EXHIBIT 10.1

 

FIRST AMENDMENT TO TERM LOAN AGREEMENT

 

THIS FIRST AMENDMENT TO TERM LOAN AGREEMENT (this “Amendment”) is made and
entered into as of January 31, 2014, by and between WSI INDUSTRIES, INC., a
Minnesota corporation (the “Borrower”) and BMO HARRIS BANK N.A., a national
banking association, successor by merger to M&I Marshall & Ilsley Bank (the
“Bank”).

 

RECITALS:

 

A.     The Borrower and the Bank are parties to a certain Loan Agreement dated
as of May 8, 2013 (the “Loan Agreement”). All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan Agreement.

 

B.     The Borrower has requested that the Bank amend certain provisions of the
Loan Agreement, and the Bank has agreed to do so upon the terms and subject to
the conditions set forth in this Amendment.

 

AGREEMENTS:

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
nature, receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

 

Section 1.     Delivery of Documents. At or prior to the execution of this
Amendment, and as a condition precedent to the effectiveness of this Amendment,
the Borrower shall have satisfied the following conditions and delivered or
caused to be delivered to the Bank the following documents each dated such date
and in form and substance satisfactory to the Bank and duly executed by all
appropriate parties:

 

(a)     This Amendment.

 

(b)     An Acknowledgment of Guarantors, duly executed by each Guarantor.

 

(c)     A copy of the resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Amendment certified
as true and accurate by an officer of the Borrower, along with a certificate of
such officer which (i) certifies that there has been no amendment to either the
Articles of Incorporation or the Bylaws of the Borrower since true and accurate
copies of the same were last delivered and certified to the Bank, and that said
Articles of Incorporation or the Bylaws remain in full force and effect as of
the date of this Amendment, (ii) identifies each officer of the Borrower
authorized to execute this Amendment and any other instrument or agreement
executed by the Borrower in connection with this Amendment, and (iii) sets forth
specimen signatures of each officer of the Borrower referred to above and
identifies the office or offices held by such officer.

 

(d)     The Bank shall have received reimbursement for its legal fees and other
expenses as described in Section 9 hereof.

 

(e)     Such other documents or instruments as the Bank may reasonably require.

 

 

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Section 2.     Amendment to Loan Agreement. Section 5.8.3 of the Loan Agreement
is hereby amended and restated in its entirety to read as follows:

 

“5.8.3     Quarterly Fixed Charge Coverage Ratio. So long as the Note shall
remain unpaid or the Bank shall have any commitment hereunder, Borrower shall
maintain a quarterly Fixed Charge Coverage Ratio, tested quarterly as of the end
of each fiscal quarter of Borrower (based upon a fiscal year end of the last
Sunday in August, and fiscal quarter ends on the last Sunday of each of
November, February, May and August) for the most recently-ended four fiscal
quarters of Borrower preceding each such testing date, of not less than 1.20 to
1 as of the end of each such testing period, beginning on fiscal quarter ended
on the last Sunday of February in 2014, determined in accordance with generally
recognized accounting principles consistently applied.

 

The term “Fixed Charge Coverage Ratio” means the ratio of (a) Borrower’s
earnings after taxes, plus interest expense, plus taxes, plus depreciation, plus
amortization, plus non-cash stock option expenses, minus unfinanced capital
expenditures (but excluding from unfinanced capital expenditures an amount of up
to $600,000 contributed by Borrower to Borrower’s 2012-2013 building expansion),
minus dividends, minus taxes paid in cash; to (b) scheduled principal and
interest payments due on all Debt of the Borrower for such testing period.”

 

Section 3.     [Intentionally omitted.]

 

Section 4.     Representations; No Default. The Borrower represents and warrants
that: (a) the representations and warranties of the Borrower contained in
Article 4 of the Loan Agreement are true and correct on and as of the date
hereof, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct as of such earlier date, (b) the Borrower has the power and legal right
and authority to enter into this Amendment and has duly authorized the execution
and delivery of this Amendment and other agreements and documents executed and
delivered by the Borrower in connection herewith, (c) neither this Amendment nor
the agreements contained herein contravene or constitute an Event of Default
under the Loan Agreement or a default under any other agreement, instrument or
indenture to which the Borrower is a party or a signatory, or any provision of
the Borrower’s Articles of Incorporation or Bylaws or, to the best of the
Borrower’s knowledge, any other agreement or requirement of law, or result in
the imposition of any lien or other encumbrance on any of its property under any
agreement binding on or applicable to the Borrower or any of its property
except, if any, in favor of the Bank, (d) no consent, approval or authorization
of or registration or declaration with any party, including but not limited to
any governmental authority, is required in connection with the execution and
delivery by the Borrower of this Amendment or other agreements and documents
executed and delivered by the Borrower in connection herewith or the performance
of obligations of the Borrower herein described, except for those which the
Borrower has obtained or provided and as to which the Borrower has delivered
certified copies of documents evidencing each such action to the Bank, (e) no
events have taken place and no circumstances exist at the date hereof which
would give the Borrower grounds to assert a defense, offset or counterclaim to
the obligations of the Borrower under the Loan Agreement or any of the other
Loan Documents, (f) there are no known claims, causes of action, suits, debts,
liens, obligations, liabilities, demands, losses, costs and expenses (including
attorneys’ fees) of any kind, character or nature whatsoever, fixed or
contingent, which the Borrower may have or claim to have against the Bank, which
might arise out of or be connected with any act of commission or omission of the
Bank existing or occurring on or prior to the date of this Amendment, including,
without limitation, any claims, liabilities or obligations arising with respect
to the indebtedness evidenced by the Note, and (g) no Event of Default has
occurred and is continuing under the Loan Agreement.

 

 
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Section 5.     Affirmation, Further References. The Bank and the Borrower each
acknowledge and affirm that the Loan Agreement, as hereby amended, are hereby
ratified and confirmed in all respects and all terms, conditions and provisions
of the Loan Agreement (except as amended by this Amendment) and of each of the
other Loan Documents shall remain unmodified and in full force and effect. All
references in any document or instrument to the Loan Agreement are hereby
amended and shall refer to the Loan Agreement as amended by this Amendment.

 

Section 6.     Merger and Integration, Superseding Effect. This Amendment, from
and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into it all prior oral
and written agreements on the same subjects by and between the parties hereto
with the effect that this Amendment, shall control with respect to the specific
subjects hereof and thereof.

 

Section 7.     Severability. Whenever possible, each provision of this Amendment
and any other statement, instrument or transaction contemplated hereby or
thereby or relating hereto or thereto shall be interpreted in such manner as to
be effective, valid and enforceable under the applicable law of any
jurisdiction, but, if any provision of this Amendment or any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
thereto shall be held to be prohibited, invalid or unenforceable under the
applicable law, such provision shall be ineffective in such jurisdiction only to
the extent of such prohibition, invalidity or unenforceability, without
invalidating or rendering unenforceable the remainder of such provision or the
remaining provisions of this Amendment or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto in such
jurisdiction, or affecting the effectiveness, validity or enforceability of such
provision in any other jurisdiction.

 

Section 8.     Successors. This Amendment shall be binding upon the Borrower,
the Bank and their respective successors and assigns, and shall inure to the
benefit of the Borrower, the Bank and to the respective successors and assigns
of the Bank.

 

Section 9.     Costs and Expenses. The Borrower agrees to reimburse the Bank,
upon execution of this Amendment, for all reasonable out-of-pocket expenses
(including attorneys’ fees and legal expenses of counsel for the Bank) incurred
in connection with the Loan Agreement, including in connection with the
negotiation, preparation and execution of this Amendment and all other documents
negotiated, prepared and executed in connection with this Amendment, and in
enforcing the obligations of the Borrower under this Amendment, and to pay and
save the Bank harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Amendment.

 

Section 10.   Headings. The headings of various sections of this Amendment have
been inserted for reference only and shall not be deemed to be a part of this
Amendment.

 

Section 11.   Counterparts; Digital Copies. This Amendment may be executed in
several counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and any party to this Amendment may
execute any such agreement by executing a counterpart of such agreement. A
facsimile or digital copy (pdf) of this signed Amendment shall be deemed to be
an original thereof.

 

Section 12.   Release of Rights and Claims. Borrower, for itself and its
successors and assigns, hereby releases, acquits, and forever discharges Bank
and its successors and assigns for any and all manner of actions, suits, claims,
charges, judgments, levies and executions occurring or arising from the
transactions entered into with Bank prior to entering into this Amendment
whether known or unknown, liquidated or unliquidated, fixed or contingent,
direct or indirect which Borrower may have against Bank.

 

 
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Section 13.     Governing Law. This Amendment shall be governed by the internal
laws of the State of Minnesota, without giving effect to conflict of law
principles thereof.

 

Section 14.     No Waiver.     Nothing contained in this Amendment (or in any
other agreement or understanding between the parties) shall constitute a waiver
of, or shall otherwise diminish or impair, the Bank’s rights or remedies under
the Loan Agreement or any of the other Loan Documents, or under applicable law.

 

[signature page follows]

 

 
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EXHIBIT 10.1

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first above written.

 

BORROWER:

WSI INDUSTRIES, INC.,

a Minnesota corporation

 

 

 

 

 

 

 

  

 

 

By:

/s/ Paul D. Sheely

 

 

 

Paul D. Sheely, Chief Financial Officer

 

 

 

BANK:

BMO HARRIS BANK N.A.,

a national banking association

 

 

 

 

 

 

 

  

 

 

By:

/s/ Philip P. Krump

 

 

 

Philip P. Krump, Director