EXHIBIT
10.1


 


FIFTH
AMENDMENT TO AMENDED AND RESTATED

CREDIT AGREEMENT


 


This FIFTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT (this “Amendment”), made and entered into as of
August 13, 2004, is by and between MagStar Technologies, Inc. f/k/a Reuter
Manufacturing, Inc., a Minnesota corporation (the “Borrower”), and U.S. Bank
National Association, a national banking association (the “Lender”).


 


RECITALS


 


1.                                       The Lender and the Borrower entered into
a Amended and Restated Credit Agreement dated as of October 10, 2000, as
amended by that First Amendment to Amended and Restated Credit Agreement dated
as of November 30, 2001, as amended by that Second Amendment to Amended
and Restated Credit Agreement dated as of August 7, 2003, as amended by
that Third Amendment to Amended and Restated Credit Agreement dated as of
September 30, 2003 and as further amended by that Fourth Amendment to
Amended and Restated Credit Agreement dated as of January 6, 2004 (as
amended the “Credit Agreement”); and


 


2.                                       The Borrower desires to amend certain
provisions of the Credit Agreement, and the Lender has agreed to make such
amendments, subject to the terms and conditions set forth in this Amendment.


 


AGREEMENT


 


NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby covenant and agree
to be bound as follows:


 


Section 1.
Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement, unless the
context shall otherwise require.


 


Section 2.
Amendments. 
The Credit Agreement is hereby amended as follows:


 


2.1                               Definitions.  The definition of “Reference Rate in
Section 1.1 of the Credit Agreement is deleted in its entirety.


 


Section 1.1 of the Credit Agreement is
further amended to add the definitions of “EBITDA”, “Interest Expense”, “Prime
Rate” and “Slow Moving Inventory” in correct alphabetical order as follows:


 


“EBITDA”:  For any period of determination, without duplication, the net
income of the Borrower plus cash Interest Expense, income taxes, depreciation,
amortization, capital contributions, non-cash Interest Expense, deferred
equipment lease expense and deferred rent expense, minus gain on sale leaseback
of equipment, minus gain on sale 


 

















 


leaseback of building, all as determined in accordance with GAAP


 


“Interest Expense”:  For any period of determination, the
aggregate amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any indebtedness of the Borrower, including (a) all
but the principal component of payments in respect of conditional sale
contracts, capitalized leases and other title retention agreements, (b)
commissions, discounts and other fees and charges with respect to letters of
credit and bankers’ acceptance financings and (c) net costs under interest rate
protection agreements, in each case determined in accordance with GAAP.


 


“Prime Rate” The rate of interest from
time to time publicly announced by the Lender as its “prime rate.”  The Lender may lend to its customers at
rates that are at, above or below the Prime Rate.  For purposes of determining any interest rate hereunder or under any
Note which is based on the Prime Rate, such interest rate shall change as and
when the Prime Rate shall change.


 


“Slow Moving Inventory” any obsolete
Inventory, Inventory on the Borrower’s records or held by the Borrower for more
than one year, and any other Inventory deemed slow moving by the Lender,
excluding up to $5,000 for raw materials such as bar stock, metal rods,
extrusions, plates, sheeting, or billets which is mutually agreed by Borrower
and Lender.


 


2.2                               The
Commitments.  Section 2.1
of the Credit Agreement is amended to read in its entirety as follows:


 


Section 2.1  The
Commitments.  On the terms and
subject to the conditions hereof, the Lender agrees to make the following
lending facility available to the Borrower:


 


2.1 (a)  Revolving Credit.  A revolving loan (the “Revolving Loan”) to
the Borrower available as advances (“Advances”) at any time and from time to
time from the Closing Date to June 30, 2005 (the “Revolving Maturity
Date”), during which period the Borrower may borrow, repay and reborrow in
accordance with the provisions hereof, provided, that the unpaid principal
amount of  revolving Advances shall not
at any time exceed One Million Two Hundred Thousand Dollars ($1,200,000) (the
“Revolving Commitment Amount”); and provided, further, that no
revolving Advance will be made if, after giving effect thereto, the unpaid
principal amount of the Advances would exceed the Borrowing Base.


 


2.3                               Interest Rates,
Interest Payments and Default Interest.  Section 2.4 of the Credit Agreement is
amended to read in its entirety as follows:


 


Section 2.4
Interest Rates, Interest Payments and Default Interest.  Interest shall accrue and be payable on the
unpaid balance of the Advances at a floating rate per annum equal to the sum of
the Prime Rate plus 2.5% (the latter being the “Applicable Revolving Margin”);
provided, however, that upon the happening of any Event of Default, then, at
the option of the Lender, the Advances shall thereafter bear interest at a
floating rate equal to the sum of (a) the Prime Rate, plus (b) the
Applicable Revolving Margin, plus (c) 4%. 
Interest shall be payable monthly in arrears on the first day of each
month and upon final payment of the Advances.


 


2

















 


2.4                               Borrowing Base and
Mandatory Payment. 
Section 2.5 of the Credit Agreement is amended to read in its
entirety as follows:


 


Section 2.5
Borrowing Base and Mandatory Prepayment.  The Borrowing Base shall be equal to the sum of (1) the
lesser of (x) 40% of the lower of cost or market value of raw material
Eligible Inventory; provided,  however that Slow Moving Inventory
shall not comprise more than $100,000 of Eligible Inventory on August 30,
2004 (the “Slow Moving Inventory Tolerance Level”), the Slow Moving Inventory
Tolerance Level shall be reduced by $5,000 on the last day of each month
commencing on September 30, 2004 and continuing on the last day of each
month until the Slow Moving Inventory Tolerance Level reaches $50,000 and all
amounts of Slow Moving Inventory that exceed the Slow Moving Inventory
Tolerance Level shall be excluded from the Borrowing Base; plus 30% of the
lower of cost (determined on a first in, first out basis) or market value of
finished good Eligible inventory or (y) $500,000, plus (2) 80%
of the face value of Eligible Accounts. 
The Borrower shall deliver borrowing base certificates in substantially
the form attached hereto (a “Borrowing Base Certificate”) to the Lender
contemporaneously with each Advance request and in any event not less than
weekly.  Each such certificate shall
state the amount of Eligible Accounts and the Borrowing Base as of the end of
the previous day and shall state the amount of Eligible Inventory and Slow
Moving Inventory as of the end of the most recent of the 15th day of
that month or as of the last day of the previous month.  Any limitations on advances or required
prepayments relating to the Borrowing Base shall be based on the latest
borrowing base certificate the Borrower shall have delivered to the
Lender.  If the principal balance of the
Advances at any time exceeds the Borrowing Base, the Borrower shall immediately
prepay the Advances by the amount of that excess.


 


2.5                               Minimum EBITDA.  Section 6.10 of the Credit Agreement is
amended to read in its entirety as follows:


 


Section 6.10
Minimum EBITDA.  The Borrower
shall not permit its cumulative year-to-date EBITDA after July 1, 2004 to
be less than (i) $40,000 as of September 30, 2004, (ii) $100,000 as of
December 31, 2004, (iii) $160,000 as of March 31, 2005 and (iv)
$220,000 as of June 30, 2005, provided, however, that in the
event the Borrower’s EBITDA is less than the amounts set forth in this
Section 6.10, the Borrower shall have thirty days after the end of the
applicable fiscal quarter to obtain capital injections to raise its EBITDA to
the levels set forth in this Section 6.10.


 


2.6                               Borrowing Base
Certificate. 
The Borrowing Base Certificate attached to the Credit Agreement is
hereby amended to read as set forth on Exhibit B attached to this Amendment.


 


2.7                               Compliance
Certificate. 
The Compliance Certificate attached to the Credit Agreement as Exhibit
5.1(c) is hereby amended to read as set forth on Exhibit 5.1(c) attached to
this Amendment.


 


3

















 


Section 3.
Effectiveness of Amendments.  The amendments contained in this Amendment
shall become effective upon delivery by the Borrower of, and compliance by the
Borrower with, the following:


 


3.1                               This
Amendment duly executed by the Borrower.


 


An Amended and
Restated Note in the form of Exhibit A hereto.


 


Subordination
Agreements from Richard McNamara, Activar, Inc. and Activar Properties, Inc. in
form and substance satisfactory to the Lender.


 


A copy of the
resolutions of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Amendment certified as true and
accurate by its Secretary or Assistant Secretary, along with a certification by
such Secretary or Assistant Secretary (i) certifying that there has been
no amendment to the Articles of Incorporation or Bylaws of the Borrower since
true and accurate copies of the same were delivered to the Lender with a
certificate of the Secretary of the Borrower dated October 10, 2000, and
(ii) identifying each officer of the Borrower authorized to execute this
Amendment and any other instrument or agreement executed by the Borrower in
connection with this Amendment 
(collectively, the “Amendment Documents”), and certifying as to
specimens of such officer’s signature and such 
officer’s incumbency in such offices as such officer holds.


 


The Borrower
shall have satisfied such other conditions as specified by the Lender,
including payment of all unpaid legal fees and expenses incurred by the Lender
through the date of this Amendment in connection with the Credit Agreement and
the Amendment Documents.


 


Section 4.  Representations, Warranties, Authority, No
Adverse Claim. 



 


4.1                                 Reassertion
of Representations and Warranties, No Default.  The Borrower hereby represents that on and as of the date hereof
and after giving effect to this Amendment (a) all of the representations
and warranties contained in the Credit Agreement are true, correct and complete
in all respects as of the date hereof as though made on and as of such date,
except for changes permitted by the terms of the Credit Agreement, and (b)
there will exist no Default or Event of Default under the Credit Agreement as
amended by this Amendment on such date which has not been waived by the Lender.


 


4.2                                 Authority,
No Conflict, No Consent Required. The Borrower represents and warrants that
the Borrower has the power and legal right and authority to enter into the
Amendment Documents and has duly authorized as appropriate the execution and
delivery of the Amendment Documents and other agreements and documents executed
and delivered by the Borrower in connection herewith or therewith by proper
corporate action, and none of the Amendment Documents nor the agreements
contained herein or therein contravenes or constitutes a default under any
agreement, instrument or indenture to which the Borrower is a party or a
signatory or a provision of the Borrower’s Articles of Incorporation, Bylaws or
any other agreement or requirement of law, or result in the imposition of any
Lien on any of its property under any agreement binding on or applicable to the
Borrower or any of its property except, if any, in favor of the Lender.  The Borrower represents and warrants that no
consent, approval or authorization of or registration or declaration with any
Person, including but not limited to any governmental authority, is required in
connection with the execution and delivery by the Borrower of the Amendment
Documents or other agreements and documents executed and delivered by the
Borrower in connection therewith or the performance of obligations of the
Borrower therein described, except for those which the Borrower has obtained or
provided and as to which the Borrower has delivered certified copies of
documents evidencing each such action to the Lender.


 


4.3                                 No
Adverse Claim. The Borrower warrants, acknowledges and agrees that no
events have been taken place and no circumstances exist at the date hereof
which would give the Borrower a basis to assert a defense, offset or
counterclaim to any claim of the Lender with respect to the Obligations.


 


4

















 


Section 5. Affirmation of Credit
Agreement, Further References, Affirmation of Security Interest.  The Lender and the Borrower each acknowledge
and affirm that the Credit Agreement, as hereby amended, is hereby ratified and
confirmed in all respects and all terms, conditions and provisions of the
Credit Agreement, except as amended by this Amendment, shall remain unmodified
and in full force and effect.  All
references in any document or instrument to the Credit Agreement are hereby
amended and shall refer to the Credit Agreement as amended by this
Amendment.   The Borrower confirms to
the Lender that the Obligations are and continue to be secured by the security
interest granted by the Borrower in favor of the Lender under the Security
Agreement, and all of the terms, conditions, provisions, agreements,
requirements, promises, obligations, duties, covenants and representations of
the Borrower under such documents and any and all other documents and
agreements entered into with respect to the obligations under the Credit Agreement
are incorporated herein by reference and are hereby ratified and affirmed in
all respects by the Borrower.


 


Section 6. Merger and Integration,
Superseding Effect.  This Amendment, from and after the date hereof, embodies the
entire agreement and understanding between the parties hereto and supersedes
and has merged into this Amendment all prior oral and written agreements on the
same subjects by and between the parties hereto with the effect that this
Amendment, shall control with respect to the specific subjects hereof and
thereof.


 


Section 7. Severability.  Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness,
validity or enforceability of such provision in any other jurisdiction.


 


Section 8. Successors.  The Amendment Documents shall be binding
upon the Borrower and the Lender and their respective successors and assigns,
and shall inure to the benefit of the Borrower and the Lender and the
successors and assigns of the Lender.


 


Section 9. Legal Expenses.  As provided in Section 8.2 of the
Credit Agreement, the Borrower agrees to reimburse the Lender, upon execution
of this Amendment, for all reasonable out-of-pocket expenses (including
attorney’ fees and legal expenses of Dorsey & Whitney LLP, counsel for the
Lender) incurred in connection with the Credit Agreement, including in connection
with the negotiation, preparation and execution of the Amendment Documents and
all other documents negotiated, prepared and executed in connection with the
Amendment Documents, and in enforcing the obligations of the Borrower under the
Amendment Documents, and to pay and save the Lender harmless from all liability
for, any stamp or other taxes which may be payable with respect to the
execution or delivery of the Amendment Documents, which obligations of the
Borrower shall survive any termination of the Credit Agreement.


 


Section 10. Headings.  The headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be a
part of this Amendment.


 


Section 11. Counterparts.  The Amendment Documents may be executed in several
counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts
shall be regarded as one and the same document, and either party to the
Amendment Documents may execute any such agreement by executing a counterpart
of such agreement.


 


Section 12. Governing Law.  THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT
OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES.


 


 


[Remainder of Page Intentionally Left Blank]


 


5

















 


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first above written.


 


	
  BORROWER:

  	
   

  
	
   

  	
  MAGSTAR
  TECHNOLOGIES, INC. F/K/A

  REUTER MANUFACTURING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James L.
  Reissner

  	
   

  
	
   

  	
  Title:

  	
  President, Chief
  Executive Officer And Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDER:

  	
   

  
	
   

  	
  U.S. BANK
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  Phillipi

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
					



 


6

















 


EXHIBIT
A


 


AMENDED AND RESTATED NOTE


 


	
  $1,200,000

  	
   

  	
  August 13, 2004

  
	
   

  	
   

  	
  Minneapolis, Minnesota

  



 


FOR VALUE RECEIVED, MAGSTAR
TECHNOLOGIES, INC. F/K/A REUTER MANUFACTURING, INC., a  corporation organized under the laws of the
State of Minnesota (the “Borrower”), hereby promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Lender”) at its main office in Minneapolis,
Minnesota, in lawful money of the United States of America in immediately
available funds the principal amount of ONE MILLION TWO HUNDRED THOUSAND
DOLLARS AND NO CENTS ($1,200,000), and to pay interest (computed on the basis
of actual days elapsed and a year of 360 days) in like funds on the unpaid
principal amount hereof from time to time outstanding.


 


The principal hereof and
interest hereon is payable on the Advances (as such term and each other
capitalized term used herein are defined in the Credit Agreement hereinafter
referred to) at the rates and times set forth in the Credit Agreement.  The Advances are payable in full on the
Revolving Maturity Date.


 


This note is the Amended
and Restated Note referred to in the Amended and Restated Credit Agreement
dated as of October 10, 2000 (as the same may be hereafter from time to
time amended, restated or modified, the “Credit Agreement”) between the
Borrower and the Lender.  This note is
secured, it is subject to certain permissive and mandatory prepayments and its
maturity is subject to acceleration, in each case upon the terms provided in
said Credit Agreement.  This note is
issued in substitution and replacement but not in payment of indebtedness owed
to the Lender by the Borrower under that Promissory Note dated as of
August 7, 2003 in the original principal amount of $1,750,000 from the
Borrower to the Lender.


 


In the event of default
hereunder, the undersigned agrees to pay all costs and expenses of collection,
including reasonable attorneys’ fees. 
The undersigned waives demand, presentment, notice of nonpayment,
protest, notice of protest and notice of dishonor.


 


THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS.


 


	
   

  	
  MAGSTAR
  TECHNOLOGIES, INC. F/K/A

  REUTER MANUFACTURING, INC.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  EXHIBIT

  	
   

  
	
   

  	
  Title

  	
  EXHIBIT

  	
   

  
					



 


B-1

















 


EXHIBIT B


 


BORROWING BASE CERTIFICATE

Magstar Technologies Inc.


 


Borrowing Base
Certificate for the period ended
                             
, 20     


 


This Borrowing Base
Certificate is delivered in accordance with the Credit Agreement dated as of
October 10, 2000 between U.S. Bank National Association (the “Lender”) and
Magstar Technologies Inc. (“the Borrower”). 
Capitalized terms used herein which are defined in the Credit Agreement
shall have the meanings set forth for such terms therein.  All amounts are as of the date shown above
except as otherwise stated herein.


 


I certify that the
following amounts were correctly determined according to the Credit Agreement:


 


	
  Total
  Receivables

  	
   

  	
   

  	
   

  	
  $

  	
  (A)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Receivables 90+ days

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other Ineligible

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Ineligible

  	
   

  	
   

  	
   

  	
  $

  	
  (B)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligible
  Receivables (A) - (B)

  	
   

  	
   

  	
   

  	
  $

  	
  (C)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligible
  Receivables Borrowing Base (80% of (C))

  	
   

  	
   

  	
   

  	
  $

  	
  (D)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Raw
  Material Inventory

  	
   

  	
   

  	
   

  	
  $

  	
  (E)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ineligible Raw
  Material Inventory

  	
   

  	
   

  	
   

  	
  $

  	
  (F)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligible Raw
  Material Inventory (E) - (F)

  	
   

  	
   

  	
   

  	
  $

  	
  (G)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Raw Material
  Inventory Subtotal Borrowing Base 40% of (G)

  	
   

  	
   

  	
   

  	
  $

  	
  (H)

  



 


B-1

















 


	
  Slow Moving
  Inventory

  	
   

  	
   

  	
   

  	
  $

  	
  (I)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Slow Moving
  Inventory Tolerance Level

  	
   

  	
   

  	
   

  	
  $

  	
  (J)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deduction for
  Slow Moving Inventory (I) - (J)

  	
   

  	
   

  	
   

  	
  $

  	
  (K)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Raw Material
  Inventory Borrowing Base (H)-(K)

  	
   

  	
   

  	
   

  	
  $

  	
  (L)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Finished
  Goods Inventory

  	
   

  	
   

  	
   

  	
  $

  	
  (M)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ineligible
  Finished Goods Inventory

  	
   

  	
   

  	
   

  	
  $

  	
  (N)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligible
  Finished Goods Inventory (M) - (N)

  	
   

  	
   

  	
   

  	
  $

  	
  (O)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Finished Goods
  Inventory Borrowing Base 30% of (O)

  	
   

  	
   

  	
   

  	
  $

  	
  (P)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Borrowing
  Base (D) + (L) + (P)

  	
   

  	
   

  	
   

  	
  $

  	
  (Q)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding
  Advances

  	
   

  	
   

  	
   

  	
  $

  	
  (R)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Availability (Q)
  - (R)

  	
   

  	
   

  	
   

  	
  $

  	
  (S)

  



 


I hereby certify that all payroll and
unemployment taxes are current as of this date.


 


B-2

















 


For the purpose of
inducing the Lender to extend credit to the Borrower pursuant to the Credit
Agreement, the Borrower hereby certifies that the foregoing information is true
and correct in all respects.  The
Borrower further certifies that all amounts outstanding under the Note were
properly authorized for the benefit of the Borrower and constitute obligations
of the Borrower in accordance with the terms of the Credit Agreement.  The Borrower further certifies that no
circumstances or conditions exist at the date of the Borrowing Base Certificate
which constitute an Event of Default.


 


	
   

  	
  MAGSTAR
  TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
					



 


EXHIBIT 5.1(c) TO


CREDIT
AGREEMENT


 


[FORM OF COMPLIANCE CERTIFICATE]


 


To:          U.S. Bank National Association


 


THE UNDERSIGNED
HEREBY CERTIFIES THAT:


 


(1)  I am the duly elected chief financial
officer of REUTER MANUFACTURING, INC. (the “Borrower”);


 


(2)  I have reviewed the terms of the Amended and
Restated Credit Agreement dated as of October 10, 2000, as amended between
MAGSTAR TECHNOLOGIES, INC. F/K/A REUTER MANUFACTURING, INC., a corporation
organized under the laws of the State of Minnesota, (the “Borrower”), and U.S.
BANK NATIONAL ASSOCIATION  (the
“Lender”) (the “Credit Agreement”) and I have made, or have caused to be made
under my supervision, a detailed review of the transaction and conditions of
the Borrower during the accounting period covered by the Attachment hereto; and


 


(3)  The examination described in paragraph (2)
did not disclose, and I have no knowledge, whether arising out of such
examinations or otherwise, of the existence of any condition or event which
constitutes a Default or an Event of Default (as such terms are defined in the
Credit Agreement) during or at the end of the accounting period covered by
Attachment hereto or as of the date of this Certificate, except as described
below (or on a separate attachment to this Certificate).  The following exceptions set forth, in
detail, the nature of the condition or event, the period during which has
existed and the action which the Borrower has taken, is taking or proposes to
take with respect to each such condition or event.


 


B-3

















 


The foregoing
certification, together with the computations in the Attachment hereto and the
financial statements delivered with this Certificate in support hereof, are made
and delivered this           
day of
                   ,
          , pursuant to
Section 5.1 (c) of the Credit Agreement.


 


	
   

  	
  MAGSTAR TECHNOLOGIES, INC. F/K/A

  
	
   

  	
  REUTER MANUFACTURING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
						



 


2

















 


ATTACHMENT TO COMPLIANCE CERTIFICATE


AS OF
           ,


WHICH PERTAINS TO THE PERIOD


FROM       ,
            TO
          ,


FOR THE FISCAL YEAR ENDING
          ,


 


	
   

  	
   

  	
   

  	
  In Compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum EBITDA (Minimum of $40,000 at September 30, 2004; (ii)
  $100,000 at December 31, 2004, (iii) $160,000 at March 31, 2005 and
  (iv) $220,000 at June 30, 2005) (Section 6.10)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Actual$

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  



 


3