EXHIBIT 10.1
THIRD AMENDMENT AND MODIFICATION OF
REVOLVING LINE OF CREDIT PROMISSORY NOTE,
LOAN AGREEMENT AND REAFFIRMATION OF GUARANTIES
This Third Amendment and Modification of Revolving Line of Credit
Promissory Note, Loan Agreement and Reaffirmation of Guaranties ("Amendment") is
made effective the 1st day of January, 2005 ("Effective Date") by and among WSI
Industries, Inc., a Minnesota corporation, having an address of 000 Xxxxxxx
Xxxx, Xxxxxxxxxx, XX 00000 ("Borrower"), Taurus Numeric Tool, Inc., having an
address of 000 Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 and WSI Rochester, Inc.,
having an address of 000 Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 (jointly
"Guarantor") and Excel Bank Minnesota, a Minnesota banking corporation, having
an address of 00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000
("Bank").
WHEREAS, on or about December 4, 2002, (the "Loan Date") Borrower
executed a Revolving Line of Credit Promissory Note in favor of the Bank in the
original principal amount of One Million and 00/100 ($1,000,000.00) Dollars
("Note"); and
WHEREAS, on or about the Loan Date, Borrower and the Bank executed that
certain Loan Agreement ("Loan Agreement") which Loan Agreement, among other
things, described the terms and conditions under which the Borrower would borrow
money from and repay the money to the Bank; and
WHEREAS, to secure the sums due and payable to the Bank pursuant to the
Note and the Loan Agreement, Borrower also executed that certain Security
Agreement, also dated as of the Loan Date, whereby the Bank took a security
interest in all assets of Borrower ("Security Agreement); and
WHEREAS, to further secure the sums due and payable to the Bank
pursuant to the Note and the Loan Agreement, to perform the covenants and
conditions thereof and of certain documents executed in conjunction therewith,
each Guarantor executed an unconditional and unlimited guaranty ("Guaranty"),
also dated as of the Loan Date, whereby each Guarantor unconditionally
guaranteed the Borrower's performance of the Note and the Loan Agreement and the
other loan documents executed therewith; and
WHEREAS, the Note, the Loan Agreement and the Security Agreement were
amended and extended pursuant to that certain Amendment and Modification of
Revolving Line of Credit Promissory Note, Loan Agreement and Reaffirmation of
Guaranties dated effective December 31, 2003 ("First Amendment"); and
WHEREAS, the Note, the Loan Agreement, the Security Agreement, the
First Amendment and all of the documents executed in conjunction therewith are
sometimes jointly referred to herein as the "Loan Documents"; and
WHEREAS, the Borrower has requested that the Bank again amend and
extend the maturity date of the Note and modify the terms of the Loan Agreement;
and
WHEREAS, the Bank and the Borrower and each Guarantor desire that the
Note and the Loan Agreement be amended and modified as hereinafter described and
each Guarantor wishes to acknowledge and reaffirm the terms and conditions of
such Guarantor's Guaranty.
NOW, THEREFORE, in consideration of the above recitals, and in
consideration of credit given or to be given by the Bank to the Borrower and for
other good and valuable consideration, all of which consideration is hereby
acknowledged, the parties hereto agree as follows:
1. Each of the above recitals is true and correct and is incorporated
herein by this reference.
2. The Note is hereby amended, modified and extended as follows:
On and after the Effective Date hereof the Note shall bear interest at
the variable rate of equal to the Base Rate of interest as established
by Excel Bank Minnesota from time to time ("Base Rate"). On the
Effective Date hereof the
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Base Rate is five and one quarter (5.25%) percent per annum and the
initial rate of interest under the Note as of the Effective Date is
five and one quarter (5.25%) percent per annum. If the Base Rate is no
longer established or is otherwise no longer available the holder of
this Note may substitute a reasonably equivalent index to substitute
for the Base Rate. The rate of interest hereunder shall change when,
if, and as often as the Base Rate changes.
The principal and interest due pursuant to the Note shall be repaid as
follows: In monthly payments of all accrued interest on the sums
actually advanced thereunder commencing on February 1, 2005 and
continuing monthly thereafter on the 1st day of each and every month
until January 1, 2006, at which time the entire remaining balance due
under the Note, including all principal and accrued but unpaid
interest, shall be due and payable in full.
3. The following sections of the Loan Agreement are hereby amended and
modified as described below (all capitalized terms have the meanings
given to them in the Loan Agreement):
a. The definition of "Tangible Net Worth" shall be amended as follows:
"Tangible Net Worth" of any Person means the excess of:
(a) the tangible assets of such Person, which, in accordance with
generally accepted accounting principles, are tangible assets, after
deducting adequate reserves in each case where, in accordance with
generally accepted accounting principles, a reserve is proper, less
(b) all Debt of such Person;
provided, however, that (i) inventory shall be taken into account on
the basis of the cost or current market value, whichever is lower,
(ii) in no event shall there be included as such tangible assets
patents, trademarks, trade names, copyrights, licenses, good will,
deferred taxes, prepaid expenses, deferred charges or treasury stock
or any securities or Debt of such Person or any other securities
unless the same are readily marketable in the United States of
America or entitled to be used as a credit against Federal income
tax liabilities, (iii) securities included as such tangible assets
shall be taken into account at their current market price or cost,
whichever is lower, and (iv) any write-up in the book value of any
assets shall not be taken into account.
b. Section 5.09 of the Loan Agreement shall be amended as follows:
Section 5.09 RATIO OF DEBT TO TANGIBLE NET WORTH. So long as the
Note shall remain unpaid or the Bank shall have any Commitment
hereunder, the ratio of the Borrower's Debt to Tangible Net Worth
shall not exceed 1.85 to 1 measured at the end of each fiscal
quarter end basis.
4. Borrower hereby acknowledges and reaffirms each and every
representation, warranty, term, covenant and condition of the Loan
Documents. Borrower further acknowledges and agrees that the Loan
Documents (as hereby amended and modified) are fully enforceable
against Borrower and that Borrower has no defense, right of offset or
otherwise to preclude enforcement of the Loan Documents, as hereby
amended and modified, by the Bank against Borrower.
5. The Security Agreement shall continue to secure all sums owing to the
Bank by the Borrower pursuant to the terms and conditions of the Note
and the Loan Agreement, together with all interest thereon, in
accordance with the terms and conditions of the Note and all other sums
due and owing or to become due and owing pursuant to the terms and
conditions of this Amendment, the Loan Agreement, the Security
Agreement and the Note, as amended, including but not necessarily
limited to any further or additional extensions or renewals thereof.
6. Borrower and each Guarantor acknowledge that the principal balance
remaining unpaid on the Note as of the Effective Date hereof is - zero-
($0.00) Dollars.
7. Each Guarantor hereby acknowledges, ratifies and reaffirms each and
every term, covenant, agreement, provision, and condition of their
respective Guaranty and any collateral security documents securing such
guaranty, including but not limited to the security agreement dated of
even date with the Guaranty ("Collateral Security Documents"), and the
Loan Documents, as amended, and hereby acknowledges and agrees that the
Guaranty guarantees to the Bank the
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repayment of all sums due and owing to the Bank pursuant to the terms,
conditions and covenants of the Note, as amended, and the performance
of the terms and covenants of the balance of the Loan Documents, as
amended. Each Guarantor hereby affirms and agrees that each such
Guaranty is unconditional and unlimited and that such Guaranty along
with the Collateral Security Documents related thereto are fully
enforceable against such Guarantor. Each Guarantor hereby further
affirms and agrees and that such Guarantor has no defense, right of
offset, claim, cause of action or otherwise to preclude the absolute
and immediate enforcement of the Guaranty and/or the Collateral
Security Documents supporting such Guaranty by the Bank.
8. On or before the execution hereof, Borrower shall pay to the Bank, the
Bank's costs including its reasonable attorneys' fees, incurred in
drafting this Amendment and related documents, if any.
9. Except as herein specifically modified, amended or extended, all terms
and conditions of the Loan Documents shall otherwise remain unchanged
and in full force and effect.
10. Notwithstanding anything to the contrary herein, this Amendment or any
failure by the Bank to exercise any of its rights upon an event of
default under the Loan Documents or the Guaranty or the Collateral
Security Documents, whether prior to or subsequent to the effective
date of this Amendment, shall not be deemed a waiver of the Bank's
available remedies under the Loan Documents, the Guaranty, or the
Collateral Security Documents or any amendments thereof, or any other
documents executed in conjunction therewith or incident thereto.
11. All the terms of this Amendment shall be binding upon and inure to the
benefit of and be enforceable by the successors and assigns of the
parties hereto, to the extent assignment is permitted pursuant to the
Loan Documents or the Guaranty.
12. This Amendment is being executed in and is intended to be performed in
the State of Minnesota and shall be construed and enforced in
accordance with the laws of such state.
13. This Amendment contains the entire agreement between the parties with
respect to the covenants and promises contemplated herein and may be
amended only in a writing signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment on the day
and year first above written.
BORROWER:
WSI INDUSTRIES, INC., a
Minnesota corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Its: VP/CFO
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GUARANTOR:
TAURUS NUMERIC TOOL, INC., a
Minnesota corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Its: VP/Asst Sec.
WSI ROCHESTER, INC., a Minnesota
corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Its: VP/Asst Sec.
EXCEL BANK MINNESOTA, a Minnesota
banking corporation,
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------
Its: VP
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