fail to make when due, whether by acceleration
or otherwise, any payment of principal of or interest on this Note;
(b) Any representation or warranty made by or on behalf of the
Borrower in this Note or by or on behalf of the Borrower in any
certificate, statement, report or document herewith or hereafter furnished
to the Holder pursuant to this Note 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.
(c) The Borrower 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 the Borrower 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 the
Borrower or for a substantial part of the property thereof and shall not be
discharged within 60 days, or the Borrower shall make an assignment for the
benefit of creditors.
(d) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, and, if instituted against the Borrower shall have
been consented to or acquiesced in by the Borrower or shall remain
undismissed for 60 days, or an order for relief shall have been entered
against the Borrower.
(e) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower and, if instituted against the Borrower, shall be
consented to or acquiesced in by the Borrower or shall remain for 60 days
undismissed.
(f) A judgment or judgments for the payment of money in excess of the
sum of $75,000 in the aggregate shall be rendered against the Borrower and
the Borrower shall not
-3-
<PAGE>
discharge the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereof, prior to any execution on such judgment by
such judgment creditor, within 60 days from the date of entry thereof, and
within said period of 60 days, or such longer period during which execution of
such judgment shall be stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal.
(g) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower 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.
(h) Any default or event of default shall occur and be continuing
under the Security Agreement.
(i) Any default or event of default shall occur and be continuing
under the Mortgage.
(j) Any default or event of default shall occur and be continuing
under that Letter of Undertaking of even date herewith from the Borrower
to the Holder.
(k) Any demand for payment, in whole or in part, is made under that
Financing Agreement of even date herewith by and between the Borrower and
the Holder (as the same may be amended, modified, supplemented or
restated).
(l) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $270,000 (as same may be
amended, modified, supplemented or restated).
(m) Any default or event of default shall occur and be continuing
under that promissory note of even date by the Borrower in favor of the
Holder in the original principal amount of $1,000,000 (as same may be
amended, modified, supplemented or restated).
It is agreed that time is of the essence in the performance of this Note. Upon
the occurrence of any Event of Default, as defined in the terms of this Note,
the Holder hereof shall have the right and option to declare, without notice,
demand, presentment for payment and notice of non-payment all of which Borrower
hereby expressly waives, all the remaining unpaid principal and accrued interest
evidenced by this Note to be immediately due and payable and the Holder may,
without notice, immediately exercise any right of setoff and enforce any lien or
security interest securing payment hereof. Upon the occurrence of an Event of
Default hereunder the Borrower agrees to pay the costs of collection including
attorney's fees.
The remedies of the Holder, as provided herein, shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the Holder and may be exercised as often as the occasion therefor
shall arise. No delay or omission on the part of the Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other remedy
under this Note. A waiver on any one occasion shall not be construed as a bar
to or waiver of any such right or remedy on a future occasion.
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<PAGE>
GOVERNING LAW, JURISDICTION; WAIVER OF JURY TRIAL
This Note is made pursuant to and shall be construed in accordance with the
laws of the State of Minnesota.
The Borrower hereby consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Note, waives any argument that venue in such forums
is not convenient and agrees that any litigation instigated by the Borrower
against the Holder in connection with this Note shall be venued in either the
District Courts of Hennepin County, Minnesota, or the United States District
Court for the District of Minnesota, Fourth Division.
BY THE BORROWER'S EXECUTION AND DELIVERY HEREOF, AND BY THE HOLDER'S
ACCEPTANCE HEREOF, EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT OF A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE
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.
IN WITNESS WHEREOF, the Borrower has executed this Note as of the day and
year first above written.
REUTER MANUFACTURING, INC.
By: /s/ James W. Taylor
----------------------
Its: President
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<PAGE>
EXHIBIT A
CALCULATION OF FUNDING LOSSES
The Borrower agrees to pay the Holder a prepayment premium as described in
this exhibit upon any prepayment, voluntary or involuntary, of the principal
amount of the Fixed Rate Option of this Note (the "Loan"). Because there is no
readily available index of rates payable on the loans such as the Loan, nor any
assurance that the Holder could replace the Loan with a similar loan, the
Borrower and the Holder agree that changes in the yields on U.S. government
securities provide a reasonable approximation for changes in interest rates
generally. For purposes of this section, the following terms shall have the
meanings given below
"GOVERNMENT YIELD": As of any date of determinations the yield (converted
as necessary to the equivalent semi-annual compound rate) on U.S. Treasury
securities having a maturity date closest to the weighted average maturity of
the Loan (to the scheduled installment dates), as published in THE WALL STREET
JOURNAL (or, if not so published, as determined by the Holder by using the
average quotes obtained by the Holder from three primary dealers that market
U.S. Treasury securities in the secondary market). "U.S. Treasury securities"
means actively traded U.S. Treasury bonds, bills and notes and, if more than one
issue of U.S. Treasury securities is scheduled to mature at or about the time of
the end of the weighted average maturity of the Loan, then to the extent
possible the U.S. Treasury security issued most recently prior to the date of
determination will be chosen as the basis of the Government Yield.
"INTEREST DIFFERENTIAL": As of the date of any full or partial prepayment,
the rate of interest applicable to the Loan MINUS the sum of the Government
Yield as of the date of prepayment and the Issuance Spread.
"ISSUANCE SPREAD" The amount by which the Holder's cost of funds exceeded
the Government Yield as of the day of the making of the loans.
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SECURITY AGREEMENT EXHIBIT 10.5
THIS SECURITY AGREEMENT, dated as of December 3, 1997, is made and
given by REUTER MANUFACTURING, INC., a Minnesota corporation (the "Grantor"), to
U.S. BANK NATIONAL ASSOCIATION, a national banking association (the "Secured
Party").
RECITALS
A. The Grantor and the Secured Party have entered into a Financing
Agreement dated as of December 3, 1997 (as the same may hereafter be amended,
supplemented, extended, restated, or otherwise modified from time to time, the
"Financing Agreement") pursuant to which the Secured Party has agreed to extend
to the Grantor certain credit accommodations on the terms and conditions set
forth in the Financing Agreement.
B. The Grantor has executed and delivered three promissory notes
dated as of December 3, 1997 (as the same may hereafter be amended,
supplemented, extended, restated, or otherwise modified from time to time, the
"Promissory Notes") in the original amounts of $1,000,000; $270,000; and
$2,400,000 pursuant to which the Secured Party has agreed to extend to the
Grantor certain credit accommodations on the terms and conditions set forth in
the Promissory Notes.
C. It is a condition precedent to the extension of any credit
accommodations pursuant to the terms of the Financing Agreement and the
Promissory Notes that this Agreement be executed and delivered by the Grantor.
D. The Grantor finds it advantageous, desirable and in its best
interests to comply with the requirement that it execute and deliver this
Security Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Secured Party to enter into the Financing Agreement and to extend
credit accommodations to the Grantor thereunder, the Grantor hereby agrees with
the Secured Party for the Secured Party's benefit as follows:
Section 1. DEFINED TERMS.
1(a) As used in this Agreement, the following terms shall have
the meanings indicated:
"ACCOUNTS" shall mean each and every right to payment of Grantor,
whether such right to payment arises out of a sale or lease of goods by
Grantor, or other disposition of goods or other property of Grantor, out of
a rendering of services by Grantor, out of a loan by Grantor, out of damage
to or loss of goods in the possession of a railroad or other carrier or any
other bailee, out of overpayment of taxes or other liabilities of Grantor,
or which otherwise arises under any contract or agreement, or from any
other cause, whether such right to payment now exists or hereafter arises
and whether such right to payment is or is not yet earned by performance
and howsoever such right to payment may be evidenced, together with all
other rights and interest (including all liens and security interests)
which Grantor may at any time have by law or agreement against any account
debtor (as defined in the Uniform Commercial Code in effect in the State of
Minnesota) or other obligor obligated to make any such payment or against
any of the property of such account debtor or other obligor; specifically
(but without limitation), the term includes all present and future
instruments, documents, chattel papers, accounts and contract rights of
Grantor.
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"ACCOUNT DEBTOR" shall mean a Person who is obligated on or under any
Account, Chattel Paper, Instrument or General Intangible.
"CHATTEL PAPER" shall mean a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods;
when a transaction is evidenced by both a security agreement or a lease and
by an Instrument or a series of Instruments, the group of writings taken
together constitutes Chattel Paper.
"COLLATERAL" shall mean all property and rights in property now owned
or hereafter at any time acquired by the Grantor in or upon which a
Security Interest is granted to the Secured Party by the Grantor under this
Agreement.
"DOCUMENT" shall mean any bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of goods, together with any
other document or receipt which in the regular course of business or
financing is treated as adequately evidencing that the Person in possession
of it is entitled to receive, hold and dispose of the document and the
goods it covers.
"EQUIPMENT" shall mean all machinery, equipment, furniture,
furnishings and fixtures, including all accessions, accessories and
attachments thereto, and any guaranties, warranties, indemnities and other
agreements of manufacturers, vendors and others with respect to such
Equipment.
"EVENT OF DEFAULT" shall have the meaning given to such term in
Section 20 hereof.
"FINANCING STATEMENT" shall have the meaning given to such term in
Section 4 hereof.
"GENERAL INTANGIBLES" shall mean any personal property (other than
goods, Accounts, Chattel Paper, Documents, Instruments and money) including
choses in action, causes of action, contract rights, corporate and other
business records, inventions, designs, patents, patent applications,
service marks, trademarks, tradenames, trade secrets, engineering drawings,
good will, registrations, copyrights, licenses, franchises, customer lists,
tax refund claims, royalties, licensing and product rights, rights to the
retrieval from third parties of electronically processed and recorded data
and all rights to payment resulting from an order of any court.
"INSTRUMENT" shall mean a draft, check, certificate of deposit, note,
bill of exchange, security or any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease and is
of a type which is transferred in the ordinary course of business by
delivery with any necessary endorsement or assignment.
"INVENTORY" shall mean any and all of the Grantor's goods, including,
without limitation, goods in transit, wherever located which are or may at
any time be leased by the Grantor to a lessee, held for sale or lease,
furnished under any contract of service or held as raw materials, work in
process, or supplies or materials used or consumed in the Grantor's
business, or which are held for use in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, and all
goods, the sale or other disposition of which has given rise to a
Receivable, which are returned to and/or repossessed and/or stopped in
transit by the Grantor or the Secured Party, or at any time hereafter in
the
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possession or under the control of the Grantor or the Secured Party, or any
agent or bailee of either thereof, and all documents of title or other documents
representing the same.
"LIEN" shall mean any security interest, mortgage, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device (including the interest of the lessors under capitalized leases),
in, of or on any assets or properties of the Person referred to.
"OBLIGATIONS" shall mean (a) all indebtedness, liabilities and
obligations of the Grantor to the Secured Party of every kind, nature or
description under the Financing Agreement or under the Promissory Notes,
including the Grantor's obligation on any promissory note or notes under
the Financing Agreement and any note or notes hereafter issued in
substitution or replacement thereof, (b) all liabilities of the Grantor
under this Agreement, and (c) any and all other liabilities and obligations
of the Grantor to the Secured Party of every kind, nature and description,
whether direct or indirect or hereafter acquired by the Secured Party from
any Person, absolute or contingent, regardless of how such liabilities
arise or by what agreement or instrument they may be evidenced, and in all
of the foregoing cases whether due or to become due, and whether now
existing or hereafter arising or incurred.
"PERSON" shall mean any individual, corporation, partnership, limited
partnership, limited liability company, 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.
"SECURITY INTEREST" shall have the meaning given such term in Section
2 hereof.
1(b) All other terms used in this Agreement which are not
specifically defined herein shall have the meaning assigned to such terms
in the Uniform Commercial Code in effect in the State of Minnesota as of
the date of this Agreement to the extent such other terms are defined
therein.
1(c) Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular, the singular, the
plural and "or" has the inclusive meaning represented by the phrase
"and/or." The words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation." The words "hereof,"
"herein," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to Sections are references to Sections in this Security
Agreement unless otherwise provided.
Section 2. GRANT OF SECURITY INTEREST. As security for the payment
and performance of all of the Obligations, the Grantor hereby grants to the
Secured Party a security interest (the "Security Interest") in all of the
Grantor's right, title, and interest in and to the following, whether now or
hereafter owned, existing, arising or acquired and wherever located:
2(a) All Accounts.
2(b) All Chattel Paper.
2(c) All Documents.
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2(d) All Equipment.
2(e) All General Intangibles.
2(f) All Instruments.
2(g) All Inventory.
2(h) To the extent not otherwise included in the foregoing, (i)
all other rights to the payment of money, including rents and other sums
payable to the Grantor under leases, rental agreements and other Chattel
Paper and insurance proceeds; (ii) all books, correspondence, credit files,
records, invoices, bills of lading, and other documents relating to any of
the foregoing, including, without limitation, all tapes, cards, disks,
computer software, computer runs, and other papers and documents in the
possession or control of the Grantor or any computer bureau from time to
time acting for the Grantor; (iii) all rights in, to and under all policies
insuring the life of any officer, director, stockholder or employee of the
Grantor, the proceeds of which are payable to the Grantor; and (iv) all
accessions and additions to, parts and appurtenances of, substitutions for
and replacements of any of the foregoing.
2(i) To the extent not otherwise included, all proceeds and
products of any and all of the foregoing.
Section 3. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the Accounts, Chattel
Paper, General Intangibles and other items included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise
by the Secured Party of any of the rights hereunder shall not release the
Grantor from any of its duties or obligations under any items included in the
Collateral, and (c) the Secured Party shall have no obligation or liability
under Accounts, Chattel Paper, General Intangibles and other items included in
the Collateral by reason of this Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
Section 4. TITLE TO COLLATERAL. Except as otherwise permitted herein
or in the Financing Agreement, the Grantor has (or will have at the time it
acquires rights in Collateral hereafter acquired or arising) and will maintain
so long as the Security Interest may remain outstanding, title to each item of
Collateral (including the proceeds and products thereof), free and clear of all
Liens except the Security Interest and except Liens permitted by the Financing
Agreement. Except as otherwise permitted herein or in the Financing Agreement,
the Grantor will defend the Collateral against all claims or demands of all
Persons (other than the Secured Party) claiming the Collateral or any interest
therein. As of the date of execution of this Security Agreement, no effective
financing statement or other similar document used to perfect and preserve a
security interest under the laws of any jurisdiction (a "Financing Statement")
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed (a) in favor of the Secured Party relating to
this Agreement, or (b) to perfect Liens permitted by the Financing Agreement.
Section 5. LOCK BOX, COLLATERAL ACCOUNT. The Grantor will direct
each of its Account Debtors or other obligors to make payments due under any
Collateral directly to a special lock box to be established and maintained by
Secured Party (the "Lockbox"). The Grantor hereby
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authorizes and directs Secured Party to deposit into a special collateral
account to be established and maintained by Secured Party (the "Collateral
Account") all checks, drafts and cash payments received in said Lockbox. All
deposits from the Lockbox to the Collateral Account shall constitute proceeds of
Collateral and shall not constitute payment of any Obligation. The Grantor
agrees that it will promptly deliver to Secured Party, for deposit into said
Collateral Account, all payments on Accounts and Chattel Paper received by it.
All such payments shall be delivered to Secured Party in the form received
(except for the Grantor's endorsement where necessary). Until so delivered, all
payments on Accounts and Chattel Paper received by the Grantor shall be held in
trust by the Grantor for and as the property of Secured Party and shall not be
commingled with any funds or property of the Grantor.
Section 6. COLLECTION RIGHTS OF SECURED PARTY. Notwithstanding
Secured Party's rights under Section 5 with respect to any and all Instruments,
Chattel Paper, Accounts and other rights to payment constituting Collateral
(including proceeds), Secured Party may, at any time (after the occurrence of an
Event of Default or demand for payment under the Financing Agreement) notify any
Account Debtor, or any other person obligated to pay any amount due, that such
Chattel Paper, Account, or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party. If Secured Party so requests at any time, the Grantor will so notify
such Account Debtors and other obligors in writing and will indicate on all
invoices to such Account Debtors or other obligors that the amount due is
payable directly to Secured Party. At any time after Secured Party or the
Grantor gives such notice to an account debtor or other obligor, Secured Party
may (but need not), in its own name or in the Grantor's name, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such chattel paper, account, or other right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, notify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor. The
Borrower hereby irrevocably makes, constitutes and appoints the Lender, or any
person whom the Lender may designate, the Borrower's true and lawful attorney
with power to receive, open and dispose of all mail addressed to the Borrower;
to endorse the Borrower's name on any notes, acceptances, checks, drafts, money
orders or other means of payment that may come into the Lender's possession as
payment of or upon Accounts, Chattel Paper or other Collateral; to endorse the
Borrower's name on any invoice, freight or express bill or bill of lading
relating to any Collateral; to sign the Borrower's name to drafts against
Account Debtors, to assignments and verification of accounts and notices thereof
to Account Debtors, and to documents of title covering any Collateral, and to do
all other things necessary or proper to carry out the intent of this Agreement.
Section 7. DISPOSITION OF COLLATERAL. The Grantor will not sell,
lease or otherwise dispose of, or discount or factor with or without recourse,
any Collateral, except sales of items of Inventory in the ordinary course of
business.
Section 8. NAMES, OFFICES, LOCATIONS. The Grantor does business
solely under its own name and the trade names and styles, if any, set forth on
Schedule II hereto. Except as noted on said Schedule, no such trade names or
styles and no trademarks or other similar marks owned by the Grantor are
registered with any governmental unit. The chief place of business and chief
executive office and the office where it keeps its books and records concerning
the Accounts and General Intangibles and the originals of all Chattel Paper,
Documents and Instruments are located at its address set forth on the signature
page hereof. All items of Equipment and Inventory existing on the date of this
Agreement are located at the places specified on Schedule I hereto. The Grantor
will immediately notify the Secured Party of any additional state in which any
item of Inventory or Equipment is hereafter located. The Grantor will from time
to time at the request of the Secured
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Party provide the Secured Party with current lists as to the locations of the
Equipment and Inventory. The Grantor will not permit any Inventory,
Equipment, Chattel Paper or Documents or any records pertaining to Accounts
and General Intangibles to be located in any state or area in which, in the
event of such location, a financing statement covering such Collateral would
be required to be, but has not in fact been, filed in order to perfect the
Security Interest. The Grantor will not change its name or the location of
its chief place of business and chief executive office unless the Secured
Party has been given at least 30 days prior written notice thereof and the
Grantor has executed and delivered to the Secured Party such Financing
Statements and other instruments required or appropriate to continue the
perfection of the Security Interest.
Section 9. RIGHTS TO PAYMENT. Except as the Grantor may otherwise
advise the Secured Party in writing, each Account, Chattel Paper, Document,
General Intangible and Instrument constituting or evidencing Collateral is (or,
in the case of all future Collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation of the Account Debtor or other
obligor named therein or in the Grantor's records pertaining thereto as being
obligated to pay or perform such obligation. The Grantor will perform and
comply in all material respects with all its obligations under any items
included in the Collateral and exercise promptly and diligently its rights
thereunder.
Section 10. FURTHER ASSURANCES.
10(a) The Grantor agrees that from time to time, at its expense,
it will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or that the Secured
Party may reasonably request, in order to perfect and protect the Security
Interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral (but any failure to request or assure that the
Grantor execute and deliver such instrument or documents or to take such
action shall not affect or impair the validity, sufficiency or
enforceability of this Agreement and the Security Interest, regardless of
whether any such item was or was not executed and delivered or action taken
in a similar context or on a prior occasion). Without limiting the
generality of the foregoing, the Grantor will, promptly and from time to
time at the request of the Secured Party: (i) mark, or permit the Secured
Party to mark, conspicuously its books, records, and accounts showing or
dealing with the Collateral, and each item of Chattel Paper included in the
Collateral, with a legend, in form and substance satisfactory to the
Secured Party, indicating that each such item of Collateral and each such
item of Chattel Paper is subject to the Security Interest granted hereby;
(ii) deliver and pledge to the Secured Party, all Instruments and
Documents, duly indorsed or accompanied by duly executed instruments of
transfer or assignment, with full recourse to the Grantor, all in form and
substance satisfactory to the Secured Party; (iii) execute and file such
Financing Statements or continuation statements in respect thereof, or
amendments thereto, and such other instruments or notices (including
fixture filings with any necessary legal descriptions as to any goods
included in the Collateral which the Secured Party determines might be
deemed to be fixtures, and instruments and notices with respect to vehicle
titles), as may be necessary or desirable, or as the Secured Party may
request, in order to perfect, preserve, and enhance the Security Interest
granted or purported to be granted hereby; and (iv) obtain waivers, in form
satisfactory to the Secured Party, of any claim to any Collateral from any
landlords or mortgagees of any property where any Inventory or Equipment is
located.
10(b) The Grantor hereby authorizes the Secured Party to file
one or more Financing Statements or continuation statements in respect
thereof, and amendments
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thereto, relating to all or any part of the Collateral without the
signature of the Grantor where permitted by law. A photocopy or other
reproduction of this Agreement or any Financing Statement covering the
Collateral or any part thereof shall be sufficient as a Financing Statement
where permitted by law.
10(c) The Grantor will furnish to the Secured Party from time to
time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party may reasonably request, all in reasonable detail and in form
and substance reasonably satisfactory to the Secured Party.
Section 11. TAXES AND CLAIMS. The Grantor will promptly pay all
taxes and other governmental charges levied or assessed upon or against any
Collateral or upon or against the creation, perfection or continuance of the
Security Interest, as well as all other claims of any kind (including claims for
labor, material and supplies) against or with respect to the Collateral, except
to the extent (a) such taxes, charges or claims are being contested in good
faith by appropriate proceedings, (b) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (c) such taxes, charges or claims are adequately reserved
against on the Grantor's books in accordance with generally accepted accounting
principles.
Section 12. BOOKS AND RECORDS. The Grantor will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral,
including a record of all payments received and credits granted with respect to
all Accounts, Chattel Paper and other items included in the Collateral.
Section 13. INSPECTION, REPORTS, VERIFICATIONS. The Grantor will at
all reasonable times permit the Secured Party or its representatives to examine
or inspect any Collateral, any evidence of Collateral and the Grantor's books
and records concerning the Collateral, wherever located. The Grantor will from
time to time when requested by the Secured Party furnish to the Secured Party a
report on its Accounts, Chattel Paper, General Intangibles and Instruments,
naming the Account Debtors or other obligors thereon, the amount due and the
aging thereof. The Secured Party or its designee is authorized to contact
Account Debtors and other Persons obligated on any such Collateral from time to
time to verify the existence, amount and/or terms of such Collateral.
Section 14. NOTICE OF LOSS. The Grantor will promptly notify the
Secured Party of any loss of or material damage to any material item of
Collateral or of any substantial adverse change, known to Grantor, in any
material item of Collateral or the prospect of payment or performance thereof.
Section 15. INSURANCE. The Grantor will keep the Equipment and
Inventory insured against "all risks" for the full replacement cost thereof
subject to a deductible in an amount, and with an insurance company or
companies, satisfactory to the Secured Party, the policies to protect the
Secured Party as its interests may appear, with such policies or certificates
with respect thereto to be delivered to the Secured Party at its request. Each
such policy or the certificate with respect thereto shall provide that such
policy shall not be cancelled or allowed to lapse unless at least 30 days prior
written notice is given to the Secured Party.
Section 16. LAWFUL USE; FAIR LABOR STANDARDS ACT. The Grantor will
use and keep the Collateral, and will require that others use and keep the
Collateral, only for lawful purposes, without violation of any federal, state or
local law, statute or ordinance. All Inventory of the
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Grantor as of the date of this Agreement that was produced by the Grantor or
with respect to which the Grantor performed any manufacturing or assembly
process was produced by the Grantor (or such manufacturing or assembly process
was conducted) in compliance in all material respects with all requirements of
the Fair Labor Standards Act, and all Inventory produced, manufactured or
assembled by the Grantor after the date of this Agreement will be so produced,
manufactured or assembled, as the case may be.
Section 17. ACTION BY THE SECURED PARTY. If the Grantor at any time
fails to perform or observe any of the foregoing agreements, the Secured Party
shall have (and the Grantor hereby grants to the Secured Party) the right, power
and authority (but not the duty) to perform or observe such agreement on behalf
and in the name, place and stead of the Grantor (or, at the Secured Party's
option, in the Secured Party's name) and to take any and all other actions which
the Secured Party may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of Liens,
the procurement and maintenance of insurance, the execution of assignments,
security agreements and Financing Statements, and the indorsement of
instruments); and the Grantor shall thereupon pay to the Secured Party on demand
the amount of all monies expended and all costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Secured Party in
connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Secured Party, together with
interest thereon from the date expended or incurred at the highest lawful rate
then applicable to any of the Obligations, and all such monies expended, costs
and expenses and interest thereon shall be part of the Obligations secured by
the Security Interest.
Section 18. INSURANCE CLAIMS. As additional security for the payment
and performance of the Obligations, the Grantor hereby assigns to the Secured
Party any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Grantor with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto. At any time, whether before or
after the occurrence of any Event of Default, the Secured Party may (but need
not), in the Secured Party's name or in Grantor's name, execute and deliver
proofs of claim, receive all such monies, indorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy. Notwithstanding any of the
foregoing, so long as no Event of Default exists the Grantor shall be entitled
to all insurance proceeds with respect to Equipment or Inventory provided that
such proceeds are applied to the cost of replacement Equipment or Inventory.
Section 19. THE SECURED PARTY'S DUTIES. The powers conferred on the
Secured Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Secured
Party shall be deemed to have exercised reasonable care in the safekeeping of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to the safekeeping which the Secured Party accords its own
property of like kind. Except for the safekeeping of any Collateral in its
possession and the accounting for monies and for other properties actually
received by it hereunder, the Secured Party shall have no duty, as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Secured Party has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any Persons or any other rights pertaining to any Collateral. The
Secured Party will take action in the nature of exchanges, conversions,
redemptions, tenders and the like requested in writing by the Grantor with
respect to the Collateral in the Secured Party's possession if the Secured Party
in its reasonable judgment determines that
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such action will not impair the Security Interest or the value of the
Collateral, but a failure of the Secured Party to comply with any such request
shall not of itself be deemed a failure to exercise reasonable care.
Section 20. EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default under this Agreement:
20(a) The Grantor shall fail to make payment when due, whether
upon demand, or at a scheduled due date, or otherwise, any principal of or
interest on its obligations under the Financing Agreement or any other
obligations of the Grantor to the Secured Party, except to the extent any such
obligations expressly provide for a grace period prior to an event of default
thereunder.
20(b) Any representation or warranty made by or on behalf of the
Grantor in this Agreement or the Financing Agreement or by or on behalf of the
Grantor in any certificate, statement, report or document herewith or hereafter
furnished to the Secured Party pursuant to this Agreement or the Financing
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.
20(c) The Grantor shall fail to comply with Sections 5.2 or 5.3
or any Section of Article VI of the Financing Agreement.
20(d) The Grantor shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement or the
Financing Agreement (other than those hereinabove set forth in this Section 20)
and such failure to comply shall continue for 30 calendar days after whichever
of the following dates is the earliest: (i) the date the Grantor gives notice
of such failure to the Secured Party, or (ii) the date the Secured Party gives
notice of such failure to the Grantor.
20(e) The Grantor shall apply for or consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver of the Grantor
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 the Grantor or for a substantial part of the property thereof and
shall not be discharged within 60 days, or the Grantor shall make an assignment
for the benefit of creditors.
20(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against the Borrower and, if instituted against the Grantor, shall have been
consented to or acquiesced in by the Grantor or shall remain undismissed for 60
days, or an order for relief shall have been entered against the Grantor.
20(g) Any dissolution or liquidation proceeding shall be
instituted by or against the Grantor and, if instituted against the Grantor,
shall be consented to or acquiesced in by the Grantor or shall remain for 60
days undismissed.
20(h) A judgment or judgments for the payment of money in excess
of the sum of $75,000 in the aggregate shall be rendered against the Grantor 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
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<PAGE>
during which execution of such judgment shall be stayed during an appeal from
such judgment.
20(i) Any execution or attachment shall be issued whereby any
substantial part of the property of the Grantor 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.
20(j) Any default or event of default shall occur with respect to
any of the Promissory Notes.
20(k) Any default or event of default shall occur and be
continuing under that Letter of Undertaking of even date herewith from the
Borrower to the Holder.
20(l) Any default or event of default shall occur with respect to
the Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture
Financing Statement dated as even date from Grantor to Secured Party.
20(m) Any default or event of default (however denominated or
defined) shall occur with respect to any indebtedness of the Grantor (other than
the Obligations) permitted under the Financing Agreement.
THE FOREGOING EVENTS OF DEFAULT, AND THE REMEDIES UPON EVENT OF DEFAULT AS SET
FORTH BELOW IN SECTION 21, ARE IN ADDITION TO AND SUPPLEMENT THE RIGHTS OF THE
SECURED PARTY UNDER THE FINANCING AGREEMENT, INCLUDING WITHOUT LIMITATION THE
RIGHT OF THE SECURED PARTY TO DEMAND PAYMENT OF THE OBLIGATIONS UNDER THE
FINANCING AGREEMENT IN FULL AT ANY TIME IN ITS ABSOLUTE DISCRETION. NOTHING SET
FORTH IN THIS AGREEMENT (INCLUDING THE PROVISIONS OF THIS SECTION 20 OR THE
REMEDIES WITH RESPECT THERETO AS SET FORTH IN SECTION 21) SHALL IN ANY WAY LIMIT
THE SECURED PARTY'S DISCRETION TO MAKE OR NOT MAKE LOANS TO THE DEBTOR OR THE
SECURED PARTY'S RIGHT TO DEMAND PAYMENT OF THE OBLIGATIONS.
Section 21. REMEDIES ON DEFAULT. Upon the occurrence of an
Event of Default and at any time thereafter:
21(a) The Secured Party may exercise and enforce any and all
rights and remedies available upon default to a secured party under the Uniform
Commercial Code.
21(b) The Secured Party shall have the right to enter upon and
into and take possession of all or such part or parts of the properties of the
Grantor, including lands, plants, buildings, Equipment, Inventory and other
property as may be necessary or appropriate in the judgment of the Secured Party
to permit or enable the Secured Party to manufacture, produce, process, store or
sell or complete the manufacture, production, processing, storing or sale of all
or any part of the Collateral, as the Secured Party may elect, and to use and
operate said properties for said purposes and for such length of time as the
Secured Party may deem necessary or appropriate for said purposes without the
payment of any compensation to Grantor therefor. The Secured Party may require
the Grantor to, and the Grantor hereby agrees that it will, at its expense and
upon request of the
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<PAGE>
Secured Party forthwith, assemble all or part of the Collateral as directed by
the Secured Party and make it available to the Secured Party at a place or
places to be designated by the Secured Party.
21(c) Any sale of Collateral may be in one or more parcels at
public or private sale, at any of the Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery, and upon such other terms as the
Secured Party may reasonably believe are commercially reasonable. The Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given, and the Secured Party may adjourn any public or
private sale from time to time by announcement made at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
21(d) The Secured Party is hereby granted a license or other
right to use, without charge, all of the Grantor's property, including, without
limitation, all of the Grantor's labels, trademarks, copyrights, patents and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any
Collateral, and the Grantor's rights under all licenses and all franchise
agreements shall inure to the Secured Party's benefit until the Obligations are
paid in full.
21(e) If notice to the Grantor of any intended disposition of
Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given in the
manner specified for the giving of notice in Section 25 hereof at least ten
calendar days prior to the date of intended disposition or other action, and the
Secured Party may exercise or enforce any and all other rights or remedies
available by law or agreement against the Collateral, against the Grantor, or
against any other Person or property.
Section 22. APPLICATION OF PROCEEDS. All cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as collateral for, or then or
at any time thereafter be applied in whole or in part by the Secured Party
against, all or any part of the Obligations (including, without limitation, any
expenses of the Secured Party payable pursuant to Section 23 hereof).
Section 23. COSTS AND EXPENSES; INDEMNITY. The Grantor will pay
or reimburse the Secured Party on demand for all out-of-pocket expenses
(including in each case all filing and recording fees and taxes and all
reasonable fees and expenses of counsel and of any experts and agents) incurred
by the Secured Party in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement of this
Agreement, and all such costs and expenses shall be part of the Obligations
secured by the Security Interest. The Grantor shall indemnify and hold the
Secured Party harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) growing out of or resulting
from this Agreement and the Security Interest hereby created (including
enforcement of this Agreement) or the Secured Party's actions pursuant hereto,
except claims, losses or liabilities resulting from the Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
Secured Party harmless pursuant to the preceding sentence shall be part of the
Obligations secured by the Security Interest. The obligations of the Grantor
under this Section shall survive any termination of this Agreement.
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<PAGE>
Section 24. WAIVERS; REMEDIES; MARSHALLING. This Agreement can
be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by the Secured
Party. A waiver so signed shall be effective only in the specific instance and
for the specific purpose given. Mere delay or failure to act shall not preclude
the exercise or enforcement of any rights and remedies available to the Secured
Party. All rights and remedies of the Secured Party shall be cumulative and may
be exercised singly in any order or sequence, or concurrently, at the Secured
Party's option, and the exercise or enforcement of any such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. The Grantor hereby waives all requirements of law, if any, relating to
the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.
Section 25. NOTICES. 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.
Section 26. GRANTOR ACKNOWLEDGEMENTS. The Grantor hereby
acknowledges that (a) it has been advised by (or has had full opportunity to
avail itself of the advice of) counsel in the negotiation, execution and
delivery of this Agreement, (b) the Secured Party has no fiduciary relationship
to the Grantor, the relationship being solely that of debtor and creditor, and
(c) no joint venture exists between the Grantor and the Secured Party.
Section 27. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER
FINANCING AGREEMENT. This Agreement shall (a) create a continuing security
interest in the Collateral and shall remain in full force and effect until
payment in full of the Obligations, (b) be binding upon the Grantor, its
successors and assigns, and (c) inure to the benefit of, and be enforceable by,
the Secured Party and its successors, transferees, and assigns. Without
limiting the generality of the foregoing clause (c), the Secured Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Financing Agreement to any other Persons to the extent and in the
manner provided in the Financing Agreement and may similarly transfer all or any
portion of its rights under this Security Agreement to such Persons.
Section 28. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations, the Security Interest granted hereby shall terminate.
Upon any such termination, the Secured Party will return to the Grantor such of
the Collateral then in the possession of the Secured Party as shall not have
been sold or otherwise applied pursuant to the terms hereof and execute and
deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination. Any reversion or return of Collateral upon
termination of this Agreement and any instruments of transfer or termination
shall be at the expense of the Grantor and shall be without warranty by, or
recourse on, the Secured Party. As used in this Section, "Grantor" includes any
assigns of Grantor, any Person holding a subordinate security interest in any of
the Collateral or whoever else may be lawfully entitled to any part of the
Collateral.
SECTION 29. GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, WITHOUT
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<PAGE>
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE MANDATORILY GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF MINNESOTA. Whenever
possible, each provision of this Agreement and any other statement, instrument
or transaction contemplated hereby or relating hereto shall be interpreted in
such manner as to be effective and valid under such applicable law, but, if any
provision of this Agreement or any other statement, instrument or transaction
contemplated hereby or relating hereto shall be held to be prohibited or invalid
under such applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto.
SECTION 30. CONSENT TO JURISDICTION. AT THE OPTION OF THE
SECURED PARTY, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN HENNEPIN COUNTY; AND THE GRANTOR CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GRANTOR COMMENCES ANY ACTION IN
ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE SECURED PARTY
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 31. WAIVER OF NOTICE AND HEARING. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
SECURED PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL
PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT
PRIOR NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY
COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.
SECTION 32. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE
SECURED PARTY, BY ITS ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
Section 34. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Secured Party shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the
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<PAGE>
Obligations. The Grantor waives notice of the acceptance of this Agreement by
the Secured Party. Captions in this Agreement are for reference and convenience
only and shall not affect the interpretation or meaning of any provision of this
Agreement.
IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
REUTER MANUFACTURING, INC.
By /s/ James W. Taylor
-----------------------
Title President
Address for Grantor:
410 11th Avenue South
Hopkins, MN 55343
Grantor's Tax ID #41-0780999
Address for Secured Party :
U.S. Bank National Association
2338 Central Avenue NE, Suite 200
Minneapolis, MN 55418
Fax: (612) 782-1801
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<PAGE>
SCHEDULE I
to
Security Agreement
Locations of Equipment and Inventory
as of Date of Security Agreement
Reuter Manufacturing, Inc.
410 11th Avenue South
Hopkins, MN 55343
USA
<PAGE>
SCHEDULE II
to
Security Agreement
Trade Names and Trade Styles
as of date of Security Agreement
Envir-ro-fuge 2000
Reuter
Patents:
Schedule A
<PAGE>
SCHEDULE A
U.S. Patent Title Inventor Issue Date
- ----------- ----- -------- ----------
4,495,856 Rotary Actuator Phillip Sollami January 29, 1985
4,919,040 Rotary Vane Phillip Sollami April 24, 1990
4,656,925 Face Seal Phillip Sollami April 14, 1987
5,123,333 Seals for housing Phillip Sollami June 23, 1992
of a rotary
actuator shaft
assembly
<PAGE>
THIS INSTRUMENT WAS PREPARED BY, EXHIBIT 10.6
AND WHEN RECORDED SHOULD BE
RETURNED TO:
Dorsey & Whitney LLP (DRS)
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FINANCING STATEMENT (this "Mortgage") is made as of December 3, 1997, by
REUTER MANUFACTURING, INC., a corporation organized under the laws of the State
of Minnesota ("Borrower"), having its principal offices at Hopkins, Minnesota,
in favor of U.S. Bank National Association, a national banking association
("Lender"), having an office at St. Paul, Minnesota.
RECITALS
A. Lender has lent, or agreed to lend, to Borrower the principal sum of
TWO MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($2,400,000.00) (the
"Loan"), to be repaid with interest thereon, as evidenced by Borrower's Term
Note (the "Note", which term shall include any amendment, modification,
supplement, extension, renewal, replacement or restatement thereof). The Note
is dated the same date as this Mortgage, is hereby incorporated by reference,
and, together with this Mortgage and the Indemnification Agreement of even date
herewith from Borrower to Lender, as any of the same may be amended, modified,
supplemented, extended, renewed, replaced or restated, are sometimes
collectively referred to as the "Loan Documents".
B. The obligations secured by this Mortgage (the "Obligations") are as
follows:
(i) the principal amount of $2,400,000.00 or so much thereof as may be
advanced by Lender under the Note; plus
(ii) interest on the amount advanced and unrepaid, at the interest rate
or rates provided in the Note; plus
(iii) all other amounts payable by Borrower and all other agreements of
Borrower under the Loan Documents as the same now exist or may hereafter be
amended.
<PAGE>
C. The Obligations shall mature on or before December 1, 2002 (the
"Maturity Date").
D. The maximum principal indebtedness secured hereby is
$2,400,000.00 plus amounts which may be advanced by Lender in protection of the
Mortgaged Property or this Mortgage.
NOW, THEREFORE, Borrower, in consideration of Lender making the Loan, and
to secure the Loan and payment and performance of the Obligations, hereby
grants, bargains, sells, conveys and mortgages to Lender, its successors and
assigns, forever, with power of sale, and grants to Lender, its successors and
assigns, a security interest in, the following, all of which is called the
"Mortgaged Property":
A. LAND AND IMPROVEMENTS
The land described in Exhibit A attached hereto and all mineral rights,
hereditaments, easements and appurtenances thereto (collectively the"Land"), and
all improvements and structures thereon (the "Improvements"); and
B. FIXTURES AND PERSONAL PROPERTY
All fixtures (the "Fixtures"), and all machinery, equipment and personal
property (collectively the "Personal Property") now or hereafter located on, in
or under the Land and the Improvements, and necessary or useful in connection
with the functioning of the Land or the Improvements for their general intended
purposes (but not to the extent primarily used in the operation of Borrower's
specific business), and which are owned by Borrower or in which Borrower has an
interest, including any construction and building materials stored on and to be
included in the Improvements, and also including those specific items, if any,
described in Exhibit B attached hereto, plus any repairs, replacements and
betterments to any of the foregoing and the proceeds and products thereof; and
C. LEASES AND RENTS
All rights of Borrower with respect to tenants or occupants now or
hereafter occupying any part of the Land or the Improvements, if any, including
all leases and licenses and rights in connection therewith, whether oral or
written (collectively the "Leases"), and all rents, income, both from services
and occupation, royalties, revenues and payments, including prepayments and
security deposits (collectively the "Rents"), which are now or hereafter due or
to be paid in connection with the Land, the Improvements, the Fixtures or the
Personal Property; and
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<PAGE>
D. GENERAL INTANGIBLES
All general intangibles of Borrower which relate to any of the Land, the
Improvements, the Fixtures, the Personal Property, the Leases or the Rents,
including proceeds of insurance and condemnation or conveyance of the Land and
the Improvements, accounts, trade names, contract rights, accounts receivable
and bank accounts; and
E. AFTER ACQUIRED PROPERTY AND PROCEEDS
All after acquired property similar to the property herein described and
conveyed which may be subsequently acquired by Borrower and used in connection
with the Land, the Improvements, the Fixtures, the Personal Property and other
property; and all cash and non-cash proceeds and products of all of the
foregoing property.
TO HAVE AND TO HOLD the same, and all estate therein, together with all the
rights, privileges and appurtenances thereunto belonging, to the use and benefit
of Lender, its successors and assigns, forever.
PROVIDED NEVERTHELESS, should Borrower pay and perform all the Obligations,
then these presents will be of no further force and effect, and this Mortgage
shall be satisfied by Lender, at the expense of Borrower.
This Mortgage constitutes an assignment of rents and profits within the
meaning of Minnesota Statutes, Sections 559.17 and 576.01, and is intended to
comply fully with the provisions thereof, and to afford Lender, to the fullest
extent allowed by law, the rights and remedies of a mortgage lender or secured
lender pursuant thereto.
This Mortgage also constitutes a security agreement within the meaning of
the Uniform Commercial Code as in effect in the State of Minnesota (the "UCC"),
with respect to all property described herein as to which a security interest
may be granted and/or perfected pursuant to the UCC, and is intended to afford
Lender, to the fullest extent allowed by law, the rights and remedies of a
secured party under the UCC.
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<PAGE>
BORROWER FURTHER agrees as follows:
ARTICLE I
AGREEMENTS
SECTION 1.1 PERFORMANCE OF OBLIGATIONS; INCORPORATION BY REFERENCE.
Borrower shall pay and perform the Obligations. Time is of the essence hereof.
All of the covenants, obligations, agreements, warranties and representations of
Borrower contained in the Note and the other Loan Documents and all of the terms
and provisions thereof, are hereby incorporated herein and made a part hereof by
reference as if fully set forth herein.
SECTION 1.2 FURTHER ASSURANCES. If Lender requests, Borrower shall sign
and deliver and cause to be recorded as Lender shall direct any further
mortgages, instruments of further assurance, certificates and other documents as
Lender reasonably may consider necessary or desirable in order to perfect,
continue and preserve the Obligations and Lender's rights, title, estate, liens
and interests under the Loan Documents. Borrower further agrees to pay to
Lender, upon demand, all costs and expenses incurred by Lender in connection
with the preparation, execution, recording, filing and refiling of any such
documents, including attorneys' fees and title insurance costs.
SECTION 1.3 SALE, TRANSFER, ENCUMBRANCE. If Borrower sells, conveys,
transfers or otherwise disposes of, or encumbers, any part of its interest in
the Mortgaged Property, whether voluntarily, involuntarily or by operation of
law, without the prior written consent of Lender, Lender shall have the option
to declare the Obligations immediately due and payable without notice. Included
within the foregoing actions requiring prior written consent of Lender are: (a)
sale by deed or contract for deed; (b) mortgaging or granting a lien on the
Mortgaged Property; and (c) a transfer which changes the persons in control of
Borrower or which transfers more than 25% of the beneficial interest in
Borrower, except for transfers to related or affiliated entities. Borrower
shall give notice of any proposed action to Lender at least thirty (30) days
prior to taking such action. Borrower shall pay all costs and expenses incurred
by Lender in evaluating any such action. Lender may condition such consent upon
modification of the Loan Documents or payment of fees. No such action shall
relieve Borrower from liability for the Obligations. The consent by Lender to
any action shall not constitute a waiver of the necessity of such consent to any
subsequent action.
SECTION 1.4 INSURANCE. Borrower shall obtain, maintain and keep in full
force and effect (and upon request of Lender shall furnish to Lender copies of)
policies of insurance as described in, and meeting the requirements set forth
in, Exhibit C attached hereto, and upon request of Lender shall furnish to
Lender proof of
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<PAGE>
payment of all premiums for such insurance. At least ten (10) days prior to the
termination of any such coverage, Borrower shall provide Lender with evidence
satisfactory to Lender that such coverage will be renewed or replaced upon
termination with insurance that complies with the provisions of this Section.
Borrower, at its sole cost and expense, from time to time when Lender shall so
request, will provide Lender with evidence, in a form acceptable to Lender, of
the full insurable replacement cost of the Mortgaged Property. All property
(including boiler and machinery) and liability insurance policies maintained by
Borrower pursuant to this Section shall (i) include effective waivers by the
insurer of all claims for insurance premiums against Lender, and (ii) provide
that any losses shall be payable notwithstanding (a) any act of negligence by
Borrower or Lender, (b) any foreclosure or other proceedings or notice of
foreclosure sale relating to the Mortgaged Property, or (c) any release from
liability or waiver of subrogation rights granted by the insured. All insurance
policies maintained by Borrower pursuant to the foregoing provisions shall
respond on a primary basis relative to any other insurance carried by Lender in
the event of loss. Insurance terms not otherwise defined herein shall be
interpreted consistent with insurance industry usage.
SECTION 1.5 TAXES, LIENS AND CLAIMS, UTILITIES. Borrower, at least five
(5) days before any penalty attaches thereto, shall pay and discharge, or cause
to be paid and discharged, all taxes, assessments and governmental charges and
levies (collectively "Impositions") imposed upon or against the Mortgaged
Property or the Rents, or upon or against the Obligations, or upon or against
the interest of Lender in the Mortgaged Property or the Obligations, except
Impositions measured by the income of Lender. Borrower shall provide evidence
of such payment at Lender's request. Borrower shall keep the Mortgaged Property
free and clear of all liens, encumbrances, easements, covenants, conditions,
restrictions and reservations (collectively "Liens") except those listed on
Exhibit A attached hereto (the "Permitted Encumbrances"). Borrower shall pay or
cause to be paid when due all charges or fees for utilities and services
supplied to the Mortgaged Property. Notwithstanding anything to the contrary
contained in this Section, Borrower shall not be required to pay or discharge
any Imposition or Lien so long as Borrower shall in good faith, and after giving
notice to Lender, contest the same by appropriate legal proceedings. If
Borrower contests any Imposition or Lien against the Mortgaged Property,
Borrower shall provide such security to Lender as Lender shall reasonably
require against loss or impairment of Borrower's ownership of or Lender's lien
on the Mortgaged Property and shall in any event pay such Imposition or Lien
before loss or impairment occurs.
SECTION 1.6 ESCROW PAYMENTS. If requested by Lender, Borrower shall
deposit with Lender monthly on the same date as payments are due under the Note
the amount reasonably estimated by Lender to be necessary to enable Lender to
pay, at least five (5) days before they become due, all Impositions against the
Mortgaged Property and the premiums upon all insurance required hereby to be
maintained
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<PAGE>
with respect to the Mortgaged Property, provided, however, that Lender shall not
request such escrow deposits until after an Event of Default hereunder. All
funds so deposited shall secure the Obligations. Such deposits shall be held by
Lender, or its nominee, in a non-interest bearing account and may be commingled
with other funds. Such deposits shall be used to pay such Impositions and
insurance premiums when due. Any excess sums so deposited shall be retained by
Lender and shall be applied to pay said items in the future, unless the
Obligations have been paid and performed in full, in which case all excess sums
so paid shall be refunded to Borrower. Upon the occurrence of an Event of
Default, Lender may apply any funds in said account against the Obligations in
such order as Lender may determine.
SECTION 1.7 MAINTENANCE AND REPAIR; COMPLIANCE WITH LAWS. Borrower shall
cause the Mortgaged Property to be operated, maintained and repaired in safe and
good repair, working order and condition, reasonable wear and tear excepted;
shall not commit or permit waste thereof; except as provided in any Loan
Document, shall not remove, demolish or substantially alter the design or
structural character of any Improvements without the prior written consent of
Lender; shall complete or cause to be completed forthwith any Improvements which
are now or may hereafter be under construction upon the Land; shall comply or
cause compliance with all laws, statutes, ordinances and codes, and governmental
rules, regulations and requirements, applicable to the Mortgaged Property or the
manner of using or operating the same, and with any covenants, conditions,
restrictions and reservations affecting the title to the Mortgaged Property, and
with the terms of all insurance policies relating to the Mortgaged Property; and
shall obtain and maintain in full force and effect all consents, permits and
licenses necessary for the use and operation of the Mortgaged Property.
SECTION 1.8 LEASES.
(a) Borrower shall not enter into or amend any Lease without Lender's
prior written consent, and shall furnish to Lender, upon execution, a complete
and fully executed copy of each Lease. Borrower shall provide Lender with a
copy of each proposed Lease requiring the consent of Lender and with any
information requested by Lender regarding the proposed Tenant thereunder.
Lender may declare each Lease to be prior or subordinate to this Mortgage, at
Lender's option.
(b) Borrower shall, at its cost and expense, perform each obligation to be
performed by the landlord under each Lease; not borrow against, pledge or
further assign any rents or other payments due thereunder;not permit the
prepayment of any rents or other payments due for more than thirty (30) days in
advance; and not permit any Tenant to assign its Lease or sublet the premises
covered by its Lease, unless required to do so by the terms thereof and then
only if such assignment does
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<PAGE>
not work to relieve the Tenant of any liability for performance of its
obligations thereunder.
(c) If any Tenant shall default under its Lease, Borrower shall, in the
ordinary course of business, exercise sound business judgment with respect to
such default, but may discount, compromise, forgive or waive claims or discharge
the Tenant from its obligations under the Lease or terminate or accept a
surrender of the Lease.
(d) If Borrower fails to perform any obligations of Borrower under any
Lease or if Lender becomes aware of or is notified by any Tenant of a failure on
the part of Borrower to so perform, Lender may, but shall not be obligated to,
without waiving or releasing Borrower from any obligation in this Agreement or
any of the other Loan Documents, remedy such failure, and Borrower agrees to
repay upon demand all sums incurred by Lender in remedying any such failure,
together with interest thereon from the date incurred at the Default Rate (as
defined in the Note).
(e) For purposes of this Mortgage, the following terms shall have the
following meanings:
(i) "LEASE": Any lease or other document or agreement, written or
oral, permitting any Person to use or occupy any part of the Mortgaged Property.
(ii) "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.
(iii) "TENANT": Any person or party using or occupying any part of
the Mortgaged Property pursuant to a Lease.
SECTION 1.9 INDEMNITY. Borrower shall indemnify Lender and its
directors, officers, agents and employees (collectively the "Indemnified
Parties") against, and hold the Indemnified Parties harmless from, all losses,
damages, suits, claims, judgments, penalties, fines, liabilities, costs and
expenses (collectively a "Loss") by reason of, or on account of, or in
connection with the construction, reconstruction or alteration of the Mortgaged
Property, or any accident, injury, death or damage to any person or property
occurring in, on or about the Mortgaged Property or any street, drive, sidewalk,
curb or passageway adjacent thereto, provided such Loss is not caused by the
gross negligence or willful misconduct of the Indemnified Parties. The
indemnity contained in this Section shall include costs of defense of any such
claim asserted against an Indemnified Party, including reasonable attorneys'
fees. The indemnity contained in this Section shall survive
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payment and performance of the Obligations and satisfaction and release of this
Mortgage and any foreclosure thereof or acquisition of title by deed in lieu of
foreclosure.
SECTION 1.10 APPRAISALS. Lender shall have the right from time to
time, but not more often than once during any twelve (12)-month period, to
obtain an appraisal of the Mortgaged Property in form and substance satisfactory
to Lender and prepared by an independent MAI appraiser selected by Lender.
Borrower shall reimburse Lender for the cost incurred for any such appraisal
within ten (10) days following demand therefor by Lender, if Lender has reason
to believe that the value of the Mortgaged Property has declined materially, and
such appraisal determines that the then current principal amount of the Note
exceeds 75% of the value of the Mortgaged Property.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties:
SECTION 2.1 OWNERSHIP, LIENS, COMPLIANCE WITH LAWS. Borrower owns
the Mortgaged Property free from all Liens, except the Permitted Encumbrances.
All applicable zoning, environmental, land use, subdivision, building, fire,
safety and health laws, statutes, ordinances, codes, rules, regulations and
requirements affecting the Mortgaged Property permit the current use and
occupancy thereof, and Borrower has obtained all consents, permits and licenses
required for such use. Borrower has examined and is familiar with all
applicable covenants, conditions, restrictions and reservations, and with all
applicable laws, statutes, ordinances, codes and governmental rules, regulations
and requirements affecting the Mortgaged Property, and the Mortgaged Property
complies with all of the foregoing.
SECTION 2.2 USE. The Mortgaged Property is not homestead property
nor is it agricultural property or in agricultural use.
SECTION 2.3 UTILITIES; SERVICES. The Mortgaged Property is serviced
by all necessary public utilities, and all such utilities are operational and
have sufficient capacity. There is no contract or agreement providing for
services to or maintenance of the Mortgaged Property which cannot be cancelled
upon 30 days' or less notice.
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ARTICLE III
CASUALTY; CONDEMNATION
SECTION 3.1 CASUALTY, REPAIR, PROOF OF LOSS. If any portion of the
Mortgaged Property shall be damaged or destroyed by any cause (a "Casualty"),
Borrower shall:
(a) give immediate notice to the Lender; and
(b) promptly commence and diligently pursue to completion (in
accordance with plans and specifications approved by Lender) the restoration,
repair and rebuilding of the Mortgaged Property as nearly as possible to its
value, condition and character immediately prior to the Casualty; and
(c) if the Casualty is covered by insurance, immediately make proof
of loss and collect all insurance proceeds, all such proceeds to be payable to
Lender or as Lender shall direct. If an Event of Default shall be in existence,
or if Borrower shall fail to provide notice to Lender of filing proof of loss,
or if Borrower shall not be diligently proceeding, in Lender's reasonable
opinion, to collect such insurance proceeds, then Lender may, but is not
obligated to, make proof of loss, and is authorized, but is not obligated, to
settle any claim with respect thereto, and to collect the proceeds thereof.
Borrower shall not accept any settlement of an insurance claim, the result of
which shall be a payment which is $10,000 or more less than the full amount of
the claim, without the prior written consent of Lender.
SECTION 3.2 USE OF INSURANCE PROCEEDS. Lender shall make the net
insurance proceeds received by it (after reimbursement of Lender's out-of pocket
costs of collecting and disbursing the same) available to Borrower to pay the
cost of restoration, repair and rebuilding of the Mortgaged Property, subject to
the following conditions:
(a) There shall be no Event of Default in existence at the time of
any disbursement of the insurance proceeds.
(b) Lender shall have determined, in its reasonable discretion, that
the cost of restoration, repair and rebuilding is and will be equal to or less
than the amount of insurance proceeds and other funds deposited by Borrower with
Lender.
(c) Lender shall have determined, in its reasonable discretion, that
the restoration, repair and rebuilding can be completed in accordance with plans
and specifications approved by Lender (such approval not to be unreasonably
withheld), in accordance with codes and ordinances and in accordance with the
terms, and
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within the time requirements in order to prevent termination, of any Lease, and
in any event not less than six (6) months prior to the Maturity Date.
(d) All funds shall be disbursed, at Lender's option, in accordance
with Lender's customary disbursement procedures for construction loans.
(e) The Casualty shall have occurred more than twelve (12) months
prior to the Maturity Date.
If any of these conditions shall not be satisfied, then Lender shall have the
right to use the insurance proceeds to prepay the Loan in accordance with the
Note, and if the Loan is prepaid in full, Borrower shall not be required to
perform under Section 3.1(b) of this Mortgage. If any insurance proceeds shall
remain after completion of the restoration, repair and rebuilding of the
Mortgaged Property, they shall be disbursed to Borrower, or at the Lender's
discretion, used to prepay the Loan in accordance with the Note.
SECTION 3.3 CONDEMNATION. If any portion of the Mortgaged Property
shall be taken, condemned or acquired pursuant to exercise of the power of
eminent domain or threat thereof (a "Condemnation"), Borrower shall:
(a) give immediate notice thereof to Lender, and send a copy of each
document received by Borrower in connection with the Condemnation to Lender
promptly after receipt; and
(b) diligently pursue any negotiation and prosecute any proceeding in
connection with the Condemnation at Borrower's expense. If an Event of Default
shall be in existence, or if Borrower, in Lender's reasonable opinion, shall not
be diligently negotiating or prosecuting the claim, Lender is authorized, but
not required, to negotiate and prosecute the claim and appear at any hearing for
itself and on behalf of Borrower and to compromise or settle all compensation
for the Condemnation. Lender shall not be liable to Borrower for any failure by
Lender to collect or to exercise diligence in collecting any such compensation.
Borrower shall not compromise or settle any claim resulting from the
Condemnation if such settlement shall result in payment of $10,000 or more less
than Lender's reasonable estimate of the damages therefrom. All awards shall be
paid to Lender.
SECTION 3.4 USE OF CONDEMNATION PROCEEDS. Lender shall make the net
proceeds of any Condemnation received by it (after reimbursement of Lender's
out-of-pocket costs of collecting and disbursing the same) available to Borrower
for restoration, repair and rebuilding of the Mortgaged Property, subject to the
following conditions:
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(a) There shall be no Event of Default in existence at the time of
any disbursement of the condemnation proceeds.
(b) Lender shall determined, in its reasonable discretion, that the
cost of restoration, repair and rebuilding is and will be equal to or less than
the amount of condemnation proceeds and other funds deposited by Borrower with
Lender.
(c) Lender shall have determined, in its reasonable discretion, that
the restoration, repair and rebuilding can be completed in accordance with plans
and specifications approved by Lender (such approval not to be unreasonably
withheld), in accordance with codes and ordinances and in accordance with the
terms, and within the time requirements in order to prevent termination, of any
Lease, and in any event not less than six (6) months prior to the Maturity Date.
(d) All funds shall be disbursed, at Lender's option, in accordance
with Lender's customary disbursement procedures for construction loans.
(e) The Condemnation shall have occurred more than twelve (12) months
prior to the Maturity Date.
If any of these conditions shall not be satisfied, then Lender shall have the
right to use the condemnation proceeds to prepay the Loan in accordance with the
Note. If any condemnation proceeds shall remain after completion of the
restoration, repair and rebuilding of the Mortgaged Property, they shall be
disbursed to Borrower, or at Lender's discretion, used to prepay the Loan in
accordance with the Note.
ARTICLE IV
DEFAULTS AND REMEDIES
SECTION 4.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default:
4.1(a) Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on the Note
or any other obligations of the Borrower to the Lender pursuant to this Mortgage
or any of the other Loan Documents.
4.1(b) Any representation or warranty made by or on behalf of
Borrower in this Mortgage or any of the other Loan Documents or by or on behalf
of Borrower in any certificate, statement, report or document herewith or
hereafter furnished to the Lender pursuant to this Mortgage or any of the other
Loan
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Documents 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.
4.1(c) A sale, transfer, conveyance or encumbrance of the
Mortgaged Property or any part thereof or of all or any part of Borrower's
interest therein in violation of Section 1.3 of this Mortgage shall occur.
4.1(d) Borrower shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Mortgage or any of the
other Loan Documents (other than those herein above set forth in this Section
4.1) and such failure to comply shall continue for thirty (30) calendar days
after the date Lender gives notice of such failure to the Borrower.
4.1(e) Borrower 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 itself or for a substantial part of its
property, or, in the absence of such application, consent or acquiescence, a
custodian, trustee or receiver shall be appointed for Borrower or for a
substantial part of the property thereof and shall not be discharged within
sixty (60) days, or Borrower shall make an assignment for the benefit of
creditors.
4.1(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against Borrower and, if instituted against Borrower, shall have been consented
to or acquiesced in by Borrower or shall remain undismissed for sixty (60) days,
or an order for relief shall have been entered against Borrower.
4.1(g) Any dissolution or liquidation proceeding shall be
instituted by or against Borrower and, if instituted against Borrower, shall be
consented to or acquiesced in by Borrower or shall remain for sixty (60) days
undismissed.
4.1(h) A judgment or judgments for the payment of money in excess
of the sum of $75,000 in the aggregate shall be rendered against Borrower and
either (i) the judgment creditor executes on such judgment or (ii) such judgment
remains unpaid or undischarged for more than sixty (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.
4.1(i) A default shall occur, and continue beyond any applicable
grace or cure period, under any note or other evidence of indebtedness or credit
or loan agreement, or other document or instruments executed in connection
therewith, including without limitation the Security Agreement and Financing
Agreement both of even date herewith and all other documents or instruments
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executed in connection therewith, all now or hereafter entered into between
Lender and Borrower, as any of the same may be amended, modified, supplemented,
extended, renewed or replaced.
4.1(j) The maturity of any material indebtedness of Borrower
(other than the Loan and any indebtedness referred to in the immediately
preceding subsection) shall be accelerated, or Borrower 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 shall be deemed "material" if it 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.
4.1(k) Any execution or attachment shall be issued whereby any
substantial part of the property of Borrower shall be taken or attempted to be
taken and the same shall not have been vacated or stayed within sixty (60) days
after the issuance thereof.
4.1(l) Any default shall occur under any other Loan Document, and
shall continue beyond any grace or cure period provided therein with respect to
such default.
SECTION 4.2 REMEDIES. Upon and during the occurrence of an Event of
Default described in Sections 4.1(e), (f) or (g) of this Mortgage, all of the
Obligations shall be accelerated and become immediately due and payable without
notice or declaration to Borrower. Upon the occurrence of one or more other
Events of Default, all of the Obligations, at the option of Lender, shall be
accelerated and become immediately due and payable upon notice to Borrower. In
either event, the Obligations shall be due and payable without presentment,
demand or further notice of any kind. Lender shall have the right to proceed to
protect and enforce its rights by one or more of the following remedies:
(a) LENDER SHALL HAVE THE RIGHT TO BRING SUIT either for damages, for
specific performance of any agreement contained in any Loan Document, for the
foreclosure of this Mortgage, or for the enforcement of any other appropriate
legal or equitable remedy.
(b) LENDER SHALL HAVE THE RIGHT TO SELL THE MORTGAGED PROPERTY AT
PUBLIC AUCTION AND CONVEY THE SAME TO THE PURCHASER IN FEE SIMPLE, as provided
by law, Borrower to remain liable
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for any deficiency. Said sale may be as one tract or otherwise, at the sole
option of Lender. In the event of any sale of the Mortgaged Property pursuant
to any judgment or decree of any court or at public auction or otherwise in
connection with the enforcement of any of the terms of this Mortgage, Lender,
its successors or assigns, may become the purchaser, and for the purpose of
making settlement for or payment of the purchase price, shall be entitled to
deliver over and use the Note and any claims for interest accrued and unpaid
thereon, together with all other sums, with interest, advanced or secured hereby
and unpaid hereunder, in order that there may be credited as paid on the
purchase price the total amount of the Obligations then due, including principal
and interest on the Note and all other sums, with interest, advanced or secured
hereby and unpaid hereunder or under any of the other Loan Documents.
(c) LENDER SHALL HAVE THE RIGHT TO OBTAIN THE APPOINTMENT OF A
RECEIVER at any time after the occurrence of an Event of Default. Lender may
apply for the appointment of a receiver to the district court for the county
where the Mortgaged Property or any part thereof is located, by an action
separate from any foreclosure of this Mortgage pursuant to Minnesota Statutes
Chapter 580 or pursuant to Minnesota Statutes Chapter 581, or as a part of the
foreclosure action under said Chapter 581 (it being agreed that the existence of
a foreclosure pursuant to said Chapter 580 or a foreclosure action pursuant to
said Chapter 581 is not a prerequisite to any action for a receiver hereunder).
Lender shall be entitled to the appointment of a receiver without regard to
waste, adequacy of the security or solvency of Borrower. The receiver, who
shall be an experienced property manager, shall collect (until the Obligations
are fully paid and satisfied and, in the case of a foreclosure sale, during the
entire redemption period) the Rents, and shall manage the Mortgaged Property,
execute Leases within or beyond the period of the receivership if approved by
the court and apply all rents, profits and other income collected by him in the
following order:
(i) to the payment of all reasonable fees of the receiver, if
any, approved by the court;
(ii) to the repayment of tenant security deposits, with
interest thereon, as required by Minnesota Statutes, Section 504.20;
(iii) to the payment when due of delinquent or current real
estate taxes or special assessments with respect to the Mortgaged Property, or
the periodic escrow for the payment of the same;
(iv) to the payment when due of premiums for insurance of the
type required by this Mortgage, or the periodic escrow for the payment of the
same;
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(v) to the payment for the keeping of the covenants required
of a lessor or licensor pursuant to Minnesota Statutes, Section 504.18,
subdivision 1;
(vi) to the payment of all expenses for normal maintenance of
the Mortgaged Property; and
(vii) the balance to Lender (a) if received prior to the
commencement of a foreclosure, to be applied to the Obligations, in such order
as Lender may elect and (b) if received after the commencement of a
foreclosure, to be applied to the amount required to be paid to effect a
reinstatement prior to foreclosure sale, or, after a foreclosure sale to any
deficiency and thereafter to the amount required to be paid to effect a
redemption, all pursuant to Minnesota Statutes, Sections 580.30, 580.23 and
581.10, with any excess to be paid to Borrower. Provided, that if this Mortgage
is not reinstated nor the Mortgaged Property redeemed as provided by said
Sections 580.30, 580.23 or 581.10, the entire amount paid to Lender pursuant
hereto shall be the property of Lender together with all or any part of the
Mortgaged Property acquired through foreclosure.
Lender shall have the right, at any time and without limitation, as
provided in Minnesota Statutes, Section 582.03, to advance money to the receiver
to pay any part or all of the items which the receiver should otherwise pay if
cash were available from the Mortgaged Property and sums so advanced, with
interest at the Default Rate set forth in the Note, shall be secured hereby, or
if advanced during the period of redemption shall be part of the sum required to
be paid to redeem from the sale.
(d) LENDER SHALL HAVE THE RIGHT TO COLLECT THE RENTS from the
Mortgaged Property and apply the same in the manner hereinbefore provided with
respect to a receiver. For that purpose, Lender may enter and take possession
of the Mortgaged Property and manage and operate the same and take any action
which, in Lender's judgment, is necessary or proper to collect the Rents and to
conserve the value of the Mortgaged Property. Lender may also take possession
of, and for these purposes use, any and all of the Personal Property. The
expense (including any receiver's fees, attorneys' fees, costs and agent's
compensation) incurred pursuant to the powers herein contained shall be secured
by this Mortgage. Lender shall not be liable to account to Borrower for any
action taken pursuant hereto other than to account for any Rents actually
received by Lender. Enforcement hereof shall not cause Lender to be deemed a
mortgagee in possession unless Lender elects in writing to be a mortgagee in
possession.
(e) LENDER SHALL HAVE THE RIGHT TO ENTER AND TAKE POSSESSION of the
Mortgaged Property and manage and operate the same in conformity with all
applicable laws and take any action which, in Lender's judgment, is necessary or
proper to conserve the value of the Mortgaged Property.
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(f) LENDER SHALL HAVE ALL OF THE RIGHTS AND REMEDIES PROVIDED IN THE
UNIFORM COMMERCIAL CODE including the right to proceed under the Uniform
Commercial Code provisions governing default as to any Personal Property
separately from the real estate included within the Mortgaged Property, or to
proceed as to all of the Mortgaged Property in accordance with its rights and
remedies in respect of said real estate. If Lender should elect to proceed
separately as to such Personal Property, Borrower agrees to make such Personal
Property available to Lender at a place or places acceptable to Lender, and if
any notification of intended disposition of any of such Personal Property is
required by law, such notification shall be deemed reasonably and properly given
if given at least ten (10) days before such disposition in the manner
hereinafter provided.
(g) LENDER SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM and other
documents as may be necessary or advisable in order to have its claims allowed
in any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceedings affecting Borrower, its
creditors or its property, for the entire amount due and payable by Borrower in
respect of the Obligations at the date of the institution of such proceedings,
and for any additional amounts which may become due and payable by Borrower
after such date.
Each remedy herein specifically given shall be in addition to every other right
now or hereafter given or existing at law or in equity, and each and every right
may be exercised from time to time and as often and in such order as may be
deemed expedient by Lender and the exercise or the beginning of the exercise of
one right shall not be deemed a waiver of the right to exercise at the same time
or thereafter any other right. Lender shall have all rights and remedies
available under the law in effect now and/or at the time such rights and
remedies are sought to be enforced, whether or not they are available under the
law in effect on the date hereof.
SECTION 4.3 EXPENSES OF EXERCISING RIGHTS POWERS AND REMEDIES. The
reasonable expenses (including any reasonable receiver's fees, attorneys' fees,
appraisers' fees, environmental engineers' and/or consultants' fees, costs
incurred for documentary and expert evidence, stenographers' charges,
publication costs, costs (which may be estimated as to items to be expended
after entry of the decree of foreclosure) of procuring all abstracts of title,
continuations of abstracts of title, title searches and examinations, title
insurance policies and commitments and extensions therefor, Torrens duplicate
certificates of title, UCC and chattel lien searches, and similar data and
assurances with respect to title as Lender may deem reasonably necessary either
to prosecute any foreclosure action or to evidence to bidders at any sale which
may be had pursuant to any foreclosure decree the true condition of the title to
or the value of the Mortgaged Property, and agent's compensation) incurred by
Lender after and during the occurrence of any Event of Default and/or in
pursuing the rights, powers and remedies contained in this
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Mortgage shall be immediately due and payable by Borrower, with interest thereon
from the date incurred at the Default Rate set forth in the Note, and shall be
added to the indebtedness secured by this Mortgage.
SECTION 4.4 RESTORATION OF POSITION. In case Lender shall have
proceeded to enforce any right under this Mortgage by foreclosure, sale, entry
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, and in every such
case, Borrower and Lender shall be restored to their former positions and rights
hereunder with respect to the Mortgaged Property subject to the lien hereof.
SECTION 4.5 MARSHALLING. Borrower, for itself and on behalf of all
Persons which may claim under Borrower, hereby waives all requirements of law
relating to the marshalling of assets, if any, which would be applicable in
connection with the enforcement by Lender of its remedies for an Event of
Default hereunder, absent this waiver. Lender shall not be required to sell or
realize upon any portion of the Mortgaged Property before selling or realizing
upon any other portion thereof.
SECTION 4.6 WAIVERS. No waiver of any provision hereof shall be
implied from the conduct of the parties. Any such waiver must be in writing and
must be signed by the party against which such waiver is sought to be enforced.
The waiver or release of any breach of the provisions set forth herein to be
kept and performed shall not be a waiver or release of any preceding or
subsequent breach of the same or any other provision. No receipt of partial
payment after acceleration of any of the Obligations shall waive the
acceleration. No payment by Borrower or receipt by Lender of a lesser amount
than the full amount secured hereby shall be deemed to be other than on account
of the sums due and payable hereunder, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment be deemed an accord
and satisfaction, and Lender may accept any check or payment without prejudice
to Lender's right to recover the balance of such sums or to pursue any other
remedy provided in this Mortgage. The consent by Lender to any matter or event
requiring such consent shall not constitute a waiver of the necessity for such
consent to any subsequent matter or event.
SECTION 4.7 LENDER'S RIGHT TO CURE DEFAULTS. If Borrower shall fail
to comply with any of the terms of the Loan Documents with respect to the
procuring of insurance, the payment of taxes, assessments and other charges, the
keeping of the Mortgaged Property in repair, or any other term contained herein
or in any of the other Loan Documents, Lender may make advances to perform the
same without releasing Borrower from any of the Obligations. Borrower agrees to
repay upon demand all sums so advanced and all sums expended by Lender in
connection with such performance, including without limitation attorneys' fees,
with interest at the Default Rate set forth in the Note from the dates such
advances are made, and all sums so advanced and/or expenses incurred, with
interest, shall be secured
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hereby, but no such advance and/or incurring of expense by Lender, shall be
deemed to relieve Borrower from any default hereunder or under any of the other
Loan Documents, or to release Borrower from any of the Obligations.
SECTION 4.8 SUITS AND PROCEEDINGS. Lender shall have the power and
authority, upon prior notice to Borrower, to institute and maintain any suits
and proceedings as Lender may deem advisable to (i) prevent any impairment of
the Mortgaged Property by any act which may be unlawful or by any violation of
this Mortgage, (ii) preserve or protect its interest in the Mortgaged Property,
or (iii) restrain the enforcement of or compliance with any legislation or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid, if, in the sole opinion of Lender, the enforcement of or compliance
with such enactment, rule or order might impair the security hereunder or be
prejudicial to Lender's interest.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 BINDING EFFECT; SURVIVAL; NUMBER; GENDER. This Mortgage
shall be binding on and inure to the benefit of the parties hereto, and their
respective heirs, legal representatives, successors and assigns. All
agreements, representations and warranties contained herein or otherwise
heretofore made by Borrower to Lender shall survive the execution, delivery and
foreclosure hereof. The singular of all terms used herein shall include the
plural, the plural shall include the singular, and the use of any gender herein
shall include all other genders, where the context so requires or permits.
SECTION 5.2 SEVERABILITY. The unenforceability or invalidity of any
provision of this Mortgage as to any person or circumstance shall not render
that provision unenforceable or invalid as to any other person or circumstance.
SECTION 5.3 NOTICES. Any notice or other communication to any party
in connection with this Mortgage 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
below, 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
(as defined in the Loan Agreement) after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Notices shall be given to or made upon the respective parties hereto at their
respective addresses set forth below:
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If to Borrower: REUTER MANUFACTURING, INC.
410 11th Avenue South
Hopkins, Minnesota 55343
Attn: Bill Johnson
Telecopy No. (612) 933-5803
If to Lender: U.S. Bank National Association
332 Minnesota Street
St. Paul, Minnesota 55101
Attn: David Peterson
Telecopy No. (612) 244-5590
Either party may change its address for notices by a notice given not less than
five (5) Business Days prior to the effective date of the change.
SECTION 5.4 APPLICABLE LAW. This Mortgage and the other Loan
Documents shall be construed and enforceable in accordance with, and be governed
by, the laws of the State of Minnesota, without giving effect to conflict of
laws or principles thereof, but giving effect to federal laws of the United
States applicable to national banks. Whenever possible, each provision of this
Mortgage and any other statement, instrument or transaction contemplated hereby
or relating hereto, shall be interpreted in such manner as to be effective and
valid under such applicable law, but, if any provision of this Mortgage or any
other statement, instrument or transaction contemplated hereby or relating
hereto shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Mortgage or any other statement, instrument or
transaction contemplated hereby or relating hereto.
SECTION 5.5 WAIVER OF JURY TRIAL. Borrower and Lender each
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or relating to this Mortgage or any of the other Loan Documents
or the transactions contemplated hereby or thereby.
SECTION 5.6 EFFECT. This Mortgage is in addition and not in
substitution for any other guarantees, covenants, obligations or other rights
now or hereafter held by Lender from any other person or entity in connection
with the Obligations.
SECTION 5.7 ASSIGNABILITY. Lender shall have the right to assign
this Mortgage, in whole or in part, or sell participation interests herein, to
any person obtaining an interest in the Obligations.
SECTION 5.8 HEADINGS. Headings of the Sections of this Mortgage are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
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<PAGE>
SECTION 5.9 FIXTURE FILING. This instrument shall be deemed to be a
Fixture Filing within the meaning of the Minnesota Uniform Commercial Code, and
for such purpose, the following information is given:
(a) Name and address of Debtor: REUTER MANUFACTURING, INC.
410 11th Avenue South
Hopkins, Minnesota 55343
Federal Tax I.D. No.: 41-0780999
(b) Name and address of
Secured Party: U.S. Bank National Association
332 Minnesota Street
St. Paul, Minnesota 55101
(c) Description of the types (or
items) of property covered
by this Fixture Filing: See granting clause on pages 2 and 3
hereof.
(d) Description of real estate
to which the collateral is
attached or upon which it
is or will be located: See Exhibit A hereto.
Some of the above-described collateral is or is to become fixtures upon the
above-described real estate, and this Fixture Filing is to be filed for record
in the public real estate records.
IN WITNESS WHEREOF, Borrower has executed this Mortgage as of the date
first written above.
REUTER MANUFACTURING, INC.
By: /s/ James W. Taylor
--------------------
Name: James W. Taylor
Title: President
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<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this 3rd day of
December, 1997, by JAMES W. TAYLOR , the PRESIDENT of REUTER MANUFACTURING,
INC., a corporation organized under the laws of the State of Minnesota , on
behalf of the corporation.
/s/ Anne S. Hoffmeyer
---------------------
Notary Public
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<PAGE>
EXHIBIT A
LEGAL DESCRIPTION (Granting Clause A)
Lot 3, Auditor's Subdivision Number 195, Hennepin County, Minnesota, together
with all of that part of vacated 3 1/2 Street South lying between the Easterly
and Westerly boundary lines of said Lot 3 extended Northerly.
PERMITTED ENCUMBRANCES (Section 2.1)
1. Real estate taxes and installments of special assessments not yet due and
payable.
2. Drainage Ditch Easement recorded as Torrens Document No. 1396934.
3. Underground Utility Easement recorded as Torrens Document No. 890732.
4. Roadway and Utility Easement recorded with the County Recorder as Document
No. 6730545.
<PAGE>
EXHIBIT B
LIST OF PERSONAL PROPERTY (Granting Clause B)
All fixtures, machinery, equipment and personal property now or hereafter
located on, in or under the land , hereafter described ("Land") and the
improvements constructed thereon ("Improvements") or which are necessary or
useful in connection with the functioning of the Land or Improvements for their
general intended purposes ( but not to the extent primarily used in the
operation of Borrower's specific business) and which are owned by Borrower
including any construction and building materials stored on and to be included
in the Improvements plus any repairs, replacements, and betterments thereto and
proceeds and products thereof (the "Fixtures and Personal Property"); and all
rights of the Borrower with respect to tenants or occupants now or hereafter
occupying any part of the Land or Improvements, if any, whether oral or written,
including all leases and licenses and rights in connection therewith (the
"Leases"), and all rents, income, both from services and occupation, royalties,
revenues and payments, including prepayments and security deposits
(collectively, the "Rents"), which are now or hereafter due or to be paid in
connection with the Land, Improvements, Fixtures, or Personalty; and all general
intangibles of Borrower which relate to any of the Land, Improvements, Fixtures,
Personal Property or Leases as related to the functioning of the Land or
Improvements for their general intended purposes (but not to the extent
primarily used in the operation of Borrower's specific business), including
proceeds of insurance and condemnation or conveyance of the Land and
Improvements, accounts, trade names, contract rights, accounts receivable, and
bank accounts as related to the functioning of the Land or Improvements for
their general intended purposes (but not to the extent primarily used in the
operation of Borrower's specific business); and all after acquired property
similar to the property herein described and conveyed which may be subsequently
acquired by Borrower and used in connection with the Land, Improvements,
Fixtures, Personal Property or Leases as related to the functioning of the Land
or Improvements for their general intended purposes (but not to the extent
primarily used in the operation of Borrower's specific business); and all cash
and noncash proceeds and products of all of the foregoing property ("Proceeds").
<PAGE>
EXHIBIT C
(Insurance Requirements)
I. PROPERTY INSURANCE
As to Improvements while under construction:
An ORIGINAL (or evidence acceptable to Lender of) Builder's Risk
"All-Risk", Completed Value (Non-Reporting) Form POLICY naming Borrower as
an insured, and covering the interests of all contractors (of all tiers) in
the Mortgaged Property, reflecting coverage of 100% of the insurable
replacement cost, and written by a carrier approved by Lender with a
current A.M. Best Company rating of at least A:VII (which is authorized to
do business in the State of Minnesota), that includes:
-- Lender's Loss Payable Endorsement naming U.S. Bank National
Association as Mortgagee
-- 30-day notice to Lender in the event of cancellation or non-renewal by
either party or material adverse change
-- Replacement Cost Measure of Recovery
-- Stipulated Value/Agreed Amount Endorsement (No Coinsurance)
-- Coverage for Foundations, Off-site (Unscheduled and Temporary
Locations), Transit, Testing, Flood, Earthquake, Collapse, and Boiler
and Machinery/Mechanical and Electrical Breakdown, in such amounts as
Lender and Borrower mutually agree is appropriate
-- Coverage for indirect loss exposures (customarily referred to as "soft
cost" exposures), "Contingent Liability from Operation of Building
Laws" coverage, "Demolition Costs" coverage, "Increased Cost of
Construction" coverage, and "Increased Time to Rebuild" coverage, with
such additional limits for such coverages as Lender may reasonably
require
-- Policy to permit partial occupancy
-- No insurer subrogation action or recovery against any party whose
interests are covered under the policy
-- Deductible not to exceed $5,000
-- Coverage to become effective upon the date of the Notice to Proceed,
the date of site mobilization, or the start of any shipment of
materials, machinery or equipment to the site, whichever is earlier,
and to remain in effect until replaced by the permanent All Risk
Property Insurance described below, or until such other time as may be
mutually agreed upon by Lender and Borrower
<PAGE>
As to completed Improvements:
An ORIGINAL (or evidence acceptable to Lender of) Special Form (or
so-called All Risk) Hazard Insurance POLICY naming Borrower as an insured,
reflecting coverage of 100% of the replacement cost, and written by a
carrier approved by Lender with a current A.M. Best Company rating of at
least A:VII (which is authorized to do business in the State of Minnesota),
that includes:
-- Lender's Loss Payable Endorsement naming U.S. Bank National
Association as Mortgagee
-- 30-day notice to Lender in the event of cancellation or non-renewal by
either party or material adverse change
-- Replacement Cost Measure of Recovery
-- Stipulated Value/Agreed Amount Endorsement (No Coinsurance)
-- Boiler and Machinery Coverage (including business income, extra
expense coverage)
-- Flood Insurance
-- One (1) year's business interruption, leasehold interest and/or rent
loss insurance in an amount acceptable to Lender
-- Extra expense coverage in an amount acceptable to Lender
-- "Contingent Liability from Operation of Building Laws" coverage,
"Demolition Costs" coverage, "Increased Cost of Construction"
coverage, and "Increased Time to Rebuild" Coverage, with such
additional limits for such coverages as Lender may reasonably require
-- No exclusion for "Collapse"
-- Deductible not to exceed $5,000
II. LIABILITY INSURANCE
An ORIGINAL (or evidence acceptable to Lender of) Commercial General
Liability Insurance POLICY (Insurance Services Offices policy form title)
naming Borrower as an insured, providing coverage on an "occurrence" rather
than a "claims made" basis, and written by a carrier approved by Lender
with a current A.M. Best Company rating of at least A:VII (which is
authorized to do business in the State of Minnesota), that includes:
-- Combined general liability policy limit of at least $2,000,000.00 each
occurrence, applying to liability for Bodily Injury, Personal Injury
and Property Damage, which combined limit may be satisfied by the
limit afforded under the Commercial General Liability Policy, or by
such Policy in combination with the limits afforded by an Umbrella or
Excess Liability Policy (or policies); provided, that the coverage
afforded under any such Umbrella or Excess Liability Policy is at
least as broad in all material respects as that afforded by the
underlying Commercial General Liability Policy
<PAGE>
-- Coverage for Bodily Injury, Property Damage, Personal Injury,
Contractual Liability, Independent Contractors and Products-Completed
Operations Liability
-- Automobile Liability insurance covering liability for Bodily Injury
and Property Damage arising out of the ownership, use, maintenance or
operation of all owned, nonowned and hired automobiles and other motor
vehicles utilized by Borrower in connection with the Mortgaged
Property, which coverage may be provided under a separate policy
-- Dram shop coverage if liquor is sold or served at or in the Mortgaged
Property, which coverage may be provided under a separate policy
-- Deductible not to exceed $5,000
-- Additional Insured Endorsement naming U.S. Bank National Association
and a Severability of Interest provision
-- 30-day notice to Lender in the event of cancellation or non-renewal by
either party or material adverse change
III. WORKER'S COMPENSATION
An ORIGINAL CERTIFICATE of Worker's Compensation coverage in the statutory
amount, naming Borrower as an insured, written by a carrier approved by
Lender.
<PAGE>
ENVIRONMENTAL AND ADA INDEMNIFICATION AGREEMENT EXHIBIT 10.7
THIS AGREEMENT is made as of December 3, 1997, by REUTER
MANUFACTURING, INC., a corporation organized under the laws of the State of
Minnesota ("Borrower"), in favor of U.S. Bank National Association, a national
banking association ("Lender").
RECITALS
A. Lender has agreed to lend to Borrower $2,400,000.00 (the "Loan"),
which Loan is secured in part by a Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Financing Statement of even date herewith (the
"Mortgage") pertaining to certain land described in the Mortgage and
improvements thereon (collectively the "Property") owned by Borrower and located
in Hennepin County, Minnesota; and
B. Lender has refused to make the Loan to Borrower unless this
Agreement is executed and delivered by Borrower.
NOW, THEREFORE, in consideration of Lender's agreement to make
the Loan to Borrower, Borrower hereby warrants and represents to, and covenants
and agrees with, Lender as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Accessibility Regulation" means a Law relating to accessibility of
facilities or properties for disabled, handicapped and/or physically
challenged persons, including, without limitation, the Americans With
Disabilities Act of 1991, as amended.
(b) "Environmental Regulation" means a Law relating to the environment
and/or to human health or safety, or governing, regulating or
pertaining to the generation, treatment, storage, handling,
transportation, use or disposal of any Hazardous Substance.
(c) "Hazardous Substance" means any substance or material defined in or
governed or regulated by any Environmental Regulation as a dangerous,
toxic or hazardous pollutant, contaminant, chemical, waste, material
or substance, and also expressly includes urea-formaldehyde,
polychlorinated biphenyls, dioxin, radon, lead-based paint, asbestos,
asbestos containing materials, nuclear fuel or waste, radioactive
materials, explosives, carcinogens and petroleum products, including
but not limited to crude oil or any fraction thereof, natural gas,
natural gas liquids, gasoline and synthetic gas, and any other waste,
material,
<PAGE>
substance, pollutant or contaminant the presence of which on, in, about or under
the Property would subject the owner or operator thereof to any damages,
penalties, fines or liabilities under any applicable Environmental Regulation.
(d) "Law" means any federal, state or local law, statute, code, ordinance,
rule, regulation or requirement.
2. WARRANTIES AND REPRESENTATIONS. Borrower warrants and represents
to Lender that to Borrower's knowledge, and except as otherwise described in
documents identified on Exhibit A attached hereto and in the letter of
undertaking regarding environmental matters from Borrower to Lender of even date
herewith:
(a) There is not located on, in, about or under the Property any Hazardous
Substances except for Hazardous Substances of the type ordinarily
used, stored or manufactured in connection with the operation of the
Property as it is presently operated, and such existing Hazardous
Substances have been and are used, stored and manufactured in
compliance with all Environmental Regulations. The Property is
operated as an office/manufacturing facility.
(b) The Property is not presently used, and has not in the past been used,
as a landfill, dump, disposal facility or gasoline station, or for
industrial, or for military purposes, or for the storage, generation,
production, manufacture, processing, treatment, disposal, handling,
transportation or deposit of any Hazardous Substances.
(c) There has not in the past been, and no present threat now exists of, a
spill, discharge, emission or release of a Hazardous Substance in,
upon, under, over or from the Property or from any other property
which would have an impact on the Property.
(d) The Property is in compliance with, and there are no past or present
investigations, administrative proceedings, litigation, regulatory
hearings or other actions completed, proposed, threatened or pending,
alleging noncompliance with or violation of, any Environmental
Regulations respecting the Property, or relating to any required
environmental permits covering the Property.
(e) Borrower has disclosed to Lender all reports and investigations
commissioned by or in the possession or control of Borrower and
relating to Hazardous Substances and the Property.
-2-
<PAGE>
(f) There are not now, nor have there ever been, any above ground or
underground storage tanks located in or under the Property. All
storage tanks identified on Exhibit A have been registered and/or
permitted as required by Environmental Regulations, and evidence of
such registration and/or permitting has been given to Lender. There
are no wells on or under the Property.
3. COVENANTS AND AGREEMENTS. Borrower covenants and agrees as
follows:
(a) Except for substances normally used for maintenance or operation of
the Property which are used, stored and disposed of in accordance with
all applicable Environmental Regulations, Borrower shall not, nor
shall it permit others to, place, store, locate, generate, produce,
create, process, treat, handle, transport, incorporate, discharge,
emit, spill, release, deposit or dispose of any Hazardous Substance
in, upon, under, over or from the Property. Borrower shall cause all
Hazardous Substances found on or under the Property, which are not
permitted under the foregoing sentence, to be properly removed
therefrom and properly disposed of at Borrower's cost and expense.
Borrower shall not install or permit to be installed any underground
storage tank on or under the Property. Borrower shall give written
notice to Lender prior to a change in the operations on the Property.
(b) In the event that (i) Lender reasonably believes that a violation of
an Environmental Regulation may have occurred in connection with the
Property; (ii) Lender receives notice from Borrower or otherwise has
knowledge that an event described in subparagraph 3(d) has occurred;
(iii) Lender reasonably believes that a representation or warranty of
Borrower in Paragraph 2 was untrue in any material respect when made
or has become untrue in any material respect; (iv) Lender receives
notice from Borrower or otherwise has knowledge of a change in
operations on the Property and Lender reasonably believes that the new
operations may entail the presence of more or different Hazardous
Substances on the Property; or (v) Lender reasonably believes that
Hazardous Substances are present on the Property which were not
previously known by Lender to be present on the Property; then, in any
such event, Borrower shall at its cost obtain and deliver to Lender an
environmental review, audit, assessment and/or report relating to the
Property or shall have any previously delivered materials updated
and/or amplified, by an engineer or scientist selected by Borrower and
acceptable to Lender; if Borrower fails to do so within forty-five
(45) days after such request is made, Lender shall have the right to
do so, in which event Borrower shall reimburse Lender for the cost
incurred by
-3-
<PAGE>
Lender in doing so within ten (10) days following demand therefor by
Lender.
(c) Borrower shall comply with all Accessibility Regulations which are
applicable to the Property. In the event that (i) Lender reasonably
believes that a material violation of an Accessibility Regulation may
have occurred in connection with the Property; or (ii) Lender receives
notice from Borrower or otherwise has knowledge that an event
described in subparagraph 3(d) and pertaining to Accessibility
Regulations has occurred; then, in any such event, Borrower shall at
its cost obtain and deliver to Lender an Accessibility Regulation
compliance report relating to the Property or shall have any
previously delivered materials updated and/or amplified, by a
qualified consultant selected by Borrower and acceptable to Lender; if
Borrower fails to do so within forty-five (45) days after such request
is made, Lender shall have the right to do so, in which event Borrower
shall reimburse Lender for the cost incurred by Lender in doing so
within ten (10) days following demand therefor by Lender.
(d) Borrower shall, promptly after obtaining actual knowledge thereof,
give notice to Lender of: (i) any activity in violation of any
applicable Environmental Regulations relating to the Property, (ii)
any governmental or regulatory actions instituted or threatened under
any Environmental Regulations or any Accessibility Regulations
affecting the Property, (iii) all claims made or threatened by any
third party against the Borrower or the Property relating to any
Hazardous Substance or a violation of any Environmental Regulations or
any Accessibility Regulations, (iv) discovery by Borrower of any
occurrence or condition on or under the Property or on or under any
real property adjoining or in the vicinity of the Property which could
subject Borrower, Lender or the Property to a claim under any
Environmental Regulations or Accessibility Regulations. Any such
notice shall include copies of any written materials received by
Borrower.
(e) Any investigation or any remedial or corrective action taken with
respect to the Property shall be done under the supervision of a
qualified consultant, engineer or scientist acceptable to Lender who
shall, at Borrower's cost and at the completion of such investigation
or action, provide a written report of such investigation or action to
Lender. Borrower shall also provide Lender with a copy of any interim
reports prepared in connection with any such investigation or action.
(f) If the Property has, or is suspected to have, asbestos or asbestos
containing materials ("ACM") which, due to its condition or location
-4-
<PAGE>
or due to any planned building renovation or demolition, is recommended to
be abated by repair, encapsulation, removal or other action, Borrower shall
promptly carry out the recommended abatement action. If the recommended
abatement includes removal of ACM, Borrower shall cause the same to be
removed and disposed of offsite by a licensed and experienced asbestos
removal contractor, all in accordance with Environmental Regulations. Upon
completion of the recommended abatement action, Borrower shall deliver to
Lender a certificate, signed by an officer of Borrower and the consultant
overseeing the abatement action, certifying to Lender that the work has
been completed in compliance with all applicable laws, ordinances, codes
and regulations (including without limitation those regarding notification,
removal and disposal) and that no airborne fibers beyond permissible
exposure limits remain on site. Borrower shall develop and implement an
Operations and Maintenance Program (as contemplated by Environmental
Protection Agency guidance document entitled "Managing Asbestos In Place; A
Building Owner's Guide to Operations and Maintenance Programs for
Asbestos-Containing Materials") for managing in place any ACM at or in the
Property. Borrower shall deliver a complete copy of such Operations and
Maintenance Program to Lender and certify to Lender that such Program has
been implemented.
(f) After an Event of Default (as defined in the Mortgage of even date
herewith between Lender and Borrower or the Note which the Mortgage
secures), Lender shall have the right, after ten (10) days' prior
written notice to Borrower, to have an environmental review, audit,
assessment, testing program and/or report with respect to the Property
performed or prepared by an environmental engineering firm selected by
Lender. Borrower shall reimburse Lender for the cost incurred for
each such action within ten (10) days following demand therefor by
Lender.
4. INDEMNITY. Borrower shall indemnify Lender, any participant of
Lender, its and their directors, officers, employees, agents, contractors,
licensees, invitees, and the respective heirs, legal representatives, successors
and assigns of all such persons and parties (hereinafter collectively referred
to as "Indemnified Parties") against, shall hold the Indemnified Parties
harmless from, and shall reimburse the Indemnified Parties for, any and all
loss, damage, liability, cost and expense directly or indirectly incurred by the
Indemnified Parties, including reasonable attorneys' and consultants' fees
("Losses"), resulting from: (a) the presence or discovery of any Hazardous
Substance in, upon, under or over, or emanating from, the Property, whether or
not Borrower is responsible therefor, and whether or not it was placed, located,
deposited or released by Borrower; and/or (b)
-5-
<PAGE>
any violation of any Environmental Regulation or any Accessibility Regulation,
provided, however, that such indemnity shall not include Losses which
Indemnitors demonstrate to have arisen solely as a result of the gross
negligence or intentional misconduct of the Indemnified Parties committed after
Borrower is no longer in possession of the Property. Borrower agrees that the
Indemnified Parties shall have no responsibility for, and Borrower hereby
releases the Indemnified Parties from responsibility for, damage or injury to
human health, property, the environment or natural resources caused by Hazardous
Substances and for abatement, clean-up, detoxification, removal or disposal of,
or otherwise with respect to, Hazardous Substances, and which are not caused by
the gross negligence or intentional misconduct of the Indemnified Parties. The
indemnity contained in this paragraph 4 shall be deemed continuing for the
benefit of the Indemnified Parties, including any purchaser at a foreclosure or
other sale under the Mortgage, any transferee of the title from Lender, and any
subsequent owner of the Property, and shall survive the satisfaction or release
of the Mortgage, any foreclosure of or other sale under the Mortgage and/or any
acquisition of title to the Property or any part thereof by Lender, or anyone
claiming by, through or under Lender, by deed in lieu of foreclosure or
otherwise, and also shall survive the repayment or any other satisfaction of the
Loan. Notwithstanding the foregoing, the indemnity contained in this paragraph
4 shall not apply with respect to any loss, damage, liability, cost or expense
which Borrower proves by a preponderance of the evidence was caused solely by or
resulted solely from any act or omission of any Person (as defined in the Loan
Agreement), other than the Borrower or an agent, employee, invitee or contractor
of the Borrower, which occurred after Lender or anyone claiming by, through or
under Lender acquired title to the Property by foreclosure of the Mortgage or
deed in lieu of foreclosure or otherwise and control of the Property. Any
amounts covered by the foregoing indemnification shall bear interest from the
date incurred at the Default Rate (as defined in the Loan Agreement), and shall
be payable on demand. The Borrower agrees that its obligations under this
Agreement are separate from, independent of, and in addition to its obligations
under the Mortgage and other documents which secure the Loan.
5. LIABILITY. The liability of the Borrower under this Agreement
shall not be subject to any limitations on liability set forth in the Mortgage
or any other document evidencing or securing the Loan. Without limitation, the
obligations and liability of the Borrower under this Agreement shall in no way
be waived, released, discharged, reduced, mitigated or otherwise affected by
Lender's making of the Loan with knowledge of the matters described in documents
identified on Exhibit A attached hereto, or of the presence of any Hazardous
Substance on, in, about or under the Property or any property adjoining or in
the vicinity of the Property, or of any violation of any Environmental
Regulation or any Accessibility Regulation or any condition or state of facts or
circumstances which with notice or lapse of time or both might ripen into such a
violation, or by any neglect, delay or forbearance of Lender in demanding,
requiring or enforcing
-6-
<PAGE>
payment or performance of the obligations and liability of the Borrower
hereunder, or by the receivership, bankruptcy, insolvency or dissolution of the
Borrower or any affiliate thereof. No action or proceeding brought or
instituted under this Agreement, and no recovery made as a result thereof, shall
be a bar or a defense to any further action or proceeding under any other
agreement. The Borrower shall reimburse Lender and the other Indemnified Parties
for all attorneys' fees and expenses incurred in connection with the enforcement
of the Indemnified Parties' rights under this Agreement, including those
incurred in any case, action, proceeding or claim under the Federal Bankruptcy
Code or any successor statute.
6. NOTICES. Any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent in
accordance with the provisions of the Mortgage.
7. GOVERNING LAW AND CONSTRUCTION. The validity, construction and
enforceability of this Agreement shall be governed by the laws of the State of
Minnesota, without giving effect to conflict of laws or principles thereof, but
giving effect to federal laws of the United States applicable to national banks.
Whenever possible, each provision of this Agreement and any other statement,
instrument or transaction contemplated hereby or relating hereto, shall be
interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Agreement or any other statement, instrument
or transaction contemplated hereby or relating hereto shall be held to be
prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any other statement, instrument or transaction contemplated hereby
or relating hereto.
8. CONSENT TO JURISDICTION. At the option of Lender, this Agreement
may be enforced in any Federal Court or Minnesota State Court sitting in
Minneapolis or St. Paul, Minnesota; 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, 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.
9. WAIVER OF JURY TRIAL The Borrower and Lender irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or any of the Loan Documents (as defined in the Loan
Agreement) or the transactions contemplated hereby or thereby.
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<PAGE>
10. BINDING EFFECT; GENDER. This Agreement shall inure to the
benefit of Lender, and the Indemnified Parties, and shall bind the Borrower and
the Borrower's successors and assigns. The obligations of the Borrower under
this Agreement shall be enforceable in all events against the Borrower, its
successors and assigns, and each of them, jointly and severally . The use of
any gender herein shall include all other genders.
IN WITNESS WHEREOF, the Borrower has executed this Agreement as of the
date first above written.
REUTER MANUFACTURING, INC.
By /s/ James W. Taylor
---------------------
Its President
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<PAGE>
EXHIBIT A
(Description of Environmental Reports)
Phase I Environmental Site Assessment dated November 18, 1997, by Peer
Environmental Engineering Resources, Inc.
<PAGE>
U.S. Bank National Association EXHIBIT 10.8 December 3, 1997
Mail Stop: SPFN0205
332 Minnesota Street
St. Paul, MN 55101
ATTENTION: Mr. David P. Peterson
Re: $8,670,000 Loan (the "Loan") from U.S. Bank National Association
(US Bank) to Reuter Manufacturing, Inc. (Reuter) secured, in part, by
Mortgage on Property located at 410 Eleventh Avenue South, Hopkins,
Minnesota
Dear Mr. Peterson:
Reuter acknowledges that environmental due diligence in connection with the
Loan has revealed the following:
- Historical or current conditions or activities on or near the Property
which have been interpreted by an environmental consultant as "recognized
environmental conditions" (as said term is defined in ASTM Practice
E 1527-97 "Standard Practice for Environmental Site Assessments: Phase I
Environmental Site Assessment Process) as more particularly described in
that certain report (the "Phase I Report") entitled "Phase I Environmental
Site Assessment, Reuter Manufacturing, Inc, 410 Eleventh Avenue South,
Hopkins, Minnesota 55343" and dated November 18, 1997, prepared by Peer
Environmental & Engineering Resources, Inc. (PEER); and
- Certain suspect asbestos containing materials ("ACM") observed by PEER
including drop-in ceiling panels, wallboard and floor tile, as more
particularly described in Section 6.2 of the Phase I Report.
US Bank requires that Reuter take certain steps with respect to the ACM and
the "recognized environmental conditions" but nevertheless has agreed to proceed
with the closing of the Loan as long as Reuter gives US Bank the assurances set
forth in this letter.
In consideration of US Bank's proceeding to close the Loan, Reuter hereby
assures US Bank that it will undertake to do the following:
1. ASBESTOS. Reuter shall engage PEER or another consultant properly
certified and experienced in the nature of the required work and reasonably
acceptable to US Bank to conduct a survey of the suspect ACM observed in the
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U.S. Bank National Association December 3, 1997
Page 2
Property. Reuter shall forward to US Bank a true, correct and complete copy of
the survey. In the event that the survey reveals actual ACM, Reuter shall do
the following:
A. In the event of actual ACM which, due to its condition or
location, is recommended to be abated by repair, encapsulation, removal or
other action, Reuter shall carry out the recommended abatement action. In
the event the recommended abatement includes removal of ACM, Reuter shall
cause the same to be removed and disposed of offsite by a licensed and
experienced asbestos removal contractor, all in accordance with applicable
state, federal and local laws and regulations. Upon completion of any such
recommended abatement action, Reuter shall deliver to US Bank a
certificate, signed by an officer of Reuter and the consultant overseeing
the abatement action, certifying to US Bank that the work has been
completed in compliance with all applicable laws, ordinances, codes and
regulations (including without limitation those regarding notification,
removal and disposal) and that no airborne fibers beyond permissible
exposure limits remain on site.
B. Reuter shall develop and implement an Operations and Maintenance
Program (as contemplated by Environmental Protection Agency guidance
document entitled "Managing Asbestos In Place; A Building Owner's Guide to
Operations and Maintenance Programs for Asbestos-Containing Materials" and
addressing any obligations of Reuter under the Federal Occupational Safety
and Health Act) for managing in place any and all ACM recommended by the
report to remain in place in the Property. Reuter shall deliver a true,
correct and complete copy of such Operations and Maintenance Program to
US Bank and a certificate signed by an officer of Reuter certifying to
US Bank that such Program has been implemented.
The foregoing work with respect to ACM shall begin as soon as reasonably
possible and be diligently pursued to completion and copies of all required
reports, certificates and plans shall be furnished to US Bank no later than
sixty (60) days after the date of this letter.
2. FURTHER INQUIRY AS TO "RECOGNIZED ENVIRONMENTAL CONDITIONS". Reuter
shall engage PEER or another consultant properly certified and experienced in
the nature of the required work and reasonably acceptable to US Bank to assist
Reuter in the following tasks:
A. Reuter shall review files at the Minnesota Pollution Control
Agency (MPCA) in an attempt to gain sufficient information about the
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U.S. Bank National Association December 3, 1997
Page 3
off-site recognized environmental conditions to enable the consultant to judge
them as NOT falling within the definition of "recognized environmental
condition."
B. Reuter shall perform the Phase II activities recommended by PEER
in the workplan attached hereto as Exhibit A.
The work described in A and B above shall begin as soon as reasonably possible
and be pursued diligently to completion and a true, correct and complete copy of
the consultant's report (the "Phase II Report") with respect thereto shall be
furnished to US Bank no later than sixty (60) days after the date of this
letter. Reuter shall cause the environmental consultant to authorize US Bank to
rely on the report.
3. POST PHASE II WORK. In the event that the Phase II Report contains
recommendations with respect to compliance with applicable laws and regulations,
Reuter shall comply with such recommendations within a time period reasonably
satisfactory to US Bank. Without regard to the consultant's recommendations, in
the event the Phase II Report reveals the presence of contamination, Reuter
agrees to enter the Property into the appropriate voluntary program(s) at MPCA
and perform the work necessary to obtain from such program(s), within a time
period reasonably satisfactory to US Bank, such liability assurances for
Reuter's and/or US Bank's benefit as may be requested by US Bank in its
reasonable discretion. Prior to entering the Property into such program(s),
Reuter shall discuss with US Bank the type of assurances that will be sought and
US Bank shall approve Reuter's application(s) to such program(s) before
submittal. Reuter shall keep US Bank apprised of the progress of the
application(s) and promptly provide to US Bank full and complete copies of all
reports and other documents related thereto and of all responses or other
communications from such program(s).
4. FOLLOW-UP AS TO PHASE I REPORT. Reuter shall cause PEER to issue a
letter addressed to US Bank confirming the following with respect to the Phase I
Report:
A. During the site visit, PEER observed the Property for obvious
instances of noncompliance and mentioned any observations in the
Phase I Report.
B. In PEER's opinion, based on the investigation summarized in the
Phase I Report, the Property involves no "significant environmental risk"
with the possible exception of issues mentioned in Section 6 (Findings and
Conclusions) of the Phase I Report.
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U.S. Bank National Association December 3, 1997
Page 4
5. DEFAULT. Reuter agrees that failure to carry out its obligations set
forth in this letter, within ten (10) days after written notice of such failure
from US Bank to Reuter, shall constitute a default by Reuter under the documents
and agreements evidencing and/or securing the Loan, including, without
limitation the Financing Agreement and the Security Agreement, each dated as of
December 3, 1997, and made between US Bank and Reuter, and the three Promissory
Notes made by Reuter payable to the order of US Bank in the amounts of
$2,400,000, $1,000,000 and $270,000, respectively.
Very truly yours,
REUTER MANUFACTURING, INC.
By /s/ William H. Johnson
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Its Vice President-Controller
