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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): August 28, 2015 (August 26, 2015)
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MOCON, INC.
(Exact name of registrant as specified in its charter)
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Minnesota |
000-09273 |
41-0903312 |
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
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7500 Mendelssohn Avenue North Minneapolis, MN |
55428 |
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(Address of Principal Executive Offices) |
(Zip Code) |
(763) 493-6370
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 1.01 |
Amendment of a Material Definitive Agreement |
On August 26, 2015, MOCON, Inc. (“MOCON”) entered into a Fourth Amendment to Credit Agreement (the “Fourth Amendment”) with Wells Fargo Bank, National Association (“Wells Fargo”), which amended the Credit Agreement (as amended, the “Credit Agreement”) between MOCON and Wells Fargo Bank, National Association (“Wells Fargo”) originally dated March 28, 2012. Pursuant to the Fourth Amendment, the revolving credit line available to MOCON under the Credit Agreement has been increased to $10 million and the maturity date of the credit line was extended to August 26, 2018.
MOCON and Wells Fargo also agreed to certain other matters as set forth in the Fourth Amendment, and the description of the Fourth Amendment set forth above is qualified by the Fourth Amendment filed as Exhibit 10.1 to this Current Report on Form 8-K and is hereby incorporated herein by this reference.
In connection with the execution of the Fourth Amendment, MOCON and Wells Fargo also entered into a Security Agreement (the “Security Agreement”) pursuant to which MOCON granted to Wells Fargo a security interest in certain shares of the stock of foreign direct and indirect subsidiaries of MOCON. The foregoing description of the Security Agreement is qualified by the Security Agreement filed as Exhibit 10.2 to this Current Report on Form 8-K and is hereby incorporated herein by this reference.
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Item 9.01 |
Financial Statements and Exhibits |
(d) Exhibits.
| Exhibit No. | Description | |
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10.1 |
Fourth Amendment to Credit Agreement dated August 26, 2015 by and between MOCON, Inc. and Wells Fargo Bank, National Association. | |
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10.2 |
Security Agreement dated August 26, 2015 by and between MOCON, Inc. and Wells Fargo Bank, National Association. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MOCON, INC. | |
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Dated: August 28, 2015 |
By: |
/s/ Elissa Lindsoe |
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Elissa Lindsoe | |
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Vice President, Chief Financial Officer, Treasurer and Secretary | |
MOCON, INC.
CURRENT REPORT ON FORM 8-K
INDEX TO EXHIBITS
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Exhibit No. |
Description |
Method of Filing | |
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10.1 |
Fourth Amendment to Credit Agreement dated August 26, 2015 by and between MOCON, Inc. and Wells Fargo Bank, National Association. |
Filed herewith. | |
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10.2 |
Security Agreement dated August 26, 2015 by and between MOCON, Inc. and Wells Fargo Bank, National Association. |
Filed herewith. |
4
Exhibit 10.1
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Amendment is agreed to as of August 26, 2015, by and between MOCON, Inc., a Minnesota corporation (the “Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (the “Bank”).
The Borrower and the Bank are parties to that certain Credit Agreement dated as of March 28, 2012, as amended by a First Amendment to Credit Agreement dated as of September 24, 2013, a Second Amendment to Credit Agreement dated as of March 28, 2014 and a Third Amendment to Credit Agreement dated as of January 13, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Bank has agreed to make certain financial accommodations available to the Borrower.
The Borrower has requested that the Bank make certain amendments to the Credit Agreement, and the Bank is willing to accommodate such request on the terms and subject to the conditions set forth below.
NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. Definitions; References. Capitalized terms used in this Amendment that are defined in the Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
2. Amendments to Credit Agreement.
(a) Section 1.1(a) of the Credit Agreement is hereby amended in its entirety to read as follows:
(a) Line of Credit. Subject to the terms and conditions of this Agreement, the Bank hereby agrees to make advances to Borrower from time to time up to and including August 26, 2018 (the “Maturity Date”), not to exceed at any time the aggregate principal amount of Ten Million Dollars ($10,000,000) (the “Line of Credit”), the proceeds of which shall be used by Borrower to (i) on or about August 26, 2015 repay the outstanding principal balance of the Term Loan, (ii) provide for the working capital and general corporate purpose needs of Borrower (including the issuance of Letters of Credit, as defined below) and Baseline-MOCON, Inc., a Colorado corporation and a wholly owned subsidiary of Borrower (“Baseline”, and together with Borrower, collectively, “Obligors”), and (iii) provide for Permitted Acquisitions (as defined below). Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note originally dated March 28, 2012, as amended by an amended and restated promissory note dated August 26, 2015 (as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof, the “Revolving Line of Credit Note”), all terms of which are incorporated herein by this reference.
(b) Section 1.5 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 1.5 Collateral. As security for all indebtedness and other debts, liabilities and obligations of Borrower to Bank, Borrower hereby grants to Bank security interests of first priority in all of Borrower’s property, including but not limited to all accounts, chattel paper, deposit accounts, documents, equipment, farm products, general intangibles, instruments, inventory, investment property, letter-of-credit rights, letters of credit and money, whether now owned or hereafter acquired; provided, however, that in no event shall the collateral covered by such security interest include (i) the voting capital stock of any First-Tier Foreign Subsidiary in excess of 65% of the issued and outstanding voting capital stock thereof, or (ii) any voting capital stock of any Foreign Subsidiary that is not a First-Tier Foreign Subsidiary. All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security interests, agreements and documents, including, without limitation, filing and recording fees and costs of appraisals, audits and title insurance. Notwithstanding the foregoing, so long as no Default or Event of Default has occurred and is continuing, nothing in this Agreement or any other Loan Document shall require the Borrower to take any action under the law of any jurisdiction outside the United States to perfect the Lender’s security interest in any stock of any First-Tier Foreign Subsidiary. As used herein:
“Domestic Subsidiary” means any Subsidiary organized under the laws of any political subdivision of the United States.
“First-Tier Foreign Subsidiary” means any Foreign Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code and the capital stock of which is owned directly by the Borrower or any Domestic Subsidiary thereof.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
(c) Section 4.9 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 4.9 Financial Condition. Maintain financial condition of Borrower and its Subsidiaries as follows using GAAP consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein):
(a) Total Funded Debt to EBITDA not greater than 2.0 to 1.0 as of each quarter end, determined on a rolling 4-quarter basis, with “Funded Debt” defined as the sum of all obligations for borrowed money (including subordinated debt) plus all capital lease obligations, and with “EBITDA” as defined below.
(b) EBITDA not less than $5,000,000 as of each quarter end, determined on a rolling 4-quarter basis.
As used herein, “EBITDA” means, with reference to any period, (a) the consolidated net income for such period determined on a consolidated basis in accordance with GAAP consistently applied for such period, plus (b) to the extent deducted in determining such consolidated net income for such period, the sum of the following for such period, without duplication: (i) consolidated interest expense for such period, (ii) income tax expense for such period, (iii) depreciation and amortization for such period, (iv) the aggregate amount of extraordinary, non-operating or non-cash charges for such period, (v) non-recurring costs and expenses incurred in connection with a merger or permitted acquisition to the extent acceptable to Bank for such period, and (vi) any compensation paid in the form of shares of stock of the payor, and minus, without duplication, (c) the aggregate amount of extraordinary income during such period. Pro forma credit shall be given for the EBITDA of any person (or identifiable business units or divisions of such person) acquired by the Borrower in accordance with the terms of the credit agreement as if owned on the first day of the applicable period, and subject to adjustments calculated in a manner reasonably satisfactory to Bank.
(d) Section 5.2 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 5.2 Capital Expenditures. Make any additional investment in fixed assets in any fiscal year of Borrower year in excess of an aggregate of $2,500,000.
(e) Section 5.3 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 5.3 [Reserved]
(f) Section 5.6 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 5.6 Merger, Consolidation, Transfer of Assets. Merge into or consolidate with any other entity; make any substantial change in the nature of any Obligor’s business as conducted as of the Closing Date; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of any Obligor’s assets except in the ordinary course of its business; provided, however, that Borrower and its Subsidiaries may make one or more acquisitions in similar or related businesses provided that (a) Borrower demonstrates pro forma compliance with all terms and conditions of the Line of Credit after giving effect to any acquisition; (b) total aggregate consideration paid or to be paid in connection with such acquisition, inclusive of all unsecured indebtedness incurred or assumed, together with the aggregate consideration paid in connection with all Permitted Acquisitions occurring during the trailing 24 months from such acquisition consummation for which consent was not required is equal to or less than $25,000,000; (c) the acquired entity or the assets acquired shall be acquired on a non-hostile basis; (d) the acquired entity or assets acquired shall be owned directly by Borrower or by a wholly-owned Subsidiary of Borrower after giving effect to any acquisition; (e) the acquired entity, if it shall become a Subsidiary of Borrower and is not a foreign Subsidiary, shall become a guarantor hereunder (if deemed material); (f) there shall exist no potential default, or Event of Default before or after giving effect to any acquisition; (g) Borrower shall provide historical financial statements on the acquired entity and additional information as requested by Bank regarding any acquisitions and (h) Borrower shall have satisfied such other reasonable conditions as Bank shall require with respect to providing reasonable assurance that such acquisition will not materially impact Borrower’s ability to comply with its obligations hereunder (each such acquisition, a “Permitted Acquisition”).
(g) Section 5.9 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 5.9 Redemptions. Redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now or hereafter outstanding in excess of an aggregate of $2,000,000 from and after the date of this Agreement.
3. Replacement Note. Concurrently with the execution of this Amendment, the Borrower shall execute and deliver to the Bank its promissory note in the form of Exhibit A hereto (the “Replacement Note”). The Bank shall accept the Replacement Note in substitution for, but not in payment of, the Revolving Line of Credit Note. Each reference in the Credit Agreement to the “Revolving Line of Credit Note” shall hereafter be deemed to be a reference to the Replacement Note.
4. Waiver of 2014 Capital Expenditures Covenant Compliance. Section 5.2 of the Credit Agreement (as in effect prior to the amendment effected above) prohibited the Borrower and the other Obligors from making additional investments in fixed assets in any fiscal year in an aggregate amount in excess of $1,000,000. In fact, the investments of the Borrower and the other Obligors during the fiscal year ending December 31, 2015 exceeded $1,000,000. As used herein, “Specified Default” means any Event of Default arising under Section 6.1(c) of the Credit Agreement on account of the Borrowers’ breach of Section 5.2 of the Credit Agreement with respect to the fiscal year ending December 31, 2014, but only so long as the aggregate amount of such investments during such fiscal year did not exceed $2,500,000. Subject to the conditions set forth in Section 5, the Bank hereby waives the Specified Default. The waiver set forth in this Section 4 shall be effective only in accordance with its express terms and for the specific instance given. Without limiting the generality of the foregoing, nothing in this Section shall constitute a waiver of any Default or Event of Default arising from any breach of Section 5.2 with respect to any fiscal year ending after December 31, 2014, or any breach of any other Section of the Credit Agreement.
5. Conditions Precedent; Effective Date. This Amendment shall be effective only if the Bank has received, on or before the date hereof (or such later date as the Bank may agree to in writing), each of the following, each in form and substance acceptable to the Bank:
(a) this Amendment, duly executed by the Borrower;
(b) the Acknowledgment and Agreement of Guarantor set forth at the end of this Amendment, duly executed by Baseline, as a guarantor of the obligations of the Borrower to the Bank;
(c) the Replacement Note, duly executed by the Borrower;
(d) a Security Agreement, granting and/or confirming the Bank’s security interest in all investment property of the Borrower, including the capital stock of its subsidiaries (subject to the limitation set forth in Section 1.5 of the Credit Agreement, as amended above) (the “Investment Property Security Agreement”);
(e) a certificate of the secretary or other appropriate officer of each Obligor (i) certifying that the execution and delivery of this Amendment, the Replacement Note and the Investment Property Security Agreement, and the performance of this Amendment, the Replacement Note and the Investment Property Security Agreement, and the Credit Agreement as amended hereby, or the Acknowledgment and Agreement of Guarantor, as applicable, have been duly approved by all necessary action of the board of directors of such Obligor, and attaching true and correct copies of the applicable resolutions granting such approval, (ii) certifying that there have been no amendments to or restatements of the articles of incorporation and bylaws as furnished to the Bank in connection with the execution and delivery of the Credit Agreement, other than those that may be attached to the certificate, and (iii) certifying the names of the officers of such Obligor that are authorized to sign this Amendment, the Replacement Note and the Intellectual Property Security Agreement or the Acknowledgment and Agreement of Guarantor, as applicable, together with the true signatures of such officers; and
(f) such other items as the Bank shall require.
6. Representations and Warranties. To induce the Bank to enter into this Amendment, the Borrower hereby represents, warrants and acknowledges that as of the date hereof:
(a) each of this Amendment and the Replacement Note 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 and the Replacement Note, and the performance by the Borrower of the Credit Agreement as amended hereby, do not: (i) 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 (ii) result in a breach of, or constitute a default under, any indenture, loan or credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by which the Borrower or its properties may be bound or affected;
(c) no default or Event of Default exists under the Credit Agreement or any other Loan Document; and
(d) the representations and warranties contained in Article II of the Credit Agreement are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties relate solely to an earlier date.
7. Costs and Expenses. Without limiting Section 7.3 of the Credit Agreement, the Borrower agrees to pay on demand all costs and expenses incurred by the Bank in connection with the preparation, execution and delivery of this Amendment and all related documents herein described, including, without limitation, all reasonable fees and disbursements of legal counsel.
8. Miscellaneous.
(a) Except as amended hereby, the provisions of the Credit Agreement shall remain in full force and effect. After the effective date hereof, all references in the Loan Documents to the “Credit Agreement” shall be deemed to refer to the Credit Agreement as amended hereby.
(b) This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each complete set of which, when so executed and delivered by all parties, shall be an original, but all such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or by e-mail transmission of a PDF or similar copy shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart signature page to this Agreement by facsimile or by e-mail transmission shall also deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability or binding effect of this Agreement.
(c) The execution of this Amendment shall not be deemed to be a waiver of any default or Event of Default that may exist under the Credit Agreement or any other Loan Document.
(d) This Amendment shall be governed by the substantive laws (other than conflict laws) of the State of Minnesota.
9. Release of Bank. The Borrower hereby absolutely and unconditionally releases and forever discharges the Bank, 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, counterclaims, 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, counterclaims, demands or causes of action are matured or unmatured.
Signature page follows
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.
| MOCON, INC. | |
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By: /s/ Elissa Lindsoe Name: Elissa Lindsoe Title: Chief Financial Officer, Vice President, Treasurer and Secretary | |
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WELLS FARGO BANK, NATIONAL ASSOCIATION | |
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By: /s/ R. James Hancock Name: R. James Hancock Title: Senior Vice President |
Exhibit 10.2
SECURITY AGREEMENT
(Investment Property)
This Security Agreement (“Agreement”) is to be effective as of August 26, 2015.
1. GRANT OF SECURITY INTEREST. For valuable consideration, MOCON, Inc., a Minnesota corporation (“Debtor”), hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (the “Bank”), a security interest in: all of Debtor’s right, title and interest in and to investment property (the “Collateral”), together with whatever is receivable or received when any of the Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, (i) all rights to payment with respect to any claim or cause of action affecting or relating to any of the foregoing, (ii) all stock rights, rights to subscribe, stock splits, liquidating dividends, cash dividends, dividends paid in stock, new securities or other property of any kind which Debtor is or may hereafter be entitled to receive on account of any securities pledged hereunder, including without limitation, stock received by Debtor due to stock splits or dividends paid in stock or sums paid upon or in respect of any securities pledged hereunder upon the liquidation or dissolution of the issuer thereof, and (iii) all other proceeds (as defined in the Minnesota Uniform Commercial Code (the “UCC”) of any of the foregoing (all such items in clauses (i) through (iii) hereinafter called “Proceeds”). Except as otherwise expressly permitted herein, in the event Debtor receives any such Proceeds, Debtor will hold the same in trust on behalf of and for the benefit of Bank and will immediately deliver all such Proceeds to Bank in the exact form received, with the endorsement of Debtor if necessary and/or appropriate undated stock powers duly executed in blank, to be held by Bank as part of the Collateral, subject to all terms hereof. As used herein, the term “investment property” shall have the meaning set forth in the Minnesota UCC.
2. LIMITATION. Notwithstanding Section 1 or any other provision of this Agreement, the Collateral shall not include (i) the voting stock of any First-Tier Foreign Subsidiary to the extent (but only to the extent) that such voting stock exceeds 65% of the aggregate voting stock of such controlled foreign corporation or (ii) any voting capital stock of any Foreign Subsidiary that is not a First-Tier Foreign Subsidiary.
As used herein:
“Domestic Subsidiary” means any Subsidiary organized under the laws of any political subdivision of the United States.
“First-Tier Foreign Subsidiary” means any Foreign Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code and the capital stock of which is owned directly by the Borrower or any Domestic Subsidiary thereof.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
3. OBLIGATIONS SECURED. The obligations secured hereby are the payment and performance of: (a) all present and future Indebtedness of Debtor (“Debtor”) to Bank and all extensions, renewals or modifications thereof, and restatements or substitutions therefor; (b) all obligations of Debtor and rights of Bank under this Agreement; and (c) all present and future obligations of Debtor to Bank of other kinds. The word “Indebtedness” is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable.
4. CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS. This is a continuing agreement and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of Debtor to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the dissolution, liquidation or bankruptcy of the Debtor or any other event or proceeding affecting the Debtor.
5. OBLIGATIONS OF BANK. Any money received by Bank in respect of the Collateral may be deposited, at Bank’s option, into a non-interest bearing account over which Debtor shall have no control, and the same shall, for all purposes, be deemed Collateral hereunder. Bank shall have no duty to take any steps necessary to preserve the rights of Debtor against prior parties, or to initiate any action to protect against the possibility of a decline in the market value of the Collateral or Proceeds. Bank shall not be obligated to take any actions with respect to the Collateral or Proceeds requested by Debtor unless such request is made in writing and Bank determines, in its sole discretion, that the requested action would not unreasonably jeopardize the value of the Collateral and Proceeds as security for the Indebtedness.
6. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank that: (i) Debtor’s legal name is exactly as set forth on the first page and Debtor’s signature line of this Agreement, and all of Debtor’s organizational documents or agreements delivered to Bank are complete and accurate in every respect and Debtor is registered as an organization in good standing under the laws of the State of Minnesota; (ii) Debtor’s chief executive office is located at 7500 Mendelssohn Avenue North, Minneapolis, Minnesota; (iii) Debtor is the owner of the Collateral and Proceeds; (iv) Debtor has the exclusive right to grant a security interest in the Collateral and Proceeds; (v) all Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created hereby or as otherwise agreed to by Bank, or heretofore disclosed by Debtor to Bank, in writing; (vi) all statements contained herein and, where applicable, in the Collateral, are true and complete in all material respects; (vii) no financing statement or control agreement covering any of the Collateral or Proceeds, and naming any secured party other than Bank, exists or is on file in any public office or remains in effect; (viii) no person or entity, other than Debtor, has any interest in or control over the Collateral; and (ix) specifically with respect to Collateral and Proceeds consisting of investment securities, instruments, chattel paper, documents, contracts, insurance policies or any like property, all persons appearing to be obligated thereon have authority and capacity to contract and are bound as they appear to be, and the same comply with applicable laws concerning form, content and manner of preparation and execution.
7. COVENANTS OF DEBTOR.
(a) Debtor agrees in general: (i) to indemnify Bank against all losses, claims, demands, liabilities and expenses of every kind caused by property subject hereto; (ii) to permit Bank to exercise its powers; (iii) to execute and deliver such documents as Bank deems necessary to create, perfect and continue the security interests contemplated hereby; (iv) not to change Debtor’s name, and as applicable, its chief executive office or the jurisdiction in which it is organized and/or registered without giving Bank prior written notice thereof; (v) not to change the places where Debtor keeps any of the Collateral or Debtor’s records concerning the Collateral and Proceeds without giving Bank prior written notice of the address to which Debtor is moving same ; and (vi) to cooperate with Bank in perfecting all security interests granted herein and in obtaining such agreements from third parties as Bank deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in writing: (i) that Bank is authorized to file financing statements in the name of Debtor to perfect Bank’s security interest in Collateral and Proceeds; (ii) not to permit any security interest in or lien on the Collateral or Proceeds, except in favor of Bank and except liens to the extent expressly permitted by Bank in writing; (iii) not to hypothecate or permit the transfer by operation of law of any of the Collateral or Proceeds or any interest therein nor withdraw any funds from any deposit account pledged to Bank hereunder; (iv) to keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral and Proceeds, and to permit Bank to inspect the same and make copies thereof at any reasonable time; (v) if requested by Bank, to receive and use reasonable diligence to collect Proceeds, in trust and as the property of Bank, and to immediately endorse as appropriate and deliver such Proceeds to Bank daily in the exact form in which they are received together with a collection report in form satisfactory to Bank; (vi) in the event Bank elects to receive payments of Collateral or Proceeds hereunder, to pay all expenses incurred by Bank in connection therewith, including expenses of accounting, correspondence, collection efforts, reporting to account or contract debtors, filing, recording, record keeping and expenses incidental thereto; (vii) to provide any service and do any other acts which may be necessary to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims; and (viii) if the Collateral or Proceeds consists of securities or other equity interests, not to vote said securities or equity interests or give (or withhold) any consent, waiver or ratification or take any other action with respect thereto without the consent of Bank (A) so long as any Event of Default exists, or (B) whether or not any Event of Default exists, if such vote or consent, waiver or ratification (or the withholding thereof) or action taken would impair Bank’s interest in the Collateral and Proceeds or be inconsistent with or violate any provisions of this Agreement.
8. POWERS OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Bank’s officers and employees, or any of them, upon the occurrence and during the continuance of an Event of Default (as defined below): (a) to perform any obligation of Debtor hereunder in Debtor’s name or otherwise; (b) to notify any person obligated on any security, instrument or other document subject to this Agreement of Bank’s rights hereunder; (c) to collect by legal proceedings or otherwise all dividends, interest, principal or other sums now or hereafter payable upon or on account of the Collateral or Proceeds; (d) to enter into any extension, modification, reorganization, deposit, merger or consolidation agreement, or any other agreement relating to or affecting the Collateral or Proceeds, and in connection therewith to deposit or surrender control of the Collateral and Proceeds, to accept other property in exchange for the Collateral and Proceeds, and to do and perform such acts and things as Bank may deem proper, with any money or property received in exchange for the Collateral or Proceeds, at Bank’s option, to be applied to the Indebtedness or held by Bank under this Agreement; (e) to make any compromise or settlement Bank deems desirable or proper in respect of the Collateral and Proceeds; (f) to insure, process and preserve the Collateral and Proceeds; (g) to exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto, including, but without limitation thereto, to make withdrawals from and to close deposit accounts or other accounts with any financial institution, wherever located, into which Proceeds may have been deposited, and to apply funds so withdrawn to payment of the Indebtedness; and (h) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Bank as necessary, proper or convenient in connection with the preservation, perfection or enforcement of its rights hereunder. To effect the purposes of this Agreement or otherwise upon instructions of Debtor, Bank may cause any Collateral and/or Proceeds to be transferred to Bank’s name or the name of Bank’s nominee. If an Event of Default has occurred and is continuing, any or all Collateral and/or Proceeds consisting of securities may be registered, without notice, in the name of Bank or its nominee, and thereafter Bank or its nominee may exercise, without notice, all voting and corporate rights at any meeting of the shareholders of the issuer thereof, any and all rights of conversion, exchange or subscription, or any other rights, privileges or options pertaining to such Collateral and/or Proceeds, all as if it were the absolute owner thereof. The foregoing shall include, without limitation, the right of Bank or its nominee to exchange, at its discretion, any and all Collateral and/or Proceeds upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, or upon the exercise by the issuer thereof or Bank of any right, privilege or option pertaining to any shares of the Collateral and/or Proceeds, and in connection therewith, the right to deposit and deliver any and all of the Collateral and/or Proceeds with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as Bank may determine. All of the foregoing rights, privileges or options may be exercised without liability on the part of Bank or its nominee except to account for property actually received by Bank. Bank shall have no duty to exercise any of the foregoing, or any other rights, privileges or options with respect to the Collateral or Proceeds and shall not be responsible for any failure to do so or delay in so doing.
9. DEBTOR’S WAIVERS.
(a) Debtor waives any right to require Bank to: (i) proceed against Debtor or any other person; (ii) marshal assets or proceed against or exhaust any security held from any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from Debtor or any other person; (iv) take any other action or pursue any other remedy in Bank’s power; (v) make any presentment or demand for performance, or any notices of any kind, including without limitation, any notice of nonpayment or nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed or secured hereunder, or in connection with the creation of new or additional Indebtedness; or (vi) to set off against the Indebtedness the fair value of any real or personal property given as collateral for the Indebtedness.
(b) Debtor further waives all rights and defenses Debtor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Debtor’s rights of subrogation or Debtor’s rights to proceed against any other person for reimbursement, or (B) any loss of rights Debtor may suffer by reason of any rights, powers or remedies of any person in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging any person’s Indebtedness, whether by operation of law, or otherwise, including any rights Debtor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.
10. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations of Debtor to Bank, due and payable immediately upon demand, together with interest at a rate determined in accordance with the provisions of this Agreement, and shall be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement.
11. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) any default in the payment or performance of any obligation, or any defined event of default, under (i) any contract or instrument evidencing any Indebtedness, (ii) any other agreement between Debtor and Bank, including without limitation any loan agreement, relating to or executed in connection with any Indebtedness, or (iii) any control, custodial or other similar agreement in effect relating to the Collateral; (b) any representation or warranty made by Debtor herein shall prove to be incorrect, false or misleading in any material respect when made; (c) Debtor shall fail to observe or perform any obligation or agreement contained herein and with respect to any such failure that by its nature can be cured, such failure shall continue for period of twenty (20) days from its occurrence; and (d) any impairment in the rights of Bank in any Collateral or Proceeds, or any attachment or like levy on any property of Debtor.
12. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have and may exercise without demand any and all rights, powers, privileges and remedies granted to a secured party upon default under the Minnesota Uniform Commercial Code or otherwise provided by law, including without limitation, the right to sell, lease, license or otherwise dispose of any or all Collateral and to give such withdrawal and/or redemption notices as may be required with respect to any of the Collateral. All rights, powers, privileges and remedies of Bank shall be cumulative. No delay, failure or discontinuance of Bank in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. It is agreed that public or private sales or other disposition, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auctions, are all commercially reasonable since differences in the prices generally realized in the different kinds of dispositions are ordinarily offset by the differences in the costs and credit risks of such dispositions. While an Event of Default exists: (a) Debtor will not dispose of any Collateral or Proceeds except on terms approved by Bank; (b) Bank may appropriate the Collateral and apply all Proceeds toward repayment of the Indebtedness in such order as Bank may from time to time elect; (c) Bank may take any action with respect to the Collateral contemplated by any control, custodial or other similar agreement then in effect, and Bank may, at any time and at Bank’s sole option, liquidate any time deposits pledged to Bank hereunder and apply the Proceeds thereof to payment of the Indebtedness, whether or not said time deposits have matured and notwithstanding the fact that such liquidation may give rise to penalties for early withdrawal of funds; and (d) at Bank’s request, Debtor will assemble and deliver all Collateral, and books and records pertaining to the Collateral or Proceeds to Bank at a reasonably convenient place designated by Bank. For any Collateral or Proceeds consisting of securities, Bank shall be under no obligation to delay a sale or other disposition of any portion thereof for the period of time necessary to permit the issuer thereof to register such securities for public sale under any applicable state or federal law, even if the issuer thereof would agree to do so. Debtor further agrees that Bank shall have no obligation to process or prepare any Collateral for sale or other disposition.
13. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of Collateral hereunder, Bank may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral or Proceeds, or any part thereof, may be applied by Bank to the payment of expenses incurred by Bank in connection with the foregoing, including reasonable attorneys’ fees, and the balance of such proceeds may be applied by Bank toward the payment of the Indebtedness in such order of application as Bank may from time to time elect. Upon the transfer of all or any part of the Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds and shall be fully discharged thereafter from all liability and responsibility with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred, Bank shall retain all rights, powers, privileges and remedies herein given.
14. NOTICES. All notices, requests and demands required under this Agreement must be given, and shall be deemed given when provided in accordance with, Section 7.2 of the Credit Agreement.
15. COSTS, EXPENSES AND ATTORNEYS’ FEES. Debtor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including, to the extent permitted by applicable law, reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel to the extent permissible), incurred by Bank in connection with (a) the perfection and preservation of the Collateral or Bank’s interest therein, and (b) the realization, enforcement and exercise of any right, power, privilege or remedy conferred by this Agreement, whether or not suit is brought or foreclosure is commenced, and if suit is brought whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Debtor or in any way affecting any of the Collateral or Bank’s ability to exercise any of its rights or remedies with respect thereto. All of the foregoing arising from: (a) Indebtedness under that certain Credit Agreement by and between Debtor and Bank of even date herewith (as amended, the “Credit Agreement”) shall be paid by Debtor with interest from the date of demand until paid in full at a rate per annum equal to the rate of interest applicable to Indebtedness under the Credit Agreement; and (b) Indebtedness not otherwise arising under the Credit Agreement but secured hereby, shall be paid by Debtor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank’s prime rate in effect from time to time, but not in excess of the maximum rate permitted under applicable Minnesota law.
16. SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Debtor may not assign or transfer any of its interests or rights hereunder without Bank’s prior written consent. Debtor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Debtor to Bank and any obligations with respect thereto, including this Agreement. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Debtor and/or this Agreement, whether furnished by Debtor or otherwise.
17. AMENDMENT. This Agreement may be amended or modified only in writing signed by Bank and Debtor.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.
Signature page follows.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.
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MOCON, INC. |
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By /s/ Elissa Lindsoe |
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Name: Elissa Lindsoe |
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Title: Chief Financial Officer, Vice President, Treasurer and Secretary |
Signature page to Security Agreement (Investment Property)