Document:

EXHIBIT 10.61

 

	
  Wells Fargo Equipment Finance, Inc.

  733 Marquette Avenue, Suite 700

  MAC N9306-070

  Minneapolis, MN  55402

  	
   

  	
  Security
  Agreement

  
	
   

  	
   

  	
   

  
	
  Dated as of December 10, 2002

  Contract Number 56101-700

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name and Address of Debtor:

  	
   

  	
   

  
	
  Medtox Scientific, Inc.

  402 West County Road D

  St. Paul, MN 55112

  	
  Medtox Laboratories, Inc.

  402 West County Road D

  St. Paul, MN 55112

  	
  Medtox Diagnostics, Inc.

  1238 Anthony Road

  Burlington, NC 27215

  

 

1. Security Interest
and Collateral.  To secure the payment and performance of
each and every debt, liability and obligation of every type and description
which Debtor may now or at any time hereafter owe to Wells Fargo Equipment
Finance, Inc. (“Secured Party”) (whether such debt, liability or obligation now
exists or is hereafter created or incurred, whether it is currently
contemplated by the Debtor and Secured Party, whether any documents evidencing
it refer to the Security Agreement, and whether it is or may be direct or
indirect, due or to become due, absolute or contingent primary or secondary,
liquidated or unliquidated, or joint, several or joint and several;  all such debts, liabilities and obligations
being herein collectively referred to as the “Obligations”), Debtor hereby grants
Secured Party a security interest (herein call the “Security Interest”) in the
following property (herein called the “Collateral”):

 

The Equipment described on Schedule A attached hereto and made a part
hereof:

together
with all substitutions and replacements for and products of the Collateral, all
proceeds, accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or used in connection with the Collateral.

 

2.  Representations, Warranties and Agreements.
Debtor represents warrants and agrees that:

 

(a)  Authorization. If Debtor is a corporation,
a partnership or a limited liability company, the execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
on the part of the Debtor and will not violate any provision of the Debtor’s
articles of incorporation or bylaws, partnership agreement or articles of
organization or management agreement, as the case may be.

 

(b)  Office Location. Debtor’s chief executive
office (if Debtor is a corporation, a partnership or a limited liability
company) is located at the address for Debtor shown above: Debtor will not
change the location of its chief executive office or

 

 

his/her
residence, as the case may be, without first giving Secured Party at least 10
days prior written notice of the new location.

 

(c)  Business Purpose; Lawful Use. The Equipment
will be used primarily for business purposes as opposed to personal, family or
household purposes. Debtor will comply with all laws and regulations applicable
to the Equipment and its use.

 

3. Additional
Representations, Warranties and Agreements. Debtor represents warrants and agrees that:

 

(a) Debtor has (or will have at the time Debtor
acquires rights in Collateral hereafter arising) absolute title to each item of
Collateral free and clear of all security interests, liens and encumbrances,
except the Security Interest and will defend the Collateral against all claims
or demands of all persons other than Secured Party.  Debtor will not sell or otherwise dispose of the Collateral or
any interest therein without the prior written consent of Secured Party. If
Debtor is a corporation, this Agreement has been duly and validly authorized by
all necessary corporate action, and, if Debtor is a partnership or a limited
liability company, the partner(s) or manager(s) executing this Agreement has
(have) authority to act for the partnership or the limited liability company.

 

(b) Debtor will not permit any Collateral to be
located in any state (and, if county filing is required, in any county) in
which the financing statement covering such

Collateral
is required to be, but has not in fact been, filed in order to perfect the
Security Interest.

 

(c) Debtor will (i) keep all Collateral in good
repair, working order and condition, normal depreciation excepted, and will,
from time to time, replace any worn, broken or defective parts thereof; (ii)
promptly pay all taxes and other governmental charges levied or assessed upon
or against any Collateral or upon or against the creation, perfection or
continuance of the Security Interest; (iii) keep all Collateral free and clear
of all security interests, liens and encumbrances except the Security
Interest;  (iv) at al/ reasonable times,
permit Secured Party or its representatives to examine or inspect any
Collateral, wherever located, and to examine, inspect and copy Debtors books
and records pertaining to the Collateral and its business and financial
condition; (v) keep accurate and complete records pertaining to Debtor’s
business and financial condition and submit to Secured Party such periodic
reports concerning Debtor’s business and financial condition as Secured Party
may from time to time reasonably request; (vi) promptly notify Secured Party of
any loss of or material damage to any Collateral; (vii) at all times keep all
Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (in case of Collateral consisting of motor
vehicles) and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest, (viii) from time to time execute such financing statements as Secured
Party may reasonably require in order to perfect the Security Interest and, if
any Collateral consists of a motor vehicle, execute such documents as may be
required to have the Security Interest properly noted on a certificate of
title; (ix) pay when due or reimburse Secured Party on demand for

 

2

 

all
costs of collection of any of the Obligations and all other out-of-pocket
expenses (including in each case all reasonable attorneys’ fees) incurred by
Secured Party in connection with the creation, perfection, satisfaction,
protection, defense or enforcement of the Security Interest or the creation,
continuance, protection, defense or enforcement of this Agreement or any or all
of the Obligations, including expenses incurred in any litigation or bankruptcy
or insolvency proceedings; (x) execute, deliver or endorse any and all instruments,
documents, assignments, security agreements and other agreements and writings
which Secured Party may at any time reasonably request in order to secure,
protect, perfect or enforce the Security Interest and Secured Party’s rights
under this Agreement; (xi) not use or keep any Collateral, or permit it to be
used or kept, for any unlawful purpose or in violation of any federal, state or
local law, statute or ordinance; and (xii) not permit any - Collateral to
become part of or to be affixed to any real property without first assuring to
the reasonable satisfaction of Secured Party that the Security Interest will be
prior and senior to any interest or lien then held or thereafter acquired by
any mortgagee of such real property or the owner or purchaser of any interest
therein. If Debtor at any time fails to perform or observe any agreement
contained in this Section 3(c), and if such failure shall continue for a period
of ten calendar days after Secured Party gives Debtor written notice thereof
(or, in the case of the agreements contained in clauses (vii) and (viii) of
this Section 3(c), immediately upon the occurrence of such failure, without
notice or lapse of time), Secured Party may (but need not) perform or observe
such agreement on behalf and in the name, place and stead of Debtor (or, at
Secured Party’s option, in Secured Party’s own name) and may (but need not)
take any and all other actions which Secured Party may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens, or
encumbrances, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments. and the procurement of
repairs, transportation or insurance); 
and except to the extent that the effect of such payment would be to
render any loan or forbearance of money usurious or otherwise illegal under any
applicable law Debtor shall thereupon pay Secured Party on demand the amount of
all moneys expended and all costs and expenses (including reasonable attorneys’
fees) incurred by Secured Party in connection with or as a result of Secured
Party’s performing or observing such agreement or taking such actions, together
with interest thereon from the date expended or incurred by Secured Party at
the highest rate then applicable to any of the Obligations.  To facilitate the performance or observance
by Secured Party of such agreements of Debtor. Debtor hereby irrevocably
appoints (which appointment is coupled with an interest) Secured Party, or its
delegate, as the attorney-in-fact of Debtor with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver, endorse or
file, in the name and on behalf of Debtor, any and all instruments, documents,
financing statements, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by Debtor
under this Section 3.

 

3

 

4. Assignment of
Insurance.
Debtor hereby assigns to Secured Party, as additional security for the payment
of the Obligations, any and aIl moneys (including but not limited to proceeds
of insurance and refunds of unearned premiums) due or to become due under, and
all other rights of Debtor under or with respect to, any and all.

 

See
attached Annex A for signatures.

 

4EXHIBIT 10.62

 

	
  Wells Fargo Equipment Finance,
  Inc.

  733 Marquette Avenue

  Suite 700

  Minneapolis, MN 55402

  	
  Promissory
  Note

  

 

Contract Number 56101-700 dated
as of December 10, 2002

 

For Value Received, the
undersigned hereby promises to pay to the order of Wells Fargo Equipment
Finance, Inc. (the Lender) at its main office in Minneapolis, Minnesota, in
lawful money of the United States of America, the principal sum of $428,495.82
together with interest on the unpaid balance hereof from the date the loan proceeds
are disbursed hereunder at an annual rate (computed on the basis of actual
number of days elapsed in a 360-day year) determined as set forth below.

 

The interest rate in effect on
the date the loan proceeds are disbursed hereunder shall be 1.25% over the rate
of interest than publicly announced by Wells Fargo Bank, N.A. (“the Bank”) as
its base rate (“the Base”), and shall remain in effect through the last day of
the calendar month in which the loan proceeds are disbursed hereunder.  (The Bank may in fact charge some borrowers
rates which are below the “Base”.)  The
interest rate in effect for each calendar month thereafter during the term of
the Note shall be the same percentage over the Base as in effect on the last
day of the preceding calendar month; provided, however, that notwithstanding
any change in the Base after the maturity of this Note, this Note shall bear
the same rate of interest after maturity as it bore at maturity.  The First Payment Due Date shall be the date
that is one month after the date loan proceeds are disbursed hereunder.  The undersigned agrees that the dates of the
First Payment Due Date and the Final Installment Due Date may be left blank
when this Note is executed and hereby authorizes Lender to insert such dates
based upon the date the loan proceeds are disbursed.

 

Principal and interest shall be
payable in 41 consecutive equal monthly installments of $11,239.03 each
commencing on the First Payment Due Date and continuing on the same day of each
month thereafter, and in a final installment of the entire unpaid balance of
this Note on the Final Installment Due Date, provided; however, that annual
adjustment payments shall be made as set forth below.

 

The amount of each monthly
installment hereunder other than the final installment is the amount necessary
to amortize this Note in equal monthly installments from the First Payment Due
Date through the Final Installment Due Date at an interest rate of 5.5% per
annum.  On each annual anniversary of
the First Payment Due Date, the undersigned shall pay Lender or Lender shall
credit

 

 

to the next installment or
installments in the order of maturity, as the case may be, an amount necessary
to make the unpaid principal balance of the Note on such anniversary date equal
to what it would have been on such anniversary date had the interest rate
hereon been the rate set fourth in this paragraph throughout the previous 12
months.  Payments shall be applied first
to interest and then to principal.

 

This Note may be prepaid in
whole or in part at any time and from time to time without penalty.  Any partial prepayment shall be applied to
the last maturing installment or installments.

 

Each of the following shall
constitute an Event of Default hereunder (a) failure to pay any Installment or
other payment hereunder when due;  (b)
the occurrence of an Event of Default as defined in any security agreement or
mortgage securing this Note;  (c) the
commencement of any bankruptcy or insolvency proceedings by or against the
undersigned or any guarantor of this Note; 
and (d) any indebtedness the undersigned may now or hereafter owe to any
affiliate of Lender shall be accelerated following a default thereunder or, if
any such indebtedness is payable on demand, payment thereof shall be
demanded.  Upon the occurrence of an
Event of Default, Lender may do any one or more of the following as it may
elect, provided, however, that upon the occurrence of an Event of Default
specified in (c) above, the entire unpaid balance of the Note shall
automatically become and be due and payable without notice or demand of any
kind;  (i) upon written notice to the
undersigned, declare the entire unpaid balance of this Note to be immediately
due and payable and the same shall thereupon become and be immediately due and
payable; (ii) exercise any one or more of the rights and remedies available to
it under any security agreement or mortgage securing this Note or under any
other agreement or by law.

 

The undersigned hereby waives
presentment, notice of dishonor, and prob. 
The undersigned agrees to pay all costs of collection of this Note,
including reasonable attorney’s fees. 
The holder hereof may change the terms of payment of this Note by
extension, renewal or otherwise, and release any security for, or party to,
this Note and such action shall not release any accommodation maker, endorser,
or guarantor from liability on this Note.

 

Notwithstanding anything to the
contrary contained herein, if the rate of interest, late payment fee,
prepayment premium or any other charges or fees due hereunder are determined by
a court of competent jurisdiction to be usurious, then said interest rate,
fee;  and/or charges shall be reduced to
the maximum amount permissible under applicable law and any such excess amounts
shall be applied towards the reduction of the principal balance of the Note.

 

This Note shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Minnesota without regard to conflicts of law
rules.

 

2

 

If this Note is signed by more
than one person as Debtor, then the term “Debtor” shall refer to each of them
separately and to all of them jointly, and each such person shall be liable
hereunder individually in full and jointly with the others.

 

First Payment Due Date:               1/24/03

 

Final Installment Due Date:                                                6/24/06

 

 

See attached Annex A for
signatures.

 

3

 

	
  Wells Fargo Equipment Finance,
  Inc.

  733 Marquette Avenue

  Suite 700

  Minneapolis, MN 55402

  	
  Annex A

  

 

Annex A to Promissory Note dated
as of December 10, 2002

 

By signing this agreement, each
of the undersigned acknowledges that they are jointly and severally bound to
perform all of the obligations of the Debtor under the note and the term
“Debtor” shall refer to each of them separately and to all of them jointly.

 

In witness whereof, Debtor and
Secured Party, intending to be legally bound hereby, have duly executed this
Agreement, as of the day and year first aforesaid.

 

 

	
  Debtor:

  	
  Medtox Scientific, Inc.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Debtor:

  	
  Medtox Laboratories, Inc.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Debtor:

  	
  Medtox Diagnostics, Inc.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

4

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