EXHIBIT 10.3

 
PROMISSORY NOTE
 
Principal
$5,000,000.00
Loan Date
08-13-2009
Maturity
02-13-2010
Loan No
2000206013
Account
309275

Borrower:
ELECSYS CORPORATION
ELECSYS INTERNATIONAL CORPORATION
846 N. MARTWAY COURT
OLATHE, KS 66061
 
Lender:
Bank Midwest N.A.
Town Pavilion Facility
1111 Main Street
Kansas City, MO 64105

Principal Amount:  $5,000,000.00
 
Date of Note:  August 13, 2009

PROMISE TO PAY. ELECSYS CORPORATION and ELECSYS INTERNATIONAL CORPORATION
(“Borrower”) jointly and severally promise to pay to Bank Midwest N.A.
(“Lender”), or order, in lawful money of the United States of America, the
principal amount of Five Million & 00/100 Dollars ($5,000,000.00) or so much as
may be outstanding, together with interest on the unpaid outstanding principal
balance of each advance.  Interest shall be calculated from the date of each
advance until repayment of each advance.
 
PAYMENT.  Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on February 13, 2010.  In addition,
Borrower will pay regular monthly payments of all accrued unpaid interest due as
of each payment date, beginning September 13, 2009, with all subsequent interest
payments to be due on the same day of each month after that.  Unless otherwise
agreed or required by applicable law, payments will be applied first to any
accrued unpaid interest; then to principal; then to any unpaid collection costs;
and then to any late charges.  Borrower will pay lender at lender’s address
shown above or at such other place as lender may designate in writing.
 
VARIABLE INTEREST RATE.  The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the Wall
Street Journal Prime Rate.  That is the base rate on corporate loans posted by
at least 75% of the nations 30 largest banks on the rate adjustment date (the
“Index”).  The Index is not necessarily the lowest rate charged by Lender on its
loans.  If the Index becomes unavailable during the term of this loan, Lender
may designate a substitute index after notifying Borrower.  Lender will tell
Borrower the current Index rate upon Borrower’s request.  The interest rate
change will not occur more often than each day.  Borrower understands that
Lender may make loans based on other rates as well.  The Index currently is
3.250% per annum.  Interest on the unpaid principal balance of this Note will be
calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a
rate equal to the Index, adjusted if necessary for any minimum and maximum rate
limitations described below, resulting in an initial rate of 5.500% per annum
based on a year of 360 days.
 
NOTICE:  Under no circumstances will the interest rate on this Note be less than
5.500% per annum or more than the maximum rate allowed by applicable law.
 
INTEREST CALCULATION METHOD.  Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding.  All interest payable under
this Note is computed using this method.
 

 
 

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PREPAYMENT.  Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law.  Except for the foregoing, Borrower may pay
without penalty all or a portion of the amount owed earlier than it is
due.  Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower’s obligation to continue to make payments of accrued unpaid
interest.  Rather, early payments will reduce the principal balance
due.  Borrower agrees not to send Lender payments marked “paid in full”,
“without recourse”, or similar language.  If Borrower sends such a payment,
Lender may accept it without losing any of Lender’s rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender.  All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes “payment in full”
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to:  Bank
Midwest N.A., Town Pavilion Facility, 1111 Main Street, Kansas City, MO 64105.
 
LATE CHARGE.  If a payment is more than 10 days late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
 
INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding a 5.000
percentage point margin (“Default Rate Margin”).  The Default Rate Margin shall
also apply to each succeeding interest rate change that would have applied had
there been no default.  However, in no event will the interest rate exceed the
maximum interest rate limitations under applicable law.
 
DEFAULT.  Each of the following shall constitute an event of default (“Event of
Default”) under this Note:
 
Payment Default.  Borrower fails to make any payment when due under this Note.
 
Other Defaults.  Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
 
Default in Favor of Third Parties.  Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s property or Borrower’s ability to repay this
Note or perform Borrower’s obligations under this Note or any of the related
documents.
 
False Statements.  Any warranty, representation or statement made or furnished
to Lender by Borrower or on Borrower’s behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.
 
Insolvency.  The dissolution or termination of Borrower’s existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
 

 
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Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan.
 
This includes a garnishment of any of Borrower’s accounts, including deposit
accounts, with Lender.  However, this Event of Default shall not apply if there
is a good faith dispute by Borrower as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture proceeding
and deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.
 
Events Affecting Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness evidenced by this Note.
 
Change In Ownership.  Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
 
Adverse Change.  A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.
 
Cure Provisions.  If any default, other than a default in payment is curable and
if Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) months, it may be cured if Borrower,
after Lender sends written notice to Borrower demanding cure of such
default:  (1) cures the default within ten (10) days; or (2) if the cure
requires more than ten (10) days, immediately initiates steps which Lender deems
in Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
 
LENDER’S RIGHTS.  Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.
 
ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes, subject to any limits under applicable law, Lender’s attorneys’ fees
and Lender’s legal expenses whether or not there is a lawsuit, including
attorneys’ fees and expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals.  If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
 
GOVERNING LAW.  This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Missouri without regard to its conflicts of law provisions.  This Note has been
accepted by Lender in the State of Missouri.
 
CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon Lender’s request
to submit to the jurisdiction of the courts of Jackson County, State of
Missouri.
 
DISHONORED ITEM FEE.  Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower’s loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
 

 
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RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account).  This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the
future.  However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law.  Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the indebtedness against any and all such accounts.
 
COLLATERAL.  Borrower acknowledges this Note is secured by A COMMERCIAL SECURITY
AGREEMENT DATED AUGUST 13, 2009.
 
LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances under
this Note may be requested orally by Borrower or as provided in this
paragraph.  All oral requests shall be confirmed in writing on the day of the
request.  All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender’s office shown above.  The
following person or persons are authorized, except as provided in this
paragraph, to request advances and authorize payments under the line of credit
until Lender receives from Borrower, at Lender’s address shown above, written
notice of revocation of such authority:  KARL B. GEMPERLI, President & CEO of
ELECSYS CORPORATION and President & CEO of ELECYSY INTERNATIONAL CORPORATION;
and TODD A. DANIELS, VP, CFO & Secretary of ELECSYS CORPORATION and CFO of
ELECSYS INTERNATIONAL CORPORATION.  FUNDS ARE TO BE DISBURSED AT BORROWER’S
REQUEST AND LOAN OFFICER’S APPROVAL.  Borrower agrees to be liable for all sums
either:  (A) advanced in accordance with the instructions of an authorized
person or (S) credited to any of Borrower’s accounts with Lender.  The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender’s internal records, including daily
computer print-outs.  Lender will have no obligation to advance funds under this
Note if:  (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s
guarantee of this Note or any other loan with Lender; or (D) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
 
PRIOR NOTE.  This Promissory Note replaces and supersedes a certain Promissory
Note dated August 14, 2008 in the original principal amount of $6,000,000.00,
payable to Bank Midwest, N. A., as the same may have been modified and
amended.  This Note represents the same indebtedness owed under the original
Note.  The parties intend that the indebtedness evidenced by this Note shall
continue to be secured by the Loan documents originally executed and delivered
as security for the original Note according to the same perfection
priority.  Nothing contained herein is intended to adversely affect the priority
or enforceability of any Lien or security interest previously granted.
 
SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
 
GENERAL PROVISIONS.  If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note.  Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them.  Each Borrower
understands and agrees that, with or without notice to Borrower, Lender may with
respect to any other Borrower (a) make one or more additional secured or
unsecured loans or otherwise extend additional credit; (b) alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of any indebtedness, including increases and decreases of
the rate of interest on the indebtedness; (c) exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any security, with or
without the substitution of new collateral; (d) apply
 

 
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such security and direct the order or manner of sale thereof, including without
limitation, any non-judicial sale permitted by the terms of the controlling
security agreements, as Lender in its discretion may determine; (e) release,
substitute, agree not to sue, or deal with anyone or more of Borrower’s
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; and (f) determine how, when and what application of payments and
credits shall be made on any other indebtedness owing by such other
Borrower.  Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment, and
notice of dishonor.  Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability.  All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender’s security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone.  All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.  The obligations under this
Note are joint and several.
 
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT
IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT.  TO PROTECT YOU (BORROWER(S)) AND
US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
 
JURY WAIVER.  Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other.
 
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  EACH BORROWER
AGREES TO THE TERMS OF THE NOTE.
 
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
 
BORROWER:
 
ELECSYS CORPORATION

By: ______________________________________________                                                                                    
KARL B. GEMPERLI, President & CEO of ELECSYS
CORPORATION

ELECSYS INTERNATIONAL CORPORATION

By: ______________________________________________                                                                                    
KARL B. GEMPERLI, President & CEO of ELECSYS
INTERNATIONAL CORPORATION

 
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