Exhibit 10.3
PROMISSORY NOTE

$2,500,000.00   Chicago, Illinois
January 8, 2010

     FOR VALUE RECEIVED, the undersigned SIGMATRON INTERNATIONAL, INC.
(“Borrower”) promises to pay to the order of WELLS FARGO HSBC TRADE BANK,
NATIONAL ASSOCIATION (“Bank”) at its office at 230 W. Monroe Street, 29th Floor,
Chicago, IL 60606, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00),
with interest thereon as set forth herein. All references to Wells Fargo Bank in
this Note shall mean Wells Fargo Bank, National Association.
1. INTEREST:
     (a) Interest. The outstanding principal balance of this Note shall bear
interest at Six and Forty Two One Hundredths of One Percent (6.42%) per annum
(computed on the basis of a 360-day year, actual days elapsed).
     (b) Payment of Interest. Interest accrued on this Note shall be payable on
the first day of each month, commencing February 1, 2010.
     (c) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest then in effect.
2. REPAYMENT AND PREPAYMENT:
     (a) Repayment. Principal shall be payable on the first day of each month in
installments of Eight Thousand Three Hundred Thirty Three Dollars ($8,333.00)
each, commencing February 1, 2010, and continuing up to and including January 1,
2015, with a final installment consisting of all remaining unpaid principal due
and payable in full on January 8, 2015. The entire principal balance and accrued
interest hereon shall be due and payable upon the occurrence of an Event of
Default or the termination (including repayment in full) of the Credit Agreement
(as hereinafter defined).
     (b) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
     (c) Prepayment. Borrower may prepay principal on this Note in the minimum
amount of Two Hundred Fifty Thousand Dollars ($250,000.00); provided however,
that if the outstanding principal balance of this Note is less than said amount,
the minimum prepayment amount shall be the entire outstanding principal balance
hereof. In consideration of Bank providing this prepayment option to Borrower,
or if this Note shall become due and payable at any time prior to the maturity
date hereof by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences

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for each month from the month of prepayment through the month in which said
maturity date occurs, calculated as follows for each such month:

  (i)   Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the maturity date hereof.     (ii)   Subtract from
the amount determined in (i) above the amount of interest which would have
accrued for the same month on the amount prepaid for the remaining term until
the maturity date hereof at the Money Market Funds Rate in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.     (iii)   If the result obtained in (ii) for any month is
greater than zero, discount that difference by the Money Market Funds Rate used
in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum four percent (4.00%) above Bank’s
Prime Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).
The “Money Market Funds Rate” means the rate per annum which Wells Fargo Bank
estimates and quotes to its borrowers as the rate, adjusted for reserve
requirements, federal deposit insurance and any other amount which Wells Fargo
Bank deems appropriate, at which funds in the amount of a loan and for a period
of time comparable to the term of such loan are available for purchase in the
money market on the date such loan is made, with the understanding that the
Money Market Funds Rate is Wells Fargo Bank’s estimate only and that Wells Fargo
Bank is under no obligation to actually purchase and/or match funds for any
transaction. This rate is not fixed by or related in any way to any rate that
Wells Fargo Bank quotes or pays for deposits accepted through its branch system.
All prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.
The Borrower shall be required to prepay amounts outstanding under the credit
facilities described herein, without premium or penalty (other than any funding
losses resulting from prepayment of the Line of Credit Note and the Term Loan
bearing interest at LIBOR other than on the last day of the relevant interest
period or other break funding costs) as follows: i) 100% of the net cash
proceeds for the sale or disposition of assets outside the ordinary course or
business; provided that so long as no Event of Default has occurred and is
continuing, proceeds of insurance may be applied by the Borrower for the
purchase of replacement property and the Borrower may retain the proceeds of the
disposition of obsolete or worn out property consistent with reasonable and
customary practices, (ii) 100% of the net cash proceeds of any issuance or sale
by the Borrower of any indebtedness other than indebtedness permitted by
Section 5.3 of the Credit Agreement and (iii) 100% of the net cash proceeds of
any issuance or sale by the Borrower of equity securities in each case applied
first to the Term Loan in the inverse order of maturity and then to the Line of
Credit.

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3. EVENTS OF DEFAULT:
     This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of January 8,
2010, as amended from time to time (the “Credit Agreement”). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an “Event of Default”
under this Note.
4. MISCELLANEOUS:
     (a) Remedies. Upon the sale, transfer, hypothecation, assignment or other
encumbrance, whether voluntary, involuntary or by operation of law, of all or
any interest in any real property securing this Note, or upon the occurrence of
any Event of Default, the holder of this Note, at the holder’s option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by Borrower. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of the holder’s in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder’s rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
     (b) Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
     (c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Illinois, but giving effect to federal
laws applicable to national banks.
     (d) Amendment. This Note may be amended or modified only in writing signed
by each party hereto. If any provision of this Note shall be held to be
prohibited by or invalid under applicable law such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Note.
5. ARBITRATION:
     (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise, in any way arising out of
or relating to (i) any credit subject hereto, or this Note or any other
contract, instrument or document relating to this Note, and their negotiation,
execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or
termination; or (ii) requests for additional credit.

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     (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Chicago, Illinois selected by the American Arbitration Association
(“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the documents between the parties; and (iii) be conducted by the AAA, or such
other administrator as the parties shall mutually agree upon, in accordance with
the AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to herein, as
applicable, as the “Rules”). If there is any inconsistency between the terms
hereof and the Rules, the terms and procedures set forth herein shall control.
Any party who fails or refuses to submit to arbitration following a demand by
any other party shall bear all costs and expenses incurred by such other party
in compelling arbitration of any dispute. Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded to
it under 12 U.S.C. §91 or any similar applicable state law.
     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Illinois or a neutral retired judge of the
state or federal judiciary of Illinois, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Illinois and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Illinois Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

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     (e) Discovery. In any arbitration proceeding, discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.
     (f) Class Proceedings and Consolidations. No party hereto shall be entitled
to join or consolidate disputes by or against others in any arbitration, except
parties who have executed this Note or any contract, instrument or document
relating to this Note, or to include in any arbitration any dispute as a
representative or member of a class, or to act in any arbitration in the
interest of the general public or in a private attorney general capacity.
     (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
     (h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the documents between the parties or the subject matter of the
dispute shall control. This Note may be amended or modified only in writing
signed by each party hereto. If any provision of this Note shall be held to be
prohibited by or invalid under applicable law such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Note. This arbitration provision shall survive termination, amendment or
expiration of any of the documents or any relationship between the parties.
     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.

          SIGMATRON INTERNATIONAL, INC.
    By:   /s/ Linda K. Frauendorfer             By:   CFO                  

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