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.

 

 
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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.

 

 
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(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.

 

 
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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.

 

 
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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.

 

 
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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.

 

 
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

 

MOCON, INC.

 

 

 

 

 

By /s/ Elissa Lindsoe

 

Name: Elissa Lindsoe

 

Title:   Chief Financial Officer, Vice President, Treasurer and Secretary

 

 

 

Signature page to Security Agreement (Investment Property)