Exhibit 10.8
SECOND AMENDMENT AND MODIFICATION OF
REVOLVING LINE OF CREDIT LOAN AGREEMENT
AND REAFFIRMATION OF GUARANTIES
This Amendment and Modification of Revolving Line of Credit Loan Agreement
and Reaffirmation of Guaranties ("Amendment") is made effective the 3rd day of
May, 2004 ("Effective Date") by and among WSI Industries, Inc., a Minnesota
corporation, having an address of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Borrower"), Taurus Numeric Tool, Inc., having an address of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and WSI Rochester, Inc., having an address of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (jointly "Guarantor") and Excel Bank
Minnesota, a Minnesota banking corporation, having an address of ▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ("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, the Security Agreement and all of
the documents executed in conjunction therewith are sometimes jointly referred
to herein as the "Loan Documents"; and
WHEREAS, the Loan Documents were amended by that certain Amendment and
Modification of Revolving Line of Credit Promissory Note, Loan Agreement and
Reaffirmation of Guaranties dated effective December 30, 2003; and
WHEREAS, the Bank and the Borrower and each Guarantor desire that 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.
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Exhibit 10.8
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 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):
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 1.75
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 1.75 to 1.
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 Eight Hundred Fifty Thousand and 00/100
($850,000.00) Dollars in any fiscal year. This covenant shall be exclusive
of the acquisition of title to the real property located at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ by the Borrower.
3. A new Section 5.11 shall be added to the Loan Agreement as follows:
Section 5.11 DEBT SERVICE COVERAGE RATIO. So long as the Note shall remain
unpaid or the Bank shall have any Commitment hereunder, the Borrower will
maintain an annual ratio of earnings before interest, taxes, depreciation
and amortization, less distributions to shareholders, all for the same
specified period to annual principal and interest payments due on all Debt
of the Borrower of not less than 1 to 1 on December 31, 2004 and not less
than 1.25 to 1 at each December 31st thereafter beginning on December 31,
2005, as determined in accordance with generally recognized accounting
principles consistently applied.
4. A new Section 7.01(l) shall be added to the Loan Agreement as follows:
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Exhibit 10.8
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 the Bank,
including but not limited to that certain Promissory Note dated May 3,
2004 and that certain Loan Agreement dated May 3, 2004 between Borrower
and the Bank; or
5. 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.
6. 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,
including but not necessarily limited to any further or additional
extensions or renewals thereof.
7. 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.
8. 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 and hereby acknowledges and agrees that the Guaranty guarantees
to the Bank the repayment of all sums due and owing to the Bank pursuant
to the terms, conditions and covenants of the Note and the performance of
the terms and covenants of the balance of the Loan Documents. 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.
9. 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.
10. Except as herein specifically modified, amended or extended, all terms and
conditions of
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Exhibit 10.8
the Loan Documents shall otherwise remain unchanged and in full force and
effect.
11. 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.
12. 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.
13. 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.
14. 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/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Financial Officer
GUARANTOR:
TAURUS NUMERIC TOOL, INC., a
Minnesota corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Financial Officer
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Exhibit 10.8
WSI ROCHESTER, INC., a Minnesota
corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Financial Officer
EXCEL BANK MINNESOTA, a
Minnesota banking corporation,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Managing Director
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