Document:

Winland Electronics, Inc.

 

EXHIBIT 10.1

	 	 	 
	Wells Fargo Bank Minnesota,

National Association	 	
Seventh Amendment

THIS SEVENTH AMENDMENT (the “Seventh Amendment”) dated to be effective as of
September 15, 2002 is between WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
(the “Bank”) successor by consolidation to Norwest Bank Minnesota South,
National Association and WINLAND ELECTRONICS, INCORPORATED (the “Borrower”).

BACKGROUND

The Borrower and the Bank entered into a Term Loan and Credit Agreement dated
as of July 31, 1998, which agreement was amended by First Amendment dated
October 23,1998, a Second Amendment dated as of September 29, 1999, a Third
Amendment dated as of September 26, 2000, a Fourth Amendment dated as of
November 27, 2000, a Fifth Amendment Dated as of December 28, 2001 and a Sixth
Amendment dated March 19, 2002 (as amended, the “Agreement”), pursuant to which
the Bank extended to the Borrower 1) a $3,500,000.00 revolving line of credit
(the “Line”), and 2) a $530,052.84 term loan (the “Term Loan”). Borrowings
under the Line are currently evidenced by a revolving note dated the date of
the Third Amendment (the “2000 Revolving Note”). The Borrower’s obligations to
the Bank under the Term Loan are evidenced by a Term Note dated September 29,
1999 (the “Term Note”). All other notes executed by Borrower in favor of the
Bank have terminated and are no longer in effect.

The Line Availability Period expired on September 15, 2002 and the Borrower has
requested an extension of the Line Availability Period. The Bank is willing to
grant this request subject to the terms and conditions of this Seventh
Amendment. Capitalized terms not otherwise defined in this Seventh Amendment
shall have the meaning given them in the Agreement.

In consideration of the above premises, the Bank and the Borrower agree that
the Agreement is hereby amended as of the date of this Seventh Amendment as
follows:

	1.	 	Section 1.2 of the Agreement is hereby deleted in its entirety and restated
as follows:
	 
	 	 	“1.2 Line Availability Period. The ‘Line Availability Period’ will mean
the period of time from the Effective Date or the date on which all
conditions precedent described in this Agreement have been met whichever
is later, to the Line Expiration Date of March 31, 2003.”
	 
	2.	 	Section 8.2 of the Agreement is hereby amended to add the following
paragraph:
	 
	 	 	“(e) Minimum Profit. Maintain a minimum profit before taxes of not less
than $1.00 for each quarter ended September 30, 2002 and December 31,
2002.”

 

 

3.          Section 8.3(h) shall be amended to provide that the Bank will conduct a
collateral audit on a semi-annual basis, and at such other times if requested
by Bank. Borrower shall immediately pay to Bank, upon request, the cost of
such collateral audits.

4.          The 2000 Revolving Note is hereby modified such that the maximum principal
amount available under the 2000 Revolving Note shall be reduced from
$3,500,000.00 to $2,500,000.00 effective the date hereof. Borrower shall
execute a Note Modification Agreement in form acceptable to the Bank evidencing
this modification.

5.          Exhibit A-1 and A-2 to the Agreement are hereby replaced with the Exhibits
A-1 and A-2 to this Amendment. Section 8.1(c) is hereby amended to provide
that the new Exhibit A-1 and A-2 to this Amendment shall be provided within ten
(10) days of September, 2002 month end and within ten (10) days of each month
end, current through the end of that period and certified as correct by an
officer of the Borrower acceptable to the Bank.

6.          Simultaneously with the execution of this Seventh Amendment the Borrower
shall pay to the Bank the fees and expenses of legal counsel for the Bank,
incurred in connection with the preparation of this Seventh Amendment in the
amount of sum of $115.00.

	7.	 	The Borrower hereby represents and warrants to the Bank as follows:
	 
	 	 	     A. The Agreement as amended by this Sixth Amendment remains in full
force and effect.
	 
	 	 	     B. The Borrower has no knowledge of any default under the terms of
the Agreement or any note evidencing any of the obligations of the
Borrower that are documented in the Agreement, or of any event that with
notice or the lapse of time or both would constitute a default under the
Agreement or any such notes.
	 
	 	 	     C. The execution, delivery and performance of this Sixth Amendment
and all related documentation described in this Sixth Amendment are
within its corporate powers, have been duly authorized and are not in
contravention of law or the terms of the Borrowers articles of
incorporation or by-laws, or of any undertaking to which the Borrower is
a party or by which it is bound.
	 
	 	 	     D. The resolutions set forth in the Corporate Certificate of
Authority dated March 18, 2002 and delivered by the Borrower to the Bank
have not been amended or rescinded, and remain in full force and effect.

-2-

 

IN WITNESS WHEREOF, the Bank and Borrower have executed this Sixth Amendment as
of the date and year first above written.

	 	 	 
	WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION	 	
WINLAND ELECTRONICS,

INCORPORATED
	 
	By:  /s/ Illegible

Its: Vice President	 	
By:   /s/ Lorin E. Krueger

Its:  CEO

-3-

 

EXHIBIT A-1

BORROWING BASE DEFINITION

“Borrowing Base” means the sum of 75% of Eligible Accounts Receivable (as
defined below) plus 40% of Eligible Inventory (as defined below), plus 0% of
work-in-process.

Eligible Accounts Receivable means all accounts receivable except those which
are:

	 	1) Greater Than 60 days past the invoice date.

2) Due from an account debtor, 10% or more of whose accounts owed to the
Borrower are more than 60 days past the invoice date.

3) Subject to offset or dispute.

4) Due from an account debtor who is subject to any bankruptcy
proceeding.

5) Owed by a shareholder, subsidiary, affiliate, officer or employee of
the Borrower.

6) Not subject to a perfected first lien security interest in favor of
the Bank.

7) Due from an account debtor located outside the United States and not
 supported by a standby letter of credit acceptable to the Bank.

8) Due from a unit of government, whether foreign or domestic.

9) Accounts receivable of Select Comfort in excess of $800,000.00.

10) Otherwise deemed ineligible by the Bank in its reasonable discretion.

Eligible Inventory means all inventory of the Borrower, at the lower of cost or
market as determined by generally accepted accounting principals, except
inventory which is:

	 	1) Work-in-process.

2) In transit; or located at any warehouse not approved by the Bank.

3) Covered by a warehouse receipt, bill of lading or other document of
title.

4) On consignment to or from any other person or subject to any
bailment.

5) Damaged, obsolete or not salable in the Borrower’s ordinary course of
business.

6) Subject to a perfected first lien security interest in favor of any
third party.

7) Supplies or parts inventory.

8) Otherwise deemed ineligible by the Bank in its reasonable discretion.

 

 

EXHIBIT A-2

WINLAND ELECTRONICS, INCORPORATED

BORROWING BASE CERTIFICATE

	 	 	 
	TO:	 	
Wells Fargo Bank Minnesota,
	 	 	
National Association
	 	 	
Second and Hickory Street
	 	 	
Mankato, Minnesota 56002-0168
	 	 	
(the “Bank”)

Winland Electronics, Incorporated (the “Borrower”) certifies that the following
computation of the Borrowing Base was performed as of the date set forth below
in accordance with the Borrowing Base definitions set forth in Exhibit A-1 to
the Credit Agreement between the Bank and the Borrower dated January 31, 1996,
as amended.

	 	 	 	 	 	 	 	 	 	 	 
	Total Accounts Receivable
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	 	Less:
	1) Greater than 60 days in age
		$	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	 	 	2) Select Comfort accounts
receivable in excess of
$800,000.00
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	 	 	2) Other ineligibles
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	Eligible Accounts Receivable
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	75% of Eligible Accounts Receivable
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 
	Total Inventory
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	 	Less: Ineligible inventory
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	Eligible Inventory
	 	$	 	 	 	 	 	 
	 
	 	
	 	 	 	 	 
	 	40% of Eligible Inventory (not to
exceed $1,000,000.00)
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 
	 	0% of Work-in-Process
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 
	 	Total Borrowing Base
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 
	 	Total Outstandings
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 
	 	Excess (Deficit)
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	
	 

	 	 	 	 	 
	
WINLAND ELECTRONICS, INCORPORATED	 	 
	 
	By:	 	 	 	 
	 	 	

	 	 
	 
	Its:	 	 	 	 
	 	 	

	 	
	 
	Date:Winland Electronics, Inc.

 

EXHIBIT 10.2

NOTE MODIFICATION AGREEMENT

     This Note Modification Agreement (“Agreement”) is made as of the 15th day
of September 2002 between Wells Fargo Bank Minnesota, National Association
(“Bank”) and Winland Electronics, Incorporated (“Borrower”).

RECITALS

     The Bank is the holder of a promissory note of Borrower dated September
26, 2000 in the maximum principal amount of $3,500,000.00 (“Note”). The Bank
and the Borrower have agreed to certain modifications to the Note, more fully
described below.

     Accordingly, in consideration of the premises and other good and valuable
consideration, each paid to the other, the parties to the Agreement agree that
the Note is modified as such that the maximum principal amount available under
the Note shall be reduced from $3,500,000.00 to $2,500,000.00 effective the
date hereof.

     Except as expressly modified above, the Note remains unchanged and in full
force and effect.

	 	 	 
	 	
WINLAND ELECTRONICS INCORPORATED
	 
	 	By:	
/s/ Lorin E. Krueger

CEO
	 
	 	
WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION

	 
	 	By:	
/s/ illegible

Vice President

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