Exhibit 10.3
LOAN AGREEMENT
This Loan Agreement ("Agreement") is made this 3rd day of May, 2004, by
and among WSI Industries, Inc., a Minnesota corporation, having the address
described in section VII.F hereof ("Borrower"), Excel Bank Minnesota, having a
principal business address of 00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx XX
00000 ("Lender").
WITNESSETH:
WHEREAS, Borrower seeks to obtain a loan from Lender in the amount of One
Million Three Hundred and Sixty Thousand and 00/100 ($1,360,000.00) Dollars to
acquire title to the real property located in Xxxxxx County, Minnesota which
property is legally described on the attached Exhibit A ("Mortgaged Premises");
and
WHEREAS, the Lender desires to loan One Million Three Hundred and Sixty
Thousand and 00/100 ($1,360,000.00) Dollars to Borrower pursuant to and subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties agree
as follows:
I. THE LOAN.
The Lender shall loan to Borrower the sum of One Million Three Hundred and
Sixty Thousand and 00/100 ($1,360,000.00) Dollars ("Loan") pursuant to the terms
and conditions of a promissory note ("Promissory Note") in form and substance
acceptable to Lender. The Loan shall bear interest and all payments shall be
made as described in the Promissory Note.
A. The parties acknowledge and agree that the sole purpose of the Loan is
to enable Borrower to acquire title to the Mortgaged Premises. Borrower
shall be in default under this Agreement if any of the proceeds from the
Promissory Note are used for any purpose other than as described above.
B. Borrower shall, on or before the execution hereof, provide Lender a
Phase I Environmental Investigation Report regarding the Mortgaged
Premises. The Loan shall be conditioned upon Lender, in Lender's sole
discretion, being satisfied with the results of the Phase I Environmental
Investigation Report.
C. The Lender may maintain from time to time, at its discretion, liability
records as to any and all loans made or repaid and interest accrued or
repaid under this Agreement. All entries made on any such record shall be
presumed correct until Borrower establishes the contrary. On demand by the
Lender, Borrower will admit and certify in writing the exact principal
balance that Borrower then asserts to be outstanding to the Lender for the
Loan. Any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on Borrower unless specific written notice of
exception is given to the Lender at its address described above by
Borrower within thirty (30) days after its receipt by Borrower.
D. Borrower shall, on or before the execution hereof, reimburse Lender for
all of Lender's reasonable attorneys' fees and all related costs incurred
by the Lender in drafting this Agreement, the related documents,
negotiating its terms with the parties hereto and establishing Lender's
collateral position, including title insurance costs. Borrower agrees that
Lender may at any time or from time to time, without further request by or
notice to Borrower, make a loan to Borrower in the sum of such attorneys'
fees and costs and add such indebtedness to other indebtedness of Borrower
under the Promissory Note or the Lender may apply proceeds of the
Promissory Note directly to pay such attorneys' fees and costs.
E. Prior to the execution hereof, Borrower shall cause to be delivered to
the Lender, at Borrower's expense an appraisal certified to the Lender for
the Mortgaged Premises by an M.A.I. appraiser acceptable to the Lender,
engaged by the Lender. The appraisal shall be satisfactory to Lender in
all respects. The initial appraisal shall provide for a current, as is
market value of the Mortgaged Premises not to exceed seventy-two (72.00%)
percent loan to value based on the total principal amount of the Loan on
the date hereof.
F. Borrower acknowledges and agrees that Borrower shall pay an origination
fee to the Lender of Six Thousand Eight Hundred ($6,800.00) Dollars, which
origination fee shall be paid in certified funds or cash on or before the
closing of the Loan.
II. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to the
Lender that:
A. Borrower is a corporation duly organized and existing in good standing
under the laws of the State of Minnesota. It has the power to own its
property and to carry on its
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business as now conducted and is duly qualified to do business in all
states in which such qualification is required.
B. Borrower is duly authorized and empowered to execute, deliver and
perform this Agreement and to borrow money from the Lender.
C. The execution and delivery of this Agreement and the performance by
Borrower of its obligations hereunder do not and will not violate or
conflict with any provisions of law or the Articles of Incorporation or
Bylaws of Borrower and do not and will not violate or conflict with or
cause any default or event of default to occur under any agreement binding
upon Borrower.
D. The execution and delivery of this Agreement have been duly approved by
all necessary action of the Board of Directors of Borrower; and this
Agreement has in fact been duly executed and delivered by Borrower and
constitutes its lawful and binding obligation, legally enforceable against
it in accordance with its terms (subject to laws generally affecting the
enforcement of creditors' rights).
E. To the best knowledge of Borrower, no litigation, tax claims, or
governmental proceedings are pending or are threatened against Borrower
and no order of any court or administrative agency is outstanding against
Borrower.
F. The authorization, execution, delivery and performance of this
Agreement are not and will not be subject to the jurisdiction, approval,
or consent of or to any requirement of registration with or notification
to any federal, state or local regulatory body or administrative agency.
G. The conduct of business by Borrower is not subject to registration
with, notification to, or regulation, licensing, franchising, consent or
approval by any state or federal governmental authority or administrative
agency except general laws and regulations which are not related or
applicable particularly or uniquely to the type of business conducted by
Borrower, which do not materially restrict or limit the business of
Borrower, and with which Borrower is in full compliance. All registrations
and notifications required to be made, and all licenses, franchises,
permits, operating certificates, approvals, and consents required to be
issued to enter into or conduct such business have been duly and lawfully
made or obtained and issued, and all terms and conditions set forth
therein or imposed thereby have been duly met and complied with.
H. To the best knowledge of Borrower based upon reasonable inquiry, no
director, officer, employee, or agent of or consultant to Borrower is
prohibited by law, by regulation, by contract, or by the terms of any
license, franchise, permit, certificate, approval, or consent from
participating in the business of Borrower as manager or member employee,
or agent of or as consultant to Borrower or is the subject to any pending
or, to Borrower's best knowledge, threatened proceeding which, if
determined adversely, would or could result in such a prohibition.
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I. Borrower has filed all federal and state tax returns that are required
to be filed, and all taxes shown as due thereon have been paid.
J. Borrower furnished certain financial statements to the Lender in
conjunction with the execution of this Agreement. Borrower acknowledges
and agrees that the Lender has acted in reliance upon the information
contained within said financial statements prior to the execution of this
Agreement and/or prior to making advances to Borrower hereunder. These
financial statements were prepared in accordance with generally accepted
accounting principles consistently maintained and present fairly the
financial condition of Borrower as of the dates thereof, and disclose
fully all liabilities of Borrower, whether or not contingent. Since the
date of the most recent financial statement, there has been no material
adverse change in the financial condition of Borrower. So long as any sums
remain due and payable pursuant to the Promissory Note, Borrower shall
furnish Lender with such further financial statements and other financial
information, such as copies of tax returns, as Lender may reasonably
request or as otherwise required by any document executed in conjunction
herewith. In addition, Borrower shall within ninety (90) days after the
end of each fiscal year furnish to the Lender audited financial and
operating statements of the Borrower for such fiscal year, including a
balance sheet and a profit and loss statement, all in reasonable detail
and conforming to generally accepted accounting principles. Borrower shall
also within thirty (30) days after the end of each month year furnish to
the Lender the interim financial statements of the Borrower. All such
financial statements shall be prepared and certified by the Borrower to
the satisfaction of the Lender at the expense of Borrower. In the event
Borrower fails to furnish any such financial statements, the Lender may
cause an audit to be made of the respective books and records at the sole
cost and expense of the Borrower (and Lender may add the expenses of such
audit to the Loan) or otherwise declare an Event of Default hereunder.
Lender also shall have the right to examine at their place of safekeeping
at reasonable times all books, accounts and records relating to the
business operations of the Borrower and the operation of the Mortgaged
Premises.
K. The Mortgaged Premises and the intended use of thereof for the purpose
and in the manner contemplated by this Agreement are permitted by and
comply in all material respects with all presently applicable use or other
restrictions and requirements in prior conveyances, zoning ordinances and
all development, pollution control, water conservation, environmental and
other laws, regulations, rules and ordinances of the Unites States and the
State of Minnesota and the respective agencies thereof, and the political
subdivision in which the Mortgaged Premises is located.
L. Borrower shall allow no encumbrances or liens to be placed upon the
Mortgaged Premises without the prior written consent of the Lender. The
Lender hereby consents to a second mortgage in favor of the City of
Monticello, Minnesota in the amount of not more than Three Hundred fifty
Thousand and 00/100 ($350,000.00) Dollars.
III. BREACH OF REPRESENTATIONS AND WARRANTIES. The material breach of any of the
representations or warranties contained in this Agreement or of any of
conditions of default or other breach of the covenants or other promises
contained in this Agreement, the Promissory
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Note, the Mortgage, the Assignment of Lease, or any instrument executed in
conformity therewith, shall entitle the Lender to pursue any of its rights and
remedies under the terms and conditions of any such documents or instruments or
as otherwise allowed by law.
IV. RESERVATION OF RIGHT TO MAKE DEMAND. Borrower acknowledge that the Lender
reserves the right to accelerate and demand immediate payment of any or all
loans and the interest thereon and of all other obligations of Borrower upon the
failure of Borrower to comply with any aspect of this Agreement, the Promissory
Note, the Mortgage, the Assignment of or any other document or instrument
executed in conformity herewith.
V. DOCUMENTATION. Borrower agree that prior to the Lender advancing any sums to
Borrower under the Promissory Note:
A. Borrower shall furnish to the Lender:
1. a certified copy of the resolutions of the Board of Directors of
the Borrower, authorizing the execution, delivery and performance of
this Agreement and related documents, in form and substance
acceptable to Lender;
2. current copies of the Articles of Incorporation or Bylaws, if
any, and any amendments thereto certified by the Secretary of the
Borrower and any amendments thereto together with a certificate of
the secretary of the Borrower in a form acceptable to the Lender.
3. A current Certificate of Good Standing from the Secretary of
State of the State of Minnesota.
B. Borrower shall deliver to Lender a Mortgage and Security Agreement and
Fixture Financing Statement, which shall be in form and substance
acceptable to the Lender ("Mortgage"), which Mortgage shall be a first
lien on the Mortgaged Premises.
C. Borrower shall execute an assignment of its right, title, and interest
in and to its leases for the Mortgaged Premises to the Lender, which
assignment shall be in form and substance acceptable to the Lender
("Assignment of Lease").
D. Borrower shall execute and deliver to Lender an environmental indemnity
agreement and an Americans with Disabilities Act indemnity agreement
("Indemnity Agreements") each of which shall be in a form acceptable to
Lender.
E. Borrower shall provide Lender with certified copies of policies of
insurance providing for proper and adequate insurance coverage for the
Mortgaged Premises at or prior to closing, which shall include, but not
necessarily be limited to liability coverage, fire, casualty and extended
coverage, all in form and amount satisfactory to the Lender. Such policies
shall be paid and shall be in amounts of not less than the full insurable
value of the Mortgaged Premises or as otherwise required by the Mortgage.
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F. The Lender shall obtain at Borrower's expense a mortgagee's policy of
title insurance ensuring that the Mortgage is a first priority lien on the
Mortgaged Premises and containing such terms and endorsements as Lender
and its counsel may require.
G. Borrower shall obtain and provide to Lender a letter of opinion from
its legal counsel that shall be in a form acceptable to Lender.
H. Borrower shall provide Lender evidence of Borrower's cash investment
for the purchase of the Mortgaged Premises in an amount not less than One
Hundred Fifty Eight Thousand and 00/100 ($158,000.00) Dollars.
I. Borrower shall execute and deliver to Lender an amendment regarding
that certain Loan Agreement dated December 4, 2002 between Borrower and
Lender.
J. In addition, Borrower shall execute all such other documents as Lender
and its legal counsel may require for the proper documentation of the
Loan.
VI. AUTOMATIC EVENTS OF DEFAULT. In addition to and not in lieu of other events
of default specified previously within this Agreement, the following shall also
constitute automatic "Events of Default" entitling the Lender to exercise any or
all of its rights under this Agreement or any instrument executed in conformity
herewith (all of which together with any "Event of Default" under the Promissory
Note, Mortgage, or Assignment are referred to in this Agreement as "Events of
Default"):
A. Any material event or condition of default (however defined) by
Borrower shall occur and the applicable cure period, if any, shall have
expired, in any promissory note or any agreement between Borrower and
Lender, including but not limited to that certain Revolving Line of Credit
Promissory Note dated December 4, 2002 and that certain Loan Agreement
dated December 4, 2002 between Borrower and Lender; or
B. Borrower's failure to comply with any of the provisions of the
Promissory Note including without limitation the failure to make any
payment on the Promissory Note whether principal, interest, premium or
late charge, when and as the same becomes due (whether at the stated
maturity or at a date fixed for any installment payment or any accelerated
payment date or otherwise) within five (5) days of the date on which such
performance is due; or
C. Borrower's failure to pay, perform or comply with when due any other
indebtedness secured by the Mortgage; or
D. Borrower's failure to comply with or perform any of the other terms,
conditions or covenants of this Mortgage and such failure shall continue
for a period of fifteen (15) days after notice thereof to Borrower or such
longer time as may be reasonably necessary for Borrower to cure, while
acting with due diligence, provided in any event that such time shall be
no more than sixty (60) days; or
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E. Borrower shall fail to pay Borrower's debts as they become due, make an
assignment for the benefit of Borrower's creditors, or shall admit in
writing Borrower's inability to pay its debts as they become due or shall
file a petition under any chapter of the United States Bankruptcy Code or
any similar law, state or federal, now or hereafter existing, or shall
become "insolvent" as that term is generally defined under the United
States Bankruptcy Code, or shall in any involuntary bankruptcy case
commenced against it file an answer admitting insolvency or inability to
pay its debts as they become due, or shall fail to obtain a dismissal of
such case within sixty (60) days after its commencement or convert the
case from one chapter of the United States Bankruptcy Code to another
chapter, or be the subject of an order for relief in such bankruptcy case,
or be adjudged a bankrupt or insolvent, or shall have a custodian, trustee
or receiver appointed for, or have any court take jurisdiction of its
property, or any part thereof, in any proceeding for the purpose of
reorganization, arrangement, dissolution or liquidation, and such
custodian, trustee or receiver shall not be discharged, or such
jurisdiction shall not be relinquished, vacated or stayed within sixty
(60) days of the appointment; or
F. an event of default shall occur under any other instrument securing the
Promissory Note and shall not have been cured within the time permitted
therein to cure; or
G. a judgment, writ or warrant of attachment or execution, or similar
process shall be entered and become a lien or be issued or levied against
the Premises and shall not be released or fully bonded within forty-five
(45) days after its entry, issue or levy; or
H. any material representation or warranty made by Borrower herein, in the
Promissory Note or in any other instrument given as security for payment
of the Indebtedness Secured Hereby or executed in conjunction with the
Promissory Note shall be false, breached or dishonored; or
I. the Borrower shall default under or shall fail to comply with any of
the terms, conditions or provisions of the Mortgage executed in
conjunction herewith.
J. Borrower furnishes to the Lender any credit application or financial
statement containing any information that shall prove to have been
incorrect in any material respect when made.
VII. ADDITIONAL COVENANTS. Borrower agrees that:
A. so long as the Loan is outstanding, the Borrower shall comply with all
loan financial covenants set forth in that certain Loan Agreement dated
December 4, 2002 between Borrower and Lender, as amended by that certain
Second Amendment and Modification of Revolving Line of Credit Loan
Agreement and Reaffirmation of Guaranties of even date herewith, including
but not limited to the Minimum net worth covenant, the debt to tangible
net worth covenant, the current ratio covenant, the maximum capital
expenditure covenant and the debt service coverage covenant.
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B. Borrower shall pay or reimburse the Lender and its participants for all
expenses, including all reasonable fees and disbursements of legal counsel
(up to the maximum amount permitted by law), incurred by the Lender or any
of the Lender's participants in connection with the enforcement of this
Agreement or any document contemplated hereby, or in connection with the
protection or enforcement of the interest and collateral security of the
Lender in any litigation or bankruptcy or insolvency proceeding or the
prosecution or defense of any action or proceeding relating in any way to
the transactions contemplated by this Agreement.
C. Borrower shall furnish to the Lender as soon as possible and in any
event within ten (10) days after the Borrower has obtained knowledge of
the occurrence of an event which would constitute an Event of Default
hereunder or a violation of any of the covenants or obligations of the
Borrower under this Agreement or which would cause any of the
representations or warranties hereunder to be false or misleading in any
material respect, or an event which with the giving of notice of lapse of
time or both would constitute an Event of Default, which is continuing on
the date of such statement, in which case the Borrower, as applicable
shall deliver a signed statement setting forth details of such violation
or event and the action which has been taken, are taking, or propose to
take to correct the same.
D. Borrower shall pay and discharge all taxes, assessments and
governmental charges or levies imposed upon either Borrower or upon
Borrower's income, or profits, or upon Borrower's assets or properties,
prior to the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a lien or charge upon the property or
assets of either the Borrower; provided, however, that the Borrower shall
not be required to pay any such tax, assessment, charge, levy or claim,
the payment of which is being contested in good faith and by proper
proceedings and for which they shall have set aside adequate reserve
therefor.
E. The performance or observance of any promise or condition set forth in
this Agreement may be waived in writing by the Lender, but not otherwise.
No delay in the exercise of any power, right, or remedy of the Lender
shall operate as a waiver thereof, nor shall any single or partial
exercise thereof or the exercise of any other power, right, or remedy.
F. The Lender and its participants, if any, are not general partners or
joint venturers with Borrower and the Lender shall not have any liability
or responsibility for any obligation, act, or omission of any of its
participants.
G. Any notices required to be given to Borrower by this Agreement or any
of the Exhibits hereto shall be provided at the addresses listed below:
WSI Industries, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
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H. Borrower agrees that the Lender may at any time or from time to time,
at its sole discretion and without demand and without notice to anyone,
set off any liability owed to Borrower by the Lender, whether or not due,
against any indebtedness owed to the Lender by Borrower (for the Loan or
for any other transaction or event, including both loans retained by the
Lender and loans in which the Lender has granted any person or entity a
participation), whether or not due. In addition, each entity or other
person holding a participating interest in any loans made to Borrower by
the Lender shall have the right to appropriate or set off any deposit or
other liability then owed by such entity or person to Borrower whether or
not due, and apply the same to the payment of said participating interest,
as fully as if such bank or person had lent directly to Borrower the
amount of such participating interest.
I. Notwithstanding anything to the contrary in any other document executed
in conjunction herewith, any written notice required by this Agreement or
any other document executed in conjunction herewith, shall be deemed
received upon mailing, regular or certified mail, to the parties at the
addresses listed above.
J. This Agreement is being executed in and is intended to be enforced in
the State of Minnesota. This Agreement and the transaction evidenced
hereby shall be construed and enforced in accordance with the laws of the
State of Minnesota in the State of Minnesota.
K. All Exhibits to this Agreement are deemed part of the Agreement and all
terms and conditions of such Exhibits are to be deemed incorporated by
reference into the Agreement.
L. This Agreement shall be binding upon Borrower and Borrower's successors
and assigns, and shall inure to the benefit of the Lender and its
participants, successors, and assigns. All rights and powers specifically
conferred upon the Lender may be transferred or delegated by the Lender to
any of its participants, successors, or assigns. If any provision or
application of this Agreement is held unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this Agreement
shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement or in any other
agreement between Borrower and the Lender shall survive the execution,
delivery, and performance of this Agreement and the creation and payment
of any indebtedness to the Lender. Borrower waive notice of the acceptance
of this Agreement by the Lender.
M. This instrument may be executed in counterparts, each of which shall be
deemed to be an original and all of which, when taken together, shall
constitute one instrument.
N. No failure or delay on the part of the Lender in exercising any right,
power or remedy hereunder or under the Mortgage, or any other instrument
binding on the Borrower 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 any other agreement or instrument
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running in favor of the Lender. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
O. No amendment, modification, termination or waiver of any provision of
this Agreement, the Mortgage or the Promissory Note or consent by the
Borrower to any departure therefrom shall be effective unless the same
shall be in writing and signed by the Lender 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.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the undersigned duly authorized individuals on the day and year first written
above.
BORROWER:
WSI INDUSTRIES, INC., a Minnesota
corporation
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
Its: Chief Financial Officer
LENDER:
EXCEL BANK MINNESOTA,
a Minnesota banking corporation
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
Its: Managing Director
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