Document:

exv10w2

Exhibit 10.2

March 30, 2011

Grubb & Ellis Company

c/o

JMP Securities LLC

Investment Banking

600 Montgomery Street, Suite 1100

San Francisco, CA 94111

Re: Grubb & Ellis Company

Ladies and Gentlemen:

We have discussed a potential transaction (the “Transaction”) involving Grubb & Ellis
Company (the “Company”), and Colony Capital Acquisitions, LLC and its affiliates
(“Colony”). In consideration of the extension of credit by affiliates of Colony and the
due diligence investigation of the Company that Colony has undertaken and intends to continue to
undertake, the Company hereby agrees that it shall, and that it shall cause its subsidiaries and
its and its subsidiaries officers, directors, employees, agents, affiliates and representatives
(including, without limitation, any investment banking, legal or accounting firm or other advisor
and any individual member or employee of the foregoing) (collectively, the
“Representatives”), until the date that is 60 days after the date of this letter agreement,
provided that such 60 day period shall be reduced to the date of termination or expiration of the
commitment letter of Colony Capital Acquisitions, LLC dated as of March 30, 2011 issued to the
Company, unless the closing of the financing contemplated by the commitment letter has been
consummated prior to the termination or expiration of such commitment letter (the “Exclusivity
Period”), to work exclusively with Colony and its representatives with respect to a potential
Transaction and not to, directly or indirectly, solicit or initiate or enter into any discussions
or transactions with, reply to or encourage, or provide any information, written or verbal to, any
individual, corporation, partnership, or other entity or group (other than Colony and its
representatives) concerning the acquisition of the Company or any subsidiary or any equity interest
therein or all or any substantial portion of any of their assets, whether through direct purchase,
merger, consolidation or other business combination or similar transaction involving the Company or
any of its subsidiaries other than assets sold in the ordinary course of business or pursuant to
the sale of Daymark Realty Advisors, Inc. or any of its subsidiaries or their respective assets,
provided that such sale is undertaken in a process independent from the Transaction with advisors
separate from those advisors involved with the Transaction, or any other transaction concerning the
acquisition of the Company, and that ethical barriers in respect of advisors with respect to
information regarding the aforementioned processes are in place and effective, (singly or
collectively,

 

 

a “Competing Transaction”); provided that the Company may notify such individuals, entities
or groups that it has entered into an exclusivity arrangement concerning the Transaction. During
the Exclusivity Period, the Company shall promptly notify Colony regarding any contact between it
or any of its Representatives and any other person or entity regarding any offer or proposal (and
shall promptly provide to Colony copies of any written materials received by the Company or its
Representatives in connection with such proposal, discussion, negotiation or inquiry, or a written
summary of any oral proposals, discussions, negotiations or inquiries) from such other person or
entity that could be construed as a proposal or offer for Competing Transaction. The Company
represents that neither it nor any of its affiliates nor, to the best of its knowledge, any of its
officers or directors is party to or bound by any agreement with respect to any Competing
Transaction.

The parties agree that, notwithstanding the restrictions contained in that certain Confidentiality
Agreement, dated March 25, 2011 (the “Confidentiality Agreement”), Colony may have
discussions regarding the Possible Transactions (as defined in the Confidentiality Agreement) and
disclose Information (as defined in the Confidentiality Agreement), with FMR LLC and its
affiliates.

The Company shall promptly reimburse Colony for all of its reasonable out-of-pocket expenses
(including, without limitation, the reasonable and documented fees, charges, disbursements and
expenses of financial advisors, accountants, consultants, experts, financing sources, attorneys and
other advisors to Colony and its affiliates) incurred by Colony and its affiliates in connection
with the Transaction, up to a maximum amount of $1,500,000 (the “Transaction Expenses”).

This letter agreement (and any amendments hereto), when executed by the Company, shall constitute a
binding obligation with respect to the matters set forth herein. That being said, this letter
agreement (and any amendments hereto) shall not constitute a binding obligation on any party to
enter into or otherwise consummate a Transaction. This letter agreement may be amended with the
written approval of all parties hereto. This letter agreement (and any amendments hereto) may be
signed in counterparts, all of which will constitute the same agreement, will be governed by and
construed in accordance with the laws (other than the conflict of laws rules) of the State of
California and will bind and inure to the benefit of the parties and their respective successors
and assigns.

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     Please indicate your agreement with the terms of this letter by executing below and returning
to Todd Sammann.

	 	 	 	 	 
	 	Very truly yours,

Colony Capital Acquisitions, LLC

 	 
	 	By:  	/s/ Todd Sammann
 	 
	 	 	Name:  	Todd Sammann 	 
	 	 	Title:  	Authorized Signatory 	 
	 

	 	 	 	 	 
	ACCEPTED AND AGREED

AS OF THIS 30th DAY OF

MARCH 2011

Grubb & Ellis Company

 	 	 
	By:  	/s/ Thomas D’Arcy
 	 	 
	 	Name:  	Thomas D’Arcy 	 	 
	 	Title:  	Pres + CEO 	 	 
	 

3exv10w1

EXHIBIT 10.1

LOAN AGREEMENT

This Loan Agreement (“Agreement”) is made as of the 1st day of February, 2011,
(“Effective Date”) by and among WSI Industries, Inc., a Minnesota corporation, having an address of
213 Chelsea Road, Monticello, MN 55362 (“Borrower”), Taurus Numeric Tool, Inc., having an address
of 213 Chelsea Road, Monticello, MN 55362 and WSI Rochester, Inc., having an address of 213 Chelsea
Road, Monticello, MN 55362 (jointly “Guarantor”) and M&I Marshall & Ilsley Bank, having an address
of 11455 Viking Drive, Eden Prairie, Minnesota 55344 (“Bank”).

RECITALS

WHEREAS, on or about December 4, 2002, (the “Loan Date”) Borrower executed a Revolving Line of
Credit Promissory Note in favor of Excel Bank Minnesota (“Excel”) in the original principal amount
of One Million and no/100 Dollars ($1,000,000.00) (“Note”) pursuant to a Loan Agreement (“Loan
Agreement”) and secured by a Security Agreement executed by Borrower (“Security Agreement); and

WHEREAS, to further secure the sums due and payable to Excel pursuant to the Note and the Loan
Agreement, each Guarantor executed a Guaranty and a Security Agreement dated as of December 4, 2002
; and

WHEREAS, the Note, the Loan Agreement and the related documents Security Agreement were
previously amended on numerous occasions; and

WHEREAS, effective on August 1, 2007, Excel was acquired by merger with the Bank; and

WHEREAS, the Borrower and Guarantors have requested that the Bank again amend and extend the
maturity date of the Note and modify the terms of the Loan Agreement and Bank is agreeable thereto.

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 that the Loan Agreement is
amended and restated in its entirety 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.

“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.

“Event of Default” has the meaning specified in Section 7.01.

“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.

 

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“Guaranty” or “Guaranties” mean the Guaranty agreements executed by Guarantors of even date
herewith in favor of the Bank.

“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 Amended and Restated Revolving Credit Note executed by Borrower of even date
herewith.

“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” or “Security Agreements” mean the Amended and Restated Security
Agreements executed by Borrower and Guarantors of even date herewith.

“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:

 

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“Tangible Net Worth” of any Person means the excess of:

(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 taxes, prepaid
expenses, 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 February 1, 2012 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 One
Million and 00/100 ($1,000,000.00) Dollars. Each Advance shall be in the amount of $10,000.00 or
an integral multiple thereof. Within the limits of the, 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 of even date herewith (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.

 

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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 Interest; Payment. Interest on the 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 the Note shall be computed using this method. This calculation method
results in a higher effective interest rate than the numeric interest rate stated in the Note. 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.

Section 2.05 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 2.06 Use of Proceeds. The proceeds of the Revolving Note shall be used by the
Borrower for general corporate working capital purposes of the Borrower.

 

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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 and the
Guarantors evidencing approval of this Agreement, the Note, the Security Agreement, the
Guaranties, and all other matters contemplated hereby (the “Loan Documents”).

(c) Copies of the Articles of Incorporation and Bylaws of the Borrower and Guarantors,
certified by the Secretary or Assistant Secretary of the Borrower and Guarantors as being
true and correct copies thereof.

(d) A signed copy of a certificate of the Secretary or an Assistant Secretary of the
Borrower and Guarantors which shall certify the names of the officers of the Borrower
authorized to sign this Agreement, the Note, the Security Agreement, the Guaranties and the
other documents or certificates to be delivered pursuant to this Agreement by the Borrower
and Guarantors or any of its or their 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 or Guarantors
canceling or amending the prior certificate and submitting the signatures of the officers
named in such further certificate.

(e) 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.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower and Guarantors represent and warrant to the Bank as follows:

Section 4.01 Corporate Existence and Power. The Borrower and Guarantors are corporations duly
incorporated, validly existing and in good standing under the laws of Minnesota, its jurisdiction
of incorporation, and each 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 and Guarantors have 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
other Loan Documents. Bank has been advised that Taurus Numeric Tool, Inc. may be changing its
name following the execution of this Agreement, and Borrower and Guarantors agree to notify Bank of
such name change within five (5) days following such name change.

Section 4.02 Authorization of Borrowing; No Conflict as to Law of Agreements. The execution,
delivery and performance by the Borrower and Guarantors of this Agreement, the Note and the other
Loan Documents 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 Guarantors, 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 Guarantors or to
the Articles of Incorporation or Bylaws of the Borrower or Guarantors, (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 or any Guarantor 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, the Note and the other Loan Documents
constitute, and when delivered by the Borrower and Guarantors hereunder, will constitute the legal,
valid and binding obligations of the Borrower enforceable against the Borrower and Guarantors 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 and Guarantors have heretofore furnished to
the Bank their financial statements for the fiscal year ended August 29, 2010 and the quarterly
financial statements for the quarter ended November 28, 2010. 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.

 

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Section 4.06 Adverse Change. There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower or Guarantors 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 or Guarantors, threatened against or affecting the Borrower or Guarantors
or the properties of the Borrower or Guarantors before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or Guarantors, would have a material adverse effect on the financial
condition, properties, or operations of the Borrower or Guarantors.

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 and Guarantors have filed all federal, state and local tax
returns which to the knowledge of the officers of the Borrower and Guarantors are required to be
filed, and the Borrower and Guarantors have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by them to the extent
such taxes have become due.

Section 4.10 Title and Liens. The Borrower and Guarantors have 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 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 and Guarantors as presently conducted.

Section 4.11 Retirement Programs. No Reportable Event has occurred and is continuing with
respect to any Plan.

 

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ARTICLE V

AFFIRMATIVE COVENANTS OF THE BORROWER AND GUARANTORS

So long as the Note shall remain unpaid or the Commitment shall be outstanding, the Borrower
and Guarantors will comply with the following requirements, unless the Bank shall otherwise consent
in writing:

Section 5.01 Financial Statements. The Borrower and Guarantors 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 and Guarantors, a copy of the financial statements of the
Borrower and Guarantors audited by independent certified public accountants selected by the
Borrower and Guarantors and acceptable to the Bank, which shall include the balance sheet of
the Borrower and Guarantors as at the end of such fiscal year and the related statements of
income, retained earnings and changes in financial position of the Borrower and Guarantors
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) as soon as available and in any event within forty-five (45) days after the end of
each quarter, balance sheets of the Borrower and Guarantors as at the end of such quarter
and related statements of earnings and retained earnings of the Borrower and Guarantors for
such quarterly 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 and
Guarantors; 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 and Guarantors are in
compliance with requirements set forth in Sections 5.08 through 5.12 hereof;

(c) immediately after the commencement thereof, notice in writing of all litigation and
of all proceedings before any governmental or regulatory agency affecting the Borrower or
any Guarantor of the type described in Section 4.07 or which seek a monetary recovery
against the Borrower in excess of $50,000.00;

 

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(d) as promptly as practicable (but in any event not later than five (5) business days)
after an officer of the Borrower or any Guarantor 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 or such Guarantor of the steps
being taken by the Borrower or such Guarantor to cure the effect of such event;

(e) as soon as possible and in any event within thirty (30) days after the Borrower or
any Guarantor 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 or such Guarantor
setting forth details as to such Reportable Event and the action which the Borrower or such
Guarantor proposes to take with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;

(f) as soon as possible after such occurrence, Borrower and Guarantors shall provide
the Bank with notice of any amendment of their Articles of Incorporation or of any material
change in the Borrower or Guarantor or its or their operations; and

(g) such other information respecting the financial condition and results of operations
of the Borrower or any Guarantor as the Bank may from time to time reasonably request.

Section 5.02 Books and Records; Inspection and Examination. The Borrower and Guarantors 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 and Guarantors 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 and Guarantors 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 and Guarantors; 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.

 

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Section 5.05 Maintenance of Properties. The Borrower and Guarantors 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 and Guarantors from discontinuing the
operation and maintenance of any of its properties if such discontinuance is, in the judgment of
the Borrower and Guarantors, 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 and Guarantors will obtain and maintain insurance with
insurers believed by the Borrower and Guarantors 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 and Guarantors operate.

Section 5.07 Preservation of Corporate Existence. The Borrower and Guarantors will preserve
and maintain their corporate existence and all of their rights, privileges and franchises;
provided, however, that the Borrower and Guarantors shall not be required to preserve any of its
rights, privileges and franchises if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Borrower or any Guarantor 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 Seven Million Five Hundred Thousand and no/100
Dollars ($7,500,000.00).

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 2.25 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 1.5 to 1.

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 1.25 to 1 as of the end of each of Borrower’s fiscal year ending on the last
Sunday of August of each calendar year, beginning on the last Sunday of August, 2011, as determined
in accordance with generally recognized accounting principles consistently applied;
notwithstanding the foregoing, however, that in making this computation at any time for the
period ending on the last Sunday of August, 2011 only, the principal balance of the loan payable to
the MEDA in the current principal amount of approximately $274,000 as of the date hereof, and due
and payable in full on or about May 1, 2011, shall be excluded from the definition of “Debt”.

 

11

 

Section 5.12 Bank Account; Automatic Payment. So long as amounts are outstanding on the
Loan, Borrower shall maintain an account with Lender, and all payments on the Loan shall be paid by
automatic debit to such account.

Section 5.13 USA Patriot Act. Bank hereby notifies Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Patriot Act”), Bank is required to obtain, verify and record information that
identifies Borrower and its affiliated entities, if any, which information includes the name and
address of Borrower and its affiliated entities, if any, and other information that will allow Bank
to identify Borrower and its affiliated entities in accordance with the Patriot Act. Borrower
hereby agrees to provide such information promptly upon request by Bank. In connection therewith,
Borrower shall: (a) ensure that no person who owns a controlling interest in or otherwise controls
Borrower or any affiliated entity is or shall be listed on the “Specially Designated Nationals and
Blocked Person List” or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury, or included in any Executive Orders; (b) not use or
permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations
of OFAC or any enabling statute or Executive Order relating thereto; and (c) comply, and cause each
affiliated entity to comply, with all applicable Bank Secrecy Act laws and regulations, as amended.

Section 5.14 Anti-Terrorism Laws. In addition to all other representations and warranties
contained herein, Borrower hereby represents and warrants that:

(a) Borrower is not in violation of any laws relating to terrorism or money laundering
including, without limitation, Executive Order No. 13224 on Terrorist Financing effective
September 23, 2001, and the Currency and Foreign Transactions Reporting Act of 1970, each as
amended from time to time (collectively, “ Anti-Terrorism Laws”). No action, proceeding,
investigation, charge, claim, report or notice has been filed, commenced or threatened
against Borrower alleging any violation of any Anti-Terrorism Law.

(b) Borrower has no knowledge or notice of any fact, event, circumstance, situation, or
condition which could reasonably be expected to result in: (A) any action, proceeding,
investigation, charge, claim, report, or notice being filed, commenced, or threatened
against it alleging any violation of, or failure to comply with, any Anti-Terrorism Law; or
(B) the imposition of any civil or criminal penalty against Borrower for any failure to so
comply.)

 

12

 

(c) Borrower has provided Bank with sufficient information (including names, addresses
and, where applicable, jurisdiction of formation or organization) to reasonably permit Bank
to verify the foregoing representation.

(d) Borrower does not: (A) conduct any business or engage in making or receiving any
contribution of funds, goods or services to or for the benefit of any person who is in
violation of any Anti-Terrorism Law; (B) deal in, or otherwise engage in any transactions
relating to any property or interests in property blocked under any Anti-Terrorism Law; or
(C) engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any prohibition set forth in any
Anti-Terrorism Law.

Section 5.15 Hedging Instruments. The obligations and indebtedness under the Loan shall
include, without limitation, all obligations, indebtedness and liabilities of Borrower to Bank
arising pursuant to or in connection with any swap, collar, cap, future, forward or derivative
transaction, including any involving, or settled by reference to, one or more interest rates,
currencies, commodities, equity or debt instruments, any economic, financial or pricing index or
basis, or any similar transaction, including any option with respect to any of these transactions
and any combination of these transactions.

ARTICLE VI

NEGATIVE COVENANTS

So long as the Note shall remain unpaid or the Bank shall have any Commitment hereunder, the
Borrower and Guarantors agree that, without the prior written consent of the Bank:

Section 6.01 Liens. The Borrower and Guarantors 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.

 

13

 

Section 6.02 Indebtedness. The Borrower and Guarantors 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;

(d) Indebtedness of the Borrower in existence on the date hereof and set forth in the
quarterly financial statements for the quarter ended November 28, 2010, but not including
any extensions or renewals thereof; and

(e) Subordinated Debt, 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.

Section 6.03 Guaranties. The Borrower and Guarantors will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any obligations of any other
Person, except the endorsement 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 and Guarantors 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 and Guarantors 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 and Guarantors will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower and Guarantors
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 and Guarantors intend to use for substantially the same purpose or purposes as
the property being sold or transferred.

 

14

 

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 of any document subordinating such debt to the Loan, (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. Notwithstanding
anything in this Section 6.07 to the contrary, Borrower may make the payment to MEDA referenced in
Section 5.11 without any further consent of Bank.

Section 6.08 Restrictions on Nature of Business. The Borrower and Guarantors 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.

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 or any Guarantor in this
Agreement or by the Borrower or any Guarantor (or any of their 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

(d) Default in the performance, or breach, of any covenant or agreement of the Borrower
or any Guarantor 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 or any
Guarantor 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 or any Guarantor by
the Bank, a written notice specifying such default or breach and requiring it to be
remedied; or

 

15

 

(e) The Borrower or any Guarantor 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 or any Guarantor 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 or any Guarantor and such
appointment shall continue undischarged for a period of 30 days; or the Borrower or any
Guarantor 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 or any Guarantor 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 or any Guarantor 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 or any Guarantor in excess of $50,000.00; or

(g) The rendering against the Borrower or any Guarantor 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 or any Guarantor (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) Adverse conditions develop at any time affecting Borrower’s or any Guarantor’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; or

(k) 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.

 

16

 

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 and Guarantors, declare the Commitment to
be terminated whereupon the same shall forthwith terminate;

(b) The Bank may, by notice to the Borrower and Guarantors, 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 Guarantors and without further
action, apply any and all money owing by the Bank to the Borrower or any Guarantor to the
payment of the Note then outstanding, including interest accrued thereon, and of all other
sums then owing by the Borrower or any Guarantor hereunder;

(d) The Bank may exercise and enforce its rights and remedies under the Security
Agreement and/or the Guaranties or any other Loan Document; 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 or any
Guarantor 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 or any
Guarantor in any case shall entitle the Borrower or any Guarantor to any other or further notice or
demand in similar or other circumstances.

 

17

 

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 and Guarantors:

WSI Industries, Inc.

WSI Rochester, Inc.

Taurus Numeric Tool, Inc.

213 Chelsea Road

Monticello, MN 55362

If to the Bank:

M&I Marshall & Ilsley Bank

11455 Viking Drive

Eden Prairie, MN 55344

Attention: David Orlady

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.

Section 8.04 Costs and Expenses. The Borrower and Guarantors agree to pay on demand all
costs and expenses of the Bank in connection with the preparation of this Agreement, the Note, the
Security Agreement, the Guaranties and the other Loan Documents 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, the Guaranties and the other Loan Documents 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.

 

18

 

Section 8.06 Binding Effect, Assignment. This Agreement and the Security Agreement shall be
binding upon and inure to the benefit of the Borrower, Guarantors 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.

 

19

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above
written.

	 	 	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 	 	 
	 	 	WSI INDUSTRIES, INC., a Minnesota

corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	Paul D. Sheely	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	VP/CFO	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	Taurus Numeric Tool, Inc., a Minnesota
corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	Paul D. Sheely	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	VP/CFO	 	 
	 
	 	 	 	 	 	 
	 	 	WSI ROCHESTER, INC., a Minnesota

Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	Paul D. Sheely	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	VP/CFO	 	 
	 
	 	 	 	 	 	 
	 	 	BANK:	 	 
	 
	 	 	 	 	 	 
	 	 	M&I MARSHALL & ILSLEY BANK,
a Wisconsin state banking corporation,	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	David Orlady	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	Senior VP	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

 

20

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