EXHIBIT 10.21 FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT This Amendment, dated as of November 13, 2001, is made by and between LECTEC CORPORATION, a Minnesota corporation (the "Borrower"), and WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"). RECITALS The Borrower and the Lender have entered into a Credit and Security Agreement dated as of November 22, 1999 as amended by that certain First Amendment to Credit and Security Agreement dated as of February 9, 2000, that certain Second Amendment to Credit and Security Agreement dated as of September 26, 2000, that certain Third Amendment to Credit and Security Agreement dated as of September 28, 2000, that certain Fourth Amendment to Credit and Security Agreement dated as of October 26, 2000, a Waiver Agreement dated November 16, 2000 and a Waiver Agreement dated March 23, 2001 (as so amended and modified, the "Credit Agreement"). Capitalized terms used in these recitals have the meanings given to them in the Credit Agreement unless otherwise specified. The Borrower has requested that certain amendments be made to the Credit Agreement, which the Lender is willing to make pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows: 1. Defined Terms. Capitalized terms used in this Amendment which are defined in the Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is amended by adding or amending, as the case may be, the following definitions: "Collateral" means all of the Borrower's Accounts, chattel paper, deposit accounts, documents, Equipment, General Intangibles, goods, instruments, Inventory, Investment Property, letter-of-credit rights, letters of credit, all sums on deposit in any Collateral Account, and any items in any Lockbox; together with (i) all substitutions and replacements for and products of any of the foregoing; (ii) in the case of all goods, all accessions; (iii) all accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to or used in connection with any goods; (iv) all warehouse receipts, bills of lading and other documents of title now or hereafter covering such goods; (v) all collateral subject to the Lien of any Security Document; (vi) any money, or other assets of the Borrower that now or hereafter come into the possession, custody, or control of the Lender; (vii) all sums on deposit in the Special Account; and (viii) proceeds of any and all of the foregoing. "Documentary L/C Amount" means the sum of (i) the aggregate face amount of any issued and outstanding documentary Letters of Credit and (ii) the unpaid amount of the Obligation of Reimbursement with respect to documentary Letters of Credit. "L/C Amount" means the sum of the Documentary L/C Amount and the Standby L/C Amount. "Maximum Line" means $2,000,000 unless said amount is reduced pursuant to Section 2.10, in which event it means the amount to which said amount is reduced. "Note" or "Revolving Note" means the Borrower's revolving promissory note, payable to the order of the Lender in substantially the form of Exhibit A hereto, as the same may hereafter be amended, supplemented or restated from time to time, and any note or notes issued in substitution therefor, as the same may hereafter be amended, supplemented or restated from time to time and any note or notes issued in substitution therefor. In addition, the definitions of and all references to "Eximbank Adjusted Maximum Line," "Eximbank Agreement," "Eximbank Note," and "Tangible Net Worth" are hereby deleted. 2. Rules of Interpretation. Section 1.2 of the Credit Agreement is amended to read as follows: "Section 1.2 Other Definitional Terms; Rules of Interpretation. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP. All terms defined in the UCC and not otherwise defined herein have the meanings assigned to them in the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and the like, are to Articles, Sections and subsections of, or Exhibits or Schedules attached to, this Agreement unless otherwise expressly provided. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". Unless the context in which used herein otherwise clearly requires, "or" has the inclusive meaning represented by the phrase "and/or". Defined terms include in the singular number the plural and in the plural number the singular. Reference to any agreement (including the Loan Documents), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof (and, if applicable, in accordance with the terms hereof and the other Loan Documents), except where otherwise explicitly provided, and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor. Reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder." 3. Letters of Credit. Section 2.2 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: Section 2.2 Letters of Credit. (a) The Lender agrees, on the terms and subject to the conditions herein set forth, to cause an Issuer to issue, from the Funding Date to the Termination Date, one or more irrevocable standby or documentary letters of credit (each, a "Letter of Credit") for the Borrower's account. The Lender shall have no obligation to cause an Issuer to issue any Letter of Credit if the face amount of the Letter of Credit to be issued would exceed the lessor of: (b) (i) with respect to irrevocable standby Letters of Credit, $250,000 less the Standby L/C Amount, plus (ii) with respect to documentary Letters of Credit, $300,000 less the Documentary L/C Amount; or (iii) with respect to the aggregate of irrevocable standby Letters of Credit plus documentary Letters of Credit, the Borrowing Base less the sum of (A) all outstanding and unpaid Revolving Advances and (B) the L/C Amount. (c) Each Letter of Credit, if any, shall be issued pursuant to a separate L/C Application entered into by the Borrower and the Lender for the benefit of the Issuer, completed in a manner satisfactory to the Lender and the Issuer. The terms and conditions set forth in each such L/C Application shall supplement the terms and conditions hereof, but if the terms of any such L/C Application and the terms of this Agreement are inconsistent, the terms hereof shall control. (d) No Letter of Credit shall be issued with an expiry date later than the Termination Date in effect as of the date of issuance. (e) Any request to cause an Issuer to issue a Letter of Credit under this Section 2.2 shall be deemed to be a representation by the Borrower that the conditions set forth in Section 4.2 have been satisfied as of the date of the request. 4. Minimum Interest. Section 2.6(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: Section 2.6 (b) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable pursuant to Section 2.6(a) and 2.6(c), (i) so long as all activity hereunder relates to Letters of Credit and there are no Advances hereunder, the Borrower shall pay to the Lender interest of not less than $50,000 per year of this Agreement or (ii) if there are any Advances hereunder, the Borrower shall pay to the Lender Interest of not less than $100,000 per year of this Agreement (the "Minimum Interest Charge") during the term of this Agreement, and the Borrower shall pay any deficiency between the Minimum Interest Charge and the amount of interest otherwise calculated under Sections 2.6(a) and 2.6(c) on the date and in the manner provided in Section 2.8. 5. Unused Line Fee. The Lender agrees that so long as all activity under the Credit Agreement relates to Letters of Credit and there are no Advances, the unused line fee required under Section 2.7(b) of the Credit Agreement shall be waived. 6. Letter of Credit Fees. Section 2.7(c) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: Section 2.7(c) LETTER OF CREDIT FEES. (i) Irrevocable Standby Letters of Credit. The Borrower agrees to pay the Lender a fee with respect to each irrevocable standby Letter of Credits, if any, accruing on a daily basis and computed at the annual rate of two percent (2%) of the aggregate amount that may then be drawn on all issued and outstanding irrevocable standby Letters of Credit assuming compliance with all conditions for drawing thereunder (the "Aggregate Standby Face Amount"), from and including the date of issuance of such irrevocable standby Letter of Credit until such date as such irrevocable standby Letter of Credit shall terminate by its terms or be returned to the Lender, due and payable monthly in arrears on the first day of each month and on the Termination Date; provided, however that during Default Periods, in the Lender's sole discretion and without waiving any of its other rights and remedies, such fee shall increase to four percent (4%) of the Aggregate Standby Face Amount. The foregoing fee shall be in addition to any and all fees, commissions and charges of any Issuer of a Letter of Credit with respect to or in connection with such irrevocable standby Letter of Credit. (ii) Documentary Letters of Credit. The Borrower agrees to pay the Lender a fee with respect to each documentary Letter of Credit, if any, computed at two percent (2%) of the face amount of such documentary Letter of Credit, due and payable upon issuance of such documentary Letter of Credit; provided, however that during Default Periods, in the Lender's sole discretion and without waiving any of its other rights and remedies, such fee shall increase to four percent (4%). The foregoing fee shall be in addition to any and all fees, commissions and charges of any Issuer of a Letter of Credit with respect to or in connection with such Letter of Credit. 7. Maturity Date. The next "Maturity Date" under Section 2.10 shall be November 22, 2003. 8. Financing Statements. Section 3.6 of the Credit Agreement is amended by adding the following new sentence before the first sentence of that Section: "The Borrower authorizes the Lender to file from time to time where permitted by law, such financing statements against collateral described as "all personal property" as the Lender deems necessary or useful to perfect the Security Interest." 9. Minimum Book Net Worth. Section 6.12 of the Credit Agreement is hereby deleted its entirety and replaced with the following: Section 6.12 Minimum Book Net Worth. The Borrower will maintain, during each period described below, its Book Net Worth, determined as at the end of each month, at an amount not less than the amount set forth opposite such period: