FIRST AMENDMENT TO
CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of June 24, 1997, is made by and
between MEDAMICUS, INC., a Minnesota corporation (the "Borrower"), and 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 (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:
"'Eligible Accounts' means all unpaid Accounts, net of any
credits and any reserves for warranty claims or items returned, except
the following shall not in any event be deemed Eligible Accounts:
(1) That portion of Accounts over 120 days past
invoice date;
(2) That portion of Accounts that are disputed or
subject to a claim of offset or a contra account except the
Medtronic Contra Amount; provided, however, that if the fair
market value of the Liquid Assets is less than the Medtronic
Contra Amount, then that portion of Accounts that is subject
to the Medtronic Contra Amount shall only be deemed Eligible
Account to the extent of the Liquid Assets;
(3) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(4) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(5) Accounts owed by an account debtor located
outside the United States which are not backed by a bank
letter of credit assigned to the Lender, in the possession of
the Lender and acceptable to the Lender in all respects, in
its sole discretion;
(6) Accounts owed by an account debtor that is the
subject of bankruptcy proceedings or has gone out of business;
(7) Accounts owed by a shareholder, subsidiary,
affiliate, officer or employee of the Borrower;
(8) Accounts not subject to a duly perfected security
interest in favor of the Lender or which are subject to any
lien, security interest or claim in favor of any Person other
than the Lender;
(9) That portion of Accounts that have been extended
more than thirty (30) days beyond the original due date,
restructured, amended or modified;
(10) That portion of Accounts that constitutes
finance charges, service charges or sales or excise taxes;
(11) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 10% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (1), (2) or (9) above; and
(12) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion."
"'First Amendment' means that certain First Amendment to
Credit and Security Agreement dated as of June 24, 1997."
"'Floating Rate' means an annual rate equal to the sum of the
Base Rate plus two and one quarter of one percent (2.25%) which annual
rate shall change when and as the Base Rate changes."
"'Liquid Assets' means (a) debt or equity securities that are
traded on any national securities exchange or on the NASDAQ National
Market System, (b) government or municipal obligations for which a
public market exists, and (c) cash or the equivalent, all of which must
be convertible to cash within 90 days through sales in the public
marketplace."
"'Maturity Date' means June 30, 1998."
"Medtronic Contra Amount" means that portion of Accounts due
from Medtronic, Inc., a Minnesota corporation, that are or could be
disputed or subject to a claim of offset or a contra account."
"'Termination Date' means the earliest of (a) the Maturity
Date, (b) the date the Lender terminates this Agreement at any time in
its sole discretion, or (c) the date the Borrower terminates this
Agreement pursuant to Section 2.6 hereof."
2. Minimum Interest Charge. Section 2.2(b) of the Credit
Agreement is hereby amended by deleting the amount of "$75,000" and inserting in
place thereof the new amount of "$70,000".
3. Extension of Credit Facility. Section 2.5 of the Credit
Agreement is hereby amended by deleting the last sentence thereof and inserting
the following new sentence: "This Agreement shall remain in effect until the
Termination Date."
4. 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:
PERIOD MINIMUM BOOK NET WORTH
June, July and August, 1997 $2,400,000
September, 1997 through $2,500,000
February, 1998
March, 1998 and thereafter $2,600,000
5. Liquid Asset Requirement. The Credit Agreement is hereby
amended by adding the following new Section 6.10:
"Section 6.10 Liquid Asset Requirement. So long as the
Borrower has outstanding obligations to Medtronic, Inc., a Minnesota
corporation, 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 of an amount that is greater than the amount of
the Borrower's outstanding obligations owed to Medtronic, Inc. To
facilitate the monitoring of the status of the Liquid Asset
requirement, the Borrower shall deliver to the Lender the monthly
statements for such NISI accounts for the prior month stating the
respective fair market values of the securities in the accounts upon
receipt thereof, and shall deliver such other information on the
Borrower's accounts at NISI as the Lender may request. The Borrower
hereby authorizes the Lender to directly contact NISI in order to
obtain information on the Borrower's accounts at NISI. In addition, if
the fair market value of the Liquid Assets falls below $300,000, the
Borrower shall provide the Lender with the Borrower's accounts payable
reports on a bi-weekly basis, or more frequently if the Lender so
requests."
6. 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.
7. Amendment Fee. The Borrower shall pay the Lender as of the
date hereof a fully earned, non-refundable fee in the amount of $3,000 in
consideration of the Lender's execution of this Amendment.
8. 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) A Certificate of the Secretary of the Borrower certifying
as to (i) the resolutions of the board of directors of the Borrower
approving the execution and delivery of this Amendment, (ii) the fact
that the resolutions of the board of directors of the Borrower, which
were certified and delivered to the Lender pursuant to the Certificate
of Authority of the Borrower's Secretary dated as of March 26, 1996 in
connection with the execution and delivery of the Credit Agreement
continue in full force and effect and have not been amended or
otherwise modified except as set forth in the Certificate to be
delivered, and (iii) certifying that the President, chief executive
officer, Chief Financial Officer, Vice President, Secretary and
Controller 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 Amendment and
all other documents, agreements and certificates on behalf of the
Borrower.
(b) Payment of the fee described in Paragraph 7.
(c) Such other matters as the Lender may require.
9. 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 to perform all of its obligations hereunder,
and this Amendment has been duly executed and delivered by the Borrower
and constitutes 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 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.
10. 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.
11. No Waiver. The execution of this Amendment and acceptance
of 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.
12. 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, 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.
13. 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 and the fee
required under paragraph 7 hereof.
14. 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.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
NORWEST CREDIT, INC. MEDAMICUS, INC.
By _________________________________ By________________________________
Xxxxxx X. Xxxxxxx Xxxxx Xxxxxxx
Its Assistant Vice President Its President
