EXHIBIT 10.1
LOAN AGREEMENT
This Loan Agreement ("Agreement") is made this 4th day of December
2002, by and between WSI Industries, Inc., a Minnesota corporation (the
"Borrower") and Excel Bank Minnesota, a Minnesota banking corporation (the
"Bank"), and the Borrower and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles.
"Accounts" means, as to any Person, the aggregate unpaid obligations of
customers and other account debtors to such Person arising out of the sale or
lease of goods or rendition of services by such Person on an open account or
deferred payment basis.
"Advance" means an advance by the Bank to the Borrower pursuant to
Article II.
"Borrowing Base" means, at any time, the lesser of the Commitment, or
the sum of
(i) Seventy-five (75%) percent of the Eligible Accounts of the Borrower,
computed on the basis of the most recent schedule of collateral prepared and
furnished to the Bank as required by Section 5.01(b); and
(ii) Fifty (50%) percent of the Eligible Inventory of the Borrower, up to an
aggregate total sum of Five Hundred Thousand and 00/100 ($500,000.00) Dollars
computed on the basis of the most recent schedule of collateral prepared and
furnished to the Bank as required by Section 5.01(b).
"Commitment" means One Million and 00/100 ($1,000,000.00) Dollars under
the Revolving Loan as evidenced by the Revolving Note.
"Current Assets" of any Person means the aggregate amount of assets of
such Person which in accordance with generally accepted accounting principles
may be properly classified as current assets, after deducting adequate reserves
where proper, but in no event including any real estate.
"Current Liabilities" of any Person means (i) all Debt of such Person
due on demand or within one year from the date of determination thereof, and
(ii) all other items (including taxes accrued as estimated) which, in accordance
with generally accepted accounting principles, may be properly classified as
current liabilities.
"Debt" means (i) all items of indebtedness or liability which in
accordance with generally accepted accounting principles would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet as at the date as of which Debt is to be determined and (ii) indebtedness
secured by any mortgage, pledge, lien or security interest existing on property
owned by the Person whose Debt is being determined, whether or not the
indebtedness secured thereby shall have been assumed, and (iii) guaranties,
endorsements (other than for purposes of collection in the ordinary course of
business) and other contingent obligations in respect of, or to purchase or
otherwise acquire indebtedness of others.
"Eligible Accounts" means Accounts that, as of the date of
determination, are unpaid and are not more than eighty-nine (89) days past due.
If ten (10.00%) percent or more of the aggregate accounts receivable from any
single customer are more than are more than eighty-nine (89) days past due, the
entire balance of all accounts receivable fro such customer shall be excluded
from being an Eligible Account. Notwithstanding the foregoing, accounts
receivable from Polaris Industries and Rockwell Xxxxxxx that are less than
eighty-nine (89) days past due shall be considered to be Eligible Accounts
regardless of whether ten (10.00%) percent or more of the aggregate accounts
receivable from such customers are more than eighty-nine (89) days past due.
However, the Bank reserves that right to disallow such Accounts as it may
determine from time to time.
"Event of Default" has the meaning specified in Section 7.01.
"Eligible Inventory" means the cost of raw materials held in inventory
for the production of products for ultimate delivery to the entity's customers.
It does not include work in process or finished goods.
"Funded Debt", with respect to any Person, means all Debt of such
Person maturing by its terms more than one year after, or which is renewable or
extendable at the option of such Person for a period ending one year or more
after, the date of determination, and shall include Debt of such maturity
created, assumed or guaranteed by such Person either directly or indirectly,
including obligations of such maturity secured by liens upon property of such
Person and upon which such entity customarily pays the interest, and all rental
payments under capitalized leases of such maturity.
"Letters of Credit" means documentary and standby letters of credit
issued and to be issued by the Bank at the request of the Borrower from time to
time.
"Loan" means the sums advanced under the Revolving Note pursuant to
Article II hereof.
"Net Worth" means the aggregate of capital and surplus of the Borrower,
all determined in accordance with generally accepted accounting principles.
"Note" means the Revolving Note.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower and covered by Title IV of the Employee Retirement
Income Security Act of 1974, as amended.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of the Employee Retirement Income Security Act of 1974, as amended.
"Revolving Note" has the meaning specified in Section 2.02.
"Security Agreement" means the security agreement of the Borrower in a
form acceptable to the Bank.
"Subordinated Debt" means the Debt of the Borrower that is subordinated
in right of payment, in terms satisfactory to the Bank, to all indebtedness of
the Borrower to the Bank.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock have general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries:
"Tangible Net Worth" of any Person means the excess of:
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(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 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.
"Working Capital" of any Person means the excess of the Current Assets
over the Current Liabilities of such Person, as determined in accordance with
generally accepted accounting principles.
ARTICLE II
AMOUNT AND TERMS OF THE REVOLVING LOAN
Section 2.01 REVOLVING LOAN AND REVOLVING NOTE. The Bank agrees, on the
terms and subject to the conditions hereinafter set forth, to make Advances to
the Borrower from time to time during the period from the date hereof to
December 31, 2003 or the earlier date of termination in whole of the Commitment
pursuant Section 7.02, in an aggregate amount not to exceed at any time
outstanding the Borrowing Base or One Million and 00/100 ($1,000,000.00)
Dollars, whichever is less. Each Advance shall be in the amount of $10,000.00 or
an integral multiple thereof. Within the limits of the Borrowing Base, the
Borrower may borrow, repay pursuant to Section 2.07 and re-borrow under this
Section 2.02. The Advances made by the Bank shall be evidenced by and repayable
with interest in accordance with a single promissory note of the Borrower (the
"Revolving Note") payable to the order of the Bank, substantially in a form
acceptable to the Bank, dated the date of this Agreement. The Revolving Note
shall bear interest on the unpaid principal amount thereof from the date thereof
until paid at the rate therein provided.
Section 2.02 MAKING THE REVOLVING LOANS. Each Advance shall be made on
at least one bank business days' prior written notice from the Borrower to the
Bank or telephonic request from any person authorized to request Advances on
behalf of the Borrower, which notice or request shall specify the date of the
requested Advance and the amount thereof. The persons authorized to make such
requests for Advances are described in the Resolution of Borrower delivered to
the Bank herewith, and such persons are subject to change by the Borrower upon
delivery of new Resolutions of the Borrower in writing to the Bank. Upon
fulfillment of the applicable conditions set forth in Article III, or as
otherwise described in the Loan Sweep Agreement, the Bank may disburse the
amount of the requested Advance by crediting the same to the Borrower's demand
deposit account maintained with the Bank or in such other manner as the Bank and
the Borrower may from time to time agree. The Borrower shall promptly confirm
each telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Bank. Any request for an Advance by
the Borrower, whether written or telephonic, shall be deemed to be a
representation that the statements set forth in Section 3.02 are correct.
Section 2.03 COMMITMENT FEES. There are no commitment fees payable by
the Borrower hereunder.
Section 2.04 COMPUTATION OF INTEREST AND FEES. Interest under the Note
shall be computed on the basis of actual number of days elapsed in a year of 360
days.
Section 2.05 PAYMENT. All payments of principal and interest under the
Note and of the fees hereunder shall be made to the Bank in immediately
available funds. Borrower agrees that the amount shown on the books and records
of the Bank, as being the aggregate amount of Advances outstanding shall be
prima facie evidence of the principal amount of the Revolving Note then
outstanding. The Borrower hereby authorizes the Bank, if and to the extent
payment is not promptly made pursuant hereto, to charge against the Borrower's
account with the Bank an amount equal to the accrued interest and fees from time
to time due and payable to the Bank under the Note or hereunder.
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Section 2.06 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder or under a Note shall be stated to be due on a Saturday, Sunday
or a holiday for banks under the laws of the State of Minnesota, such payment
may be made on the next succeeding bank business day, and such extension of time
shall in such case be included in the computation of payment of interest on the
Note or the fees hereunder, as the case may be.
Section 2.07 USE OF PROCEEDS. The proceeds of the Revolving Note shall
be used by the Borrower for general corporate working capital purposes of the
Borrower.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The
obligation of the Bank to make its initial Advance, whether pursuant to the
Revolving Note, is subject to the condition precedent that the Bank shall have
received on or before the day of such Advance all of the following, each dated
(unless otherwise indicated) such day, in form and substance satisfactory to the
Bank:
(a) The Revolving Note, properly executed on behalf of the Borrower.
(b) The original resolutions of the Board of Directors of the Borrower
evidencing approval of this Agreement and the Note and other matters
contemplated hereby.
(c) Copies of the Articles of Incorporation and Bylaws of the Borrower,
certified by the Secretary or Assistant Secretary of the Borrower as being true
and correct copies thereof.
(d) A signed copy of an opinion of counsel for the Borrower, addressed
to the Bank and its counsel, in a form acceptable to the Bank.
(e) A signed copy of a certificate of the Secretary or an Assistant
Secretary of the Borrower which shall certify the names of the officers of the
Borrower authorized to sign this Agreement, the Note and the Security Agreement
and the other documents or certificates to be delivered pursuant to this
Agreement by the Borrower or any of its officers, together with the true
signatures of such officers. The Bank may conclusively rely on such certificate
until it shall receive a further certificate of the Secretary or Assistant
Secretary of the Borrower canceling or amending the prior certificate and
submitting the signatures of the officers named in such further certificate.
(f) In addition to the foregoing, the obligation of the Bank to make
its initial Advance pursuant to the Note shall be conditioned upon the Bank
receiving such other documents as the Bank or its legal counsel may reasonably
deem necessary to document the Loans.
Section 3.02 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of
the Bank to make any Advance shall be subject to the further conditions
precedent that on the date of such Advance:
(a) the representations and warranties contained in Article IV are
correct on and as of the date of such Advance as though made on and as of such
date, except to the extent that such representations and warranties relate
solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Advance, which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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The Borrower represents and warrants to the Bank as follows:
Section 4.01 CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Minnesota, its jurisdiction of incorporation, and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. The Borrower has all requisite power
and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under this Agreement, the Note and the Security Agreement.
Section 4.02 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OF
AGREEMENTS. The execution, delivery and performance by the Borrower of this
Agreement, the Note and the Security Agreement and the borrowings from time to
time hereunder have been duly authorized by all necessary corporate action and
do and will not (i) require any consent or approval of the stockholders of the
Borrower, or any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to the Borrower or to the Articles of Incorporation or
Bylaws of the Borrower, (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its properties may
be bound or affected, or (iv) result in, or require, the creation or imposition
of any mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance of any nature (other than the Security Agreement) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 4.03 LEGAL AGREEMENTS. This Agreement and the Security
Agreement constitute, and the Note, when executed and delivered by the Borrower
hereunder, will constitute the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
Section 4.04 SUBSIDIARIES. The borrower has the following Subsidiaries
Taurus Numeric Tool, Inc., a Minnesota corporation and WSI Rochester, Inc. a
Minnesota corporation.
Section 4.05 FINANCIAL CONDITION. The Borrower has heretofore furnished
the following financial statements to the Bank: Fiscal years ended 2000, 2001,
and 2002. Said balance sheets and said statements of income and surplus fairly
present the financial condition of the Borrower on the dates thereof and the
results of their operations for the periods then ended, and were prepared in
accordance with generally accepted accounting principles.
Section 4.06 ADVERSE CHANGE. There has been no material adverse change
in the business, properties or condition (financial or otherwise) of the
Borrower since the date of the latest financial statement referred to in Section
4.05.
Section 4.07 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or the properties of the Borrower before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to the Borrower, would have a material
adverse effect on the financial condition, properties, or operations of the
Borrower.
Section 4.08 REGULATION U. The borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 4.09. TAXES. The Borrower has filed all federal, state and
local tax returns which to the knowledge of the officers of the Borrower are
required to be filed, and the Borrower has paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by it to the extent such taxes have become due.
Section 4.10 TITLE AND LIENS. The Borrower has good title to each of
the properties and assets reflected in the latest balance sheet referred to in
Section 4.05, free and clear of all mortgages, security interests, liens and
encumbrances, except for
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mortgages, security interests and liens permitted by Section 6.01 and covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the business or operations of the Borrower as
presently conducted.
Section 4.11 RETIREMENT PROGRAMS. No Reportable Event has occurred and
is continuing with respect to any Plan.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as the Note shall remain unpaid or the Commitment shall be
outstanding, the Borrower will comply with the following requirements, unless
the Bank shall otherwise consent in writing:
Section 5.01 FINANCIAL STATEMENTS. The Borrower will deliver to the
Bank:
(a) as soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, a
copy of the financial statements of the Borrower audited
by independent certified public accountants selected by
the Borrower and acceptable to the Bank, which shall
include the balance sheet of the Borrower as at the end of
such fiscal year and the related statements of income,
retained earnings and changes in financial position of the
Borrower for the fiscal year then ended, all in reasonable
detail and all prepared in accordance with generally
accepted accounting principles applied on a consistent
basis and accompanied by a certificate of said officer
stating (i) that such financial statements have been
prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the
accounting practices reflected in the annual financial
statements referred to in Section 4.05, and (ii) whether
or not he has knowledge of the occurrence of any Event of
Default hereunder or of any event not theretofore reported
and remedies which with notice or lapse of time or both
would constitute such an Event of Default and, if so,
stating in reasonable detail the facts with respect
thereto and (iii) all relevant facts in reasonable detail
to evidence, and the computations as to, whether or not
the Borrower is in compliance with requirements set forth
in Sections 5.09 through 5.13 hereof;
(b) within thirty (30) days after the end of each calendar
month, a schedule of collateral as at the end of such
calendar month separately setting forth the Accounts, the
Eligible Accounts, the Eligible Inventory, and such
certificates regarding the Borrowing Base and covenant
compliance as the Bank may request or specify, signed and
attested to by an officer of the Borrower. The Borrower
shall use the Borrowing Base Certificate and the Covenant
Compliance Certificate attached hereto as Exhibit A in
making such reports to the Bank;
(c) as soon as available and in any event within thirty (30)
days after the end of each month, balance sheets of the
Borrower as at the end of such month and related
statements of earnings and retained earnings of the
Borrower for such monthly period and for the year to date,
in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the
previous year, all prepared in accordance with generally
accepted accounting principles applied on a basis
consistent with the account practices reflected in the
annual financial statements referred to in Section 4.05
and certified by the chief financial officer of the
Borrower; subject, however, to year-end audit adjustments,
and accompanied by a certificate of said officer stating
(i) that such financial statements have been prepared in
accordance with generally accepted accounting principles
applied on a basis consistent with the accounting
practices reflected in the annual financial statements
referred to in Section 4.05, and (ii) whether or not he
has knowledge of the occurrence of any Event of Default
hereunder or of any event not theretofore reported and
remedies which with notice or lapse of time or both would
constitute such an Event of Default and, if so, stating in
reasonable detail the facts with respect thereto and (iii)
all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in
compliance with requirements set forth in Sections 5.08
through 5.12 hereof;
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(d) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before
any governmental or regulatory agency affecting the
Borrower of the type described in Section 4.07 or which
seek a monetary recovery against the Borrower in excess of
$50,000.00;
(e) as promptly as practicable (but in any event not later
than five (5) business days) after an officer of the
Borrower obtains knowledge of the occurrence of any event
which constitutes an Event of Default or would constitute
an Event of Default with the passage of time or the giving
of notice, or both, notice of such occurrence, together
with a detailed statement by a responsible officer of the
Borrower of the steps being taken by the Borrower to cure
the effect of such event;
(f) as soon as possible and in any event within thirty (30)
days after the Borrower knows or has reason to know that
any Reportable Event with respect to any Plan has
occurred, the statement of the chief financial officer of
the Borrower setting forth details as to such Reportable
Event and the action which the Borrower proposes to take
with respect thereto, together with a copy of the notice
of such Reportable Event to the Pension Benefit Guaranty
Corporation;
(g) as soon as possible after such occurrence, Borrower shall
provide the Bank with notice of any amendment of its
Articles of Incorporation or of any material change in the
Borrower or its operations; and
(h) such other information respecting the financial condition
and results of operations of the Borrower as the Bank may
from time to time reasonably request.
Section 5.02 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The
Borrower will keep accurate books of record and account for itself in which true
and complete entries will be made in accordance with generally accepted
accounting principles consistently applied and, upon request of the Bank, will
give any representative of the Bank access to, and permit such representative to
examine, copy or make extracts from, any and all books, records and documents in
its possession, to inspect any of its properties and to discuss its affairs,
finances and accounts with any of its principal officers, all at such times
during normal business hours and as often as the Bank may reasonably request.
Section 5.03 COMPLIANCE WITH LAWS. The Borrower will comply with
the requirements of applicable laws and regulations, the non-compliance with
which would materially and adversely affect its business or its financial
condition.
Section 5.04 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will
pay or discharge all taxes, assessments and governmental charges levied or
imposed upon it or upon its income or profits, or upon any properties belonging
to it, prior to the date on which penalties attach thereto and all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that except as may be
provided in any Mortgage executed in conjunction herewith the Borrower shall not
be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 5.05 MAINTENANCE OF PROPERTIES. The Borrower will keep and
maintain all of its properties necessary or useful in its business in good
condition, repair and working order; provided, however, that except as may be
provided in any Mortgage executed in conjunction herewith nothing in this
Section shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Borrower, desirable in the conduct of its business and not
disadvantageous in any material respect to the Bank as holder of a Note.
Section 5.06 INSURANCE. The Borrower will obtain and maintain
insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as is usually carried by
companies engaged in similar business and owning similar properties in the same
general areas in which the Borrower operates.
Section 5.07 PRESERVATION OF CORPORATE EXISTENCE. The Borrower will
preserve and maintain its corporate existence and all of its rights, privileges
and franchises; provided, however, that the Borrower shall not be required to
preserve any of its rights, privileges and franchises if its Board of Directors
shall determine that the preservation thereof is no longer
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desirable in the conduct of the business of the Borrower and that the loss
thereof is not disadvantageous in any material respect to the Bank as a holder
of a Note.
Section 5.08 MINIMUM NET WORTH. So long as the Note shall remain
unpaid or the Bank shall have any Commitment hereunder, the Borrower will
maintain, during and at the end of each fiscal quarter end, Net Worth at an
amount not less than Six Million One Hundred Sixty One Thousand and 00/100
($6,161,000.00) Dollars.
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 2 to 1
measured at the end of each fiscal quarter end basis.
Section 5.10 RATIO OF CURRENT ASSETS TO CURRENT LIABILITIES. The
Borrower shall maintain, for each fiscal quarter end that the Note remains
outstanding or the Bank shall have any Commitment hereunder, the ratio of its
Current Assets to its Current Liabilities added to its outstanding debt under
the Note at not less than 1.6 to 1.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment hereunder, the Borrower agrees that, without the prior written
consent of the Bank:
Section 6.01 LIENS. The Borrower will not create, incur or suffer
to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness for borrowed money; excluding, however,
from the operation of the foregoing:
(a) mortgages, deeds of trust, pledges, liens, security
interests and assignments securing any indebtedness
incurred in the ordinary course of business of the
Borrower; however notwithstanding anything to the
contrary herein Borrower shall allow no such
encumbrances in connection with the borrowing of money
or the acceptance of an advance of credit; and
(b) the security interest granted to the Bank under the
Security Agreement.
Section 6.02 INDEBTEDNESS. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness evidenced by the Note;
(b) Trade credit and short term leases;
(c) Capital leases, so long as Borrower remains in
compliance with Section 6.10 hereof;
(d) Indebtedness of the Borrower in existence on the date
hereof, but not including any extensions or renewals
thereof; and
(e) Subordinated Debt, specifically including all debt
described in the Subordination Agreement executed by
Xxxxxx Xxxxxx and Xxxx Xxxxxx in favor of the Bank of
even date herewith, or renewals thereof, provided it
is subordinated to the prior payment of principal of
and interest on the Note on terms and conditions
approved in writing and in advance by the Bank.
(f) Section 6.03 GUARANTIES. The Borrower will not assume,
guarantee, endorse
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or otherwise become directly or contingently
liable in connection with any obligations of any
other Person, except: the indorsement of
negotiable instruments by the Borrower for deposit
or collection or similar transactions in the
ordinary course of business.
Section 6.04 SALE OF ASSETS. The Borrower will not
sell, lease, assign, transfer or otherwise dispose of assets exceeding 10% or
more of the book value of its assets as of the date of such transaction to any
other Person other than in the ordinary course of business or in the event such
assets are obsolete or worn-out assets, without the prior written consent of the
Bank.
Section 6.05 CONSOLIDATION AND MERGER. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 6.06 SALE AND LEASEBACK. The Borrower will
not enter into any arrangement, directly or indirectly, with any other Person
whereby the Borrower shall sell or transfer any real or personal property,
whether now owned or hereafter acquired, and then or thereafter rent or lease as
lessee such property or any part thereof or any other property which the
Borrower intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
Section 6.07 SUBORDINATED DEBT. The Borrower will
not (i) make any payment of, or acquire, any Subordinated Debt permitted by
Section 6.02 except as expressly permitted by the subordination provision
thereof, (ii) give security for all or any part of such Subordinated Debt,
except as has been granted; (iii) amend or cancel the subordination provisions
of such Subordinated Debt; (iv) take or omit to take any action whereby the
subordination of such Subordinated Debt or any part thereof to the Note might be
terminated, impaired or adversely affected; or (v) omit to give the Bank prompt
written notice of any default under any agreement or instrument relating to such
Subordinated Debt by reason whereof such Subordinated Debt might become or be
declared to be immediately due and payable.
Section 6.08 RESTRICTIONS ON NATURE OF BUSINESS.
The Borrower will not engage in any line of business materially different from
that presently engaged in by the Borrower.
Section 6.09 LETTERS OF CREDIT. No Letters of
Credit issued hereunder shall create a liability for payment thereof by the Bank
on a date that is more than two (2) calendar years after the initial Advance
under the Revolving Note.
Section 6.10 CAPITAL EXPENDITURES. So long as the
Note shall remain unpaid or the Bank shall have any Commitment hereunder,
Borrower shall make no capital expenditures in excess of Seven Hundred Fifty
Thousand and 00/100 ($750,000.00) Dollars in any fiscal year.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 7.01 EVENTS OF DEFAULT. "Events of
Default", wherever used herein, means any one of the following events:
(a) Default in the payment of any sums payable on
the Note when it becomes due and payable and continuance of such
default for a period of 10 days; or
(b) Default in the payment of fees, if any
required under Section 2.05 when the same become due and payable
and the continuance of such default for a period of 10 days; or
(c) Any representation or warranty made by the
Borrower in this Agreement or by the Borrower (or any of its
officers) in any certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection
with this Agreement, shall prove to have been incorrect in any
material respect when made; or
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(d) Default in the performance, or breach, of any covenant
or agreement of the Borrower in this Agreement (other than a
covenant or agreement a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), any
security agreement or any other instrument or agreement signed by
the Borrower in favor of the Bank, and the continuance of such
default or breach for a period of 10 days after there has been
given, by certified mail to the Borrower by the Bank, a written
notice specifying such default or breach and requiring it to be
remedied; or
(e) The Borrower shall be adjudicated a bankrupt or
insolvent, or admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or the
Borrower shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or for all or any substantial part
of its property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Borrower and such
appointment shall continue undischarged for a period of 30 days; or the
Borrower shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower and shall remain undismissed for a period of 30
days; or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of
the property of the Borrower and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within 30 days
after its issue or levy; or
(f) Default in the performance, or breach, of any covenant
or agreement on the part of the Borrower in excess of $50,000.00;
or
(g) The rendering against the Borrower of a final
judgment, decree or order for the payment of money in excess of
$50,000.00 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 60 consecutive days
without a stay of execution; or
(h) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower (other than to the Bank)
or under any indenture or other instrument under which any such
evidence of indebtedness has been issued or by which it is
governed and the acceleration of payment of such indebtedness; or
(i) Any Reportable Event, which the Bank determines in
good faith might constitute grounds for the termination of any
Plan or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan, shall have
occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Bank; or any
Plan shall have been terminated, or a trustee shall have been
appointed by an appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation
shall have instituted proceedings to terminate any Plan or to
appoint a trustee to administer any Plan; or
(j) The outstanding and unpaid Advances shall exceed the
Borrowing Base and the Borrower shall fail within 10 days to pay
the Advances down to an amount not greater than the Borrowing
Base.
(k) Adverse conditions develop at any time affecting
Borrower's affairs, financial or otherwise, and the Bank in good
faith determines that such adverse conditions impair the due and
punctual payment of the Note.
Section 7.02 RIGHTS AND REMEDIES. Upon the occurrence of an Event
of Default or at any time thereafter until such Event of Default is cured to the
written satisfaction of the Bank, the Bank may exercise any or all of the
following rights and remedies:
(a) The Bank may, by notice to the Borrower, declare the
Commitment to be terminated whereupon the same shall
forthwith terminate;
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(b) The Bank may, by notice to the Borrower, declare the
entire unpaid principal amount of the Note then
outstanding, all interest accrued and unpaid thereon,
and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon such Note, all
such accrued interest and all such amounts shall
become and be forthwith due and payable, without
presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the
Borrower.
(c) The Bank may, without notice to the Borrower and
without further action, apply any and all money owing
by the Bank to the Borrower to the payment of the Note
then outstanding, including interest accrued thereon,
and of all other sums then owing by the Borrower
hereunder;
(d) The Bank may exercise and enforce its rights and
remedies under the Security Agreement.; and
(e) The Bank may exercise such other remedies as may be
available to it under law.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on
the part of the Bank in exercising any right, power or remedy hereunder or under
the Security Agreement shall operate as a waiver thereof; nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder or under the Security Agreement. The remedies herein and in the
Security Agreement provided are cumulative and not exclusive of any remedies
provided by law.
Section 8.02 AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of this Agreement, the Security Agreement
or the Note or consent by the Borrower to any departure there from shall be
effective unless the same shall be in writing and signed by the Bank and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 8.03 ADDRESSES FOR NOTICES, ETC. Except as otherwise
expressly provided herein, all notices, requests, demand and other
communications provided for hereunder and under the Security Agreement shall be
in writing and mailed or delivered to the applicable party at its address
indicated below:
If to the Borrower:
WSI Industries, Inc.
00000 Xxxxxxxxxxx Xxxx
Xxxxx, XX 00000
If to the Bank:
Excel Bank Minnesota
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx XX 00000
Attention: Xxxxxx X. Xxxxx
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices, requests, demands and other communications
shall, when mailed, be effective when deposited in the mails, addressed as
aforesaid, except that notices or requests to the Bank pursuant to any of the
provisions of Article II shall not be effective until received by the Bank.
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Section 8.04 COSTS AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the preparation of
this Agreement, the Note, the Security Agreement and the other instruments and
documents to be delivered hereunder and thereunder, including the reasonable
fees and out-of-pocket expenses of counsel for the Bank with respect thereto, as
well as all out-of-pocket expenses of legal counsel retained by the Bank in
connection with the enforcement of this Agreement, the Note, the Security
Agreement and the other instruments and documents to be delivered hereunder and
thereunder.
Section 8.05 EXECUTION IN COUNTERPARTS. This Agreement and the
Security Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts of this Agreement or the Security Agreement, as the case may
be, taken together, shall constitute but one and the same instrument.
Section 8.06 BINDING EFFECT, ASSIGNMENT. This Agreement and the
Security Agreement shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of the Bank.
Section 8.07 GOVERNING LAW. This Agreement, the Note and the
Security Agreement shall be governed by, and construed in accordance with, the
laws of the State of Minnesota.
Section 8.08 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement that is prohibited or unenforceable shall be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof.
Section 8.09 HEADINGS. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
WSI INDUSTRIES, INC., a Minnesota
corporation
By:_________________________
Its: _______________________
BANK:
Excel Bank Minnesota, A MINNESOTA BANKING CORPORATION
By:_________________________
Xxxxxx X. Xxxxx
Its: Managing Director
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