EXHIBIT 10.1
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Fourth Amendment, dated as of April 29, 1999, is made by and
between MEDAMICUS, INC., a Minnesota corporation (the "Borrower"), and XXXXX
FARGO CREDIT, INC. f/k/a NORWEST CREDIT, INC., a Minnesota corporation (the
"Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of March 5, 1996, as amended by First Amendment to Credit and
Security Agreement dated as of June 27, 1997 and by Second Amendment to Credit
and Security Agreement dated as of May __, 1998 and by Third Amendment to Credit
and Security Agreement dated as of June 17, 1998 (as amended, the "Credit
Agreement"). Capitalized terms used in these recitals have the meanings given to
them in the Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"'Borrowing Base' means, at any time and subject to change from time
to time in the Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b) the sum of
(i) 85% of Eligible Accounts;
(ii) the lesser of (A) 25% of Eligible Inventory, or (B)
$350,000; and
(iii) the lesser of (A) the Fixed Asset Percentage of Eligible
Fixed Assets or (B) $233,000."
"'Eligible Inventory' means all Inventory of the Borrower, at the
lower of cost or market value as determined in accordance with GAAP;
provided, however, that the following shall not in any event be deemed
Eligible Inventory:
"(i) Inventory that is: in-transit; located at any warehouse,
job site or other premises not approved by the Lender in writing;
located outside of the states, or localities, as applicable, in
which the Lender has filed financing statements to perfect a first
priority security interest in such Inventory; covered by any
negotiable or non-negotiable warehouse receipt, xxxx of lading or
other document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
"(ii) Supplies, packaging, maintenance parts or sample
Inventory;
"(iii) Work-in-process Inventory, including subassemblies;
provided however, that Medtronic introducer kits including
'Medtronic Subassembly' and Medtronic work-in-process consisting of
assembled kits needing only sterilization and shrink-wrapping may be
included in Eligible Inventory if not otherwise ineligible;
"(iv) Inventory that is damaged, obsolete, slow moving or not
currently saleable in the normal course of the Borrower's
operations;
"(v) Inventory that the Borrower has returned, has attempted
to return, is in the process of returning or intends to return to
the vendor thereof;
"(vi) Inventory that is perishable or live;
"(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in writing to
permit the Lender to exercise its rights and remedies against such
Inventory;
"(viii) Inventory that is contract Inventory;
"(ix) Inventory that is subject to a security interest in
favor of any Person other than the Lender; and
"(x) Inventory otherwise deemed ineligible by the Lender in
its sole discretion."
"'Fourth Amendment' means that certain Fourth Amendment to Credit
and Security Agreement, dated as of April 29, 1999, by and between the
Borrower and the Lender."
"'Maturity Date' means June 30, 2000."
"'Maximum Line' means $2,000,000."
"'Net Income' means fiscal year-to-date after-tax net income from
continuing operations as determined in accordance with GAAP."
"'Note' means the Borrower's Revolving Note dated as of the date of
the Fourth Amendment, in the form attached as Exhibit A to the Fourth
Amendment."
2. Reporting Requirements. Section 6.1 of the Credit Agreement is
hereby amended by adding the following new subsection (f):
"(f) promptly upon knowledge thereof, notice of termination,
non-renewal or threatened termination or non-renewal of the Medtronic
Distribution Agreement."
3. Book Net Worth Covenant. Section 6.7 of the Credit Agreement is
hereby amended in its entirety and replaced with the following:
"Section 6.7 Minimum Book Net Worth. The Borrower will at all times
maintain during each period described below, its Book Net Worth (on an
unconsolidated, Borrower-only basis), determined as of the end of each
month, of at least the amount set forth opposite such period:
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Period Minimum Book Net Worth
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January 1, 1999 through
August 31, 1999 $2,000,000
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September 1, 1999 and
thereafter $2,200,000
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4. Liquid Asset Requirement. Section 6.10(a) of the Credit Agreement
is hereby amended in its entirety and replaced with the following:
"Section 6.10 Liquid Asset Requirement.
(a) The Borrower shall at all times own and maintain in an account
or accounts with Norwest Investment Services, Inc. ("NISI"), unencumbered
Liquid Assets, free and clear of any right of set off and of any related
margin account debt. The fair market value of such Liquid Assets must be
at least 25% of the outstanding Advances."
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5. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
6. Conditions Precedent. This Amendment shall be effective when the
Lender shall have received an executed original hereof, together with each of
the following, each in substance and form acceptable to the Lender in its sole
discretion:
(a) The replacement note substantially in the form of Exhibit A
hereto, duly executed on behalf of the Borrower (the "Replacement Note").
(b) A Certificate of the Secretary of the Borrower certifying as to
(1) the resolutions of the board of directors of the Borrower approving
the execution and delivery of this Fourth Amendment and the Replacement
Note, (2) the fact that the Articles of Incorporation and Bylaws of the
Borrower, which were certified and delivered to the Lender pursuant to the
Certificate of the Borrower's Secretary dated as of March 26, 1996,
continue in full force and effect and have not been amended or otherwise
modified except as set forth in Certificates previously delivered or the
Certificate to be delivered, and (3) certifying that the officers and
agents of the Borrower who have been certified to the Lender, pursuant to
the Certificate of Authority of the Borrower's Secretary dated as of March
26, 1996, as being authorized to sign and to act on behalf of the Borrower
continue to be so authorized or setting forth the sample signatures of
each of the officers and agents of the Borrower authorized to execute and
deliver this Fourth Amendment and all other documents, agreements and
certificates on behalf of the Borrower.
(c) Such other matters as the Lender may require.
7. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and the Replacement Note and to perform all of its
obligations hereunder, and this Amendment and the Replacement Note have
been duly executed and delivered by the Borrower and constitute the legal,
valid and binding obligation of the Borrower, enforceable in accordance
with its terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Replacement Note have been duly authorized by all
necessary corporate action and do not (i) require any authorization,
consent or approval by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction
or decree presently in effect, having applicability to the Borrower, or
the articles of incorporation or by-laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected.
(c) All of the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
8. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby. Upon the
satisfaction of each of the conditions set forth in paragraph 6 hereof, the
definition of "Note" and all references thereto in the Credit Agreement shall be
deemed amended to describe the Replacement Note, which Note shall be issued by
the Borrower to the Lender in replacement, renewal and amendment, but not in
repayment, of the Note.
9. No Waiver. The execution of this Amendment and acceptance of the
Replacement Note and any documents related hereto shall not be deemed to be a
waiver of any Default or Event of Default under the Credit Agreement or breach,
default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on
the date of this Amendment.
10. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors,
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successors and assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing, from any and
all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or
federal law or otherwise, which the Borrower has had, now has or has made claim
to have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known or unknown.
11. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses.
12. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the date first written above.
XXXXX FARGO CREDIT, INC. f/k/a NORWEST CREDIT, MEDAMICUS, INC.
INC.
By By
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Xxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
Its Officer Its President
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