Document:

Exhibit
10.3

 

AMENDED
AND RESTATED

REVOLVING
CREDIT

PROMISSORY
NOTE

 

	$1,000,000.00	Eden
    Prairie, Minnesota
	 	November
    27, 2015

 

FOR
VALUE RECEIVED, WSI INDUSTRIES, INC., a Minnesota corporation, (the “Borrower”) promises to pay to the order of BMO
HARRIS BANK N.A., a national banking association, successor by merger to M&I Marshall & Ilsley Bank, or any future holder
hereof (“Lender”), the principal sum of One Million and no/100 Dollars ($1,000,000.00), or so much thereof as may
be advanced and be outstanding pursuant to and subject to the restrictions contained in the Loan Agreement (as defined below),
together with interest accruing from and after the date hereof on the unpaid principal balance from time to time outstanding at
a fluctuating annual interest rate equal to the LIBOR Rate, as hereinafter defined, plus Two Hundred (200) basis points per year
(collectively the LIBOR Rate plus Two Hundred (200) basis points is the “Note Rate”). The Note Rate shall change concurrently
with each change in the LIBOR Rate. The Note Rate is not necessarily the lowest rate charged by Lender on loans at any given time.
NOTICE: Under no circumstances will the Note Rate be more than the maximum rate allowed by applicable law. Principal and
interest due hereunder shall be paid in immediately available funds as follows:

 

1.Payments.
Interest only (at the Note Rate) on the principal balance outstanding from time to time shall be paid on or before the first day
of the first calendar month after the date hereof, and on or before the first day of each and every month thereafter throughout
the term of this Note. The amount available to be advanced under this Note (and repaid and re-advanced) shall not exceed the Commitment
(as defined in the Loan Agreement).

 

2.Application
of Payments. Unless otherwise determined by Lender in its sole discretion, all payments shall be applied first to interest,
second to principal then due, third to late charges (including any Default Rate Margin as defined below), if any, and fourth to
any escrow required under the Loan Documents, with the balance to be applied to principal then owing, provided however, that if
any advance made by the Lender as the result of a default on the part of the Borrower under the terms of this Note or any instrument
securing this Note is not repaid on demand, any monies received, at the option of the Lender, may first be applied to repay such
advances, plus interest thereon at an interest rate equal to the sum of the Note Rate plus the Default Rate Margin, and the balance,
if any, shall be applied in accordance with the provisions hereof. Any application of principal hereunder shall not reduce the
periodic amounts due and payable as provided in this Note.

 

3.Interest
Calculation. 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 shall be computed using this method. This calculation method results in a
higher effective interest rate than the numeric interest rate stated in this Note. If any payment received is less than the amount
of interest due through the effective date of receipt of such payment, Lender reserves the right to add any such deficiency to
principal.

 

    	 

     

    

 

4.Payment
Location. If Lender does not require automatic withdrawal of payments from Borrower’s account as provided herein, all
payments of principal and interest due hereunder shall be paid to Lender at 50 South Sixth Street, Suite 1000, Minneapolis, Minnesota
55402, Attention: Kevin D. Rohrer, or to such other person or at such other address as Lender may from time to time direct.

 

5.Maturity
Date. The entire outstanding balance of principal under this Note, if not sooner paid, together with all accrued interest
thereon, shall be due and payable on the Maturity Date (as defined in the Loan Agreement).

 

6.Loan
Agreement. The terms, covenants, conditions and agreements contained in that certain Loan Agreement, dated February 1, 2011,
by and among Borrower, WSI Rochester, Inc. and WSI Industries Co. (“Guarantors”) (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”) and all other Loan Documents, including
but not limited to those certain Guaranties executed by Guarantors pursuant to which Guarantors agreed to guarantee Borrower’s
obligations under this Note and the other Loan Documents, are hereby made a part hereof to the same extent and effect as if the
same were fully set forth herein.

 

7.Prepayment.
This Note may be prepaid at any time, in whole or in part, without premium or penalty.

 

8.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 one-month London Interbank Offered Rate (LIBOR) as reported on Bloomberg Financial Market’s terminal screen entitled
“Official ICE LIBOR Fixings” as reported two (2) London business days prior to the Loan payment date and effective
on the first day of the accrual period to the last day, with settlement in arrears (or, if such date is not a bank business day,
on the immediately prior bank business day) (the “LIBOR Rate”), unless such rate is no longer available or published,
in which case such rate shall be at a comparable index rate selected by the Lender with notice to the Borrower; provided
however that in no event shall the LIBOR Rate be less than 0.00%. The Lender shall determine the Note Rate based on the
foregoing, and its determination thereof shall be conclusive and binding. The interest rate change will not occur more often than
each Loan payment date and will become effective without notice to Borrower.

 

9.Default.
A default under this Note shall occur if:

 

(a)there
is a default in payment of any installment of principal and/or interest due hereunder or any payments due pursuant to the Loan
Documents; or

 

(b)there
is a default in the performance by Borrower, any Guarantor or any grantor of a mortgage, deed of trust, or other security in connection
with this Note of any of the terms, conditions or provisions contained herein other than those identified in subsection (a) above,
or contained in the Loan Documents (including, but not limited to, the Events of Default set forth in the Loan Agreement), or
contained in any document executed and/or delivered by Borrower, any Guarantor, or any other individual or entity affiliated with
Borrower and/or any Guarantor in connection herewith, or contained in any other agreement between Borrower and/or any Guarantor
and Lender or between Borrower and/or any Guarantor and any other creditor; or

 

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(c)Borrower
or any Guarantor:

 

(i)becomes
insolvent or takes any action which constitutes an admission of inability to pay its debts as they mature;

 

(ii)makes
an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its assets;

 

(iii)becomes
the subject of an “order for relief within the meaning of the United States Bankruptcy Code;

 

(iv)files
a petition in bankruptcy, or for reorganization, or to effect a plan or other arrangement with creditors;

 

(v)is
adjudged a bankrupt;

 

(vi)files
an answer to a creditor’s petition, admitting the material allegations thereof, for an adjudication of bankruptcy or for
reorganization or to effect a plan or other arrangement with creditors;

 

(vii)applies
to a court for the appointment of a receiver or a custodian for any of its assets or proceedings;

 

(viii)has
filed against it an involuntary petition pursuant to the United States Bankruptcy Code;

 

(ix)has
a receiver, trustee, custodian, liquidator or like officer appointed to take custody, control or possession of any property subject
to any lien, encumbrance or security interest securing payment of this Note;

 

(x)dies
or becomes incapacitated, or is dissolved or ceases to continue its business as a going concern;

 

(xi)has
filed against any collateral securing this Note any foreclosure or forfeiture proceedings, whether by judicial proceedings, self-help,
repossession or otherwise, by any creditor of Borrower or any governmental entity;

 

(xii)has
filed against it a judgment which is not satisfied or “bonded over” within thirty (30) days after the entry thereof;
or has issued against it any attachments or garnishments or the filing of any lien which is not discharged or “bonded over”
within thirty (30) days after such issuance or filing; or

 

(d)any
representation, certification or warranty made or provided by or on behalf of Borrower or any Guarantor to induce Lender to extend
credit to Borrower hereunder, made or provided in the Loan Documents or made or provided in any document delivered to Lender in
conjunction with this transaction is at anytime false, misleading or inaccurate, in any material respect; or

 

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(e)upon
the occurrence of a default under any of the Loan Documents (including, but not limited to, the Events of Default set forth in
the Loan Agreement), a default under any agreement executed in connection with an interest rate swap or similar transaction between
Borrower and Lender, or upon the occurrence of a default under any loan, extension of credit, security agreement, purchase or
sale 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
Loan Documents; or

 

(f)upon
any merger, consolidation, reorganization or other similar transaction or event that results in any change in the corporate structure
of the Borrower.

 

(g)a
material adverse change occurs in Borrower’s or any Guarantor’s financial condition, or Lender believes the prospect
of payment or performance of this Note or the Guaranty is impaired, or Lender in good faith believes itself to be insecure;

 

(h)Borrower
or any Guarantor shall be in default under any other agreement with Lender or with any other creditor (whether in connection with
the Loan or otherwise) and any required notice shall have been given and any time in which to cure the default shall have elapsed.
For purposes of this Section, the term “Like-Owned Affiliates” shall mean any Affiliate of Borrower that has the same
ultimate owner(s), whether directly or indirectly, as Borrower as of the date of any such default. For purposes of this Section,
the term “Affiliate” shall mean any person or entity that controls, is controlled by, or is under common control with,
Borrower as of the date of any such default.

 

If
Borrower fails to pay any installment of principal and/or interest when due or fails to make any other payments when due under
this Note or the Loan Documents (including, but not limited to, any payments of real estate taxes or insurance required to be
paid by Borrower), or if Borrower or any Guarantor fails to perform any other obligation under this Note or the Loan Documents
or if Borrower, any of its Like-Owned Affiliates or any Guarantor shall otherwise be in default under this Note or the Loan Documents,
and such failure is not cured within the cure period, if any, provided in this Section, then such failure shall constitute an
“Event of Default” hereunder. If any default (other than: (i) a default in payment of principal and/or interest or
any other payments required to be made under this Note or the Loan Documents including, but not limited to, any payments of real
estate taxes or insurance; or (ii) a default which is an Event of Default under any of the Loan Documents for which a cure period
has already been provided for under the applicable document), 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, such default may be cured if Borrower, after receiving
written notice from Lender demanding cure of such default: (1) cures the default within thirty (30) days or (2) if the cure requires
more than thirty (30) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient
to cure the default and thereafter Borrower continues to diligently pursue such cure and completes all reasonable and necessary
steps sufficient to cure such default as soon as reasonably practical.

 

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Upon
the occurrence of an Event of Default, the entire unpaid principal balance plus accrued interest shall immediately become due
and payable.

 

Upon
the occurrence of an Event of Default, including failure to pay upon final maturity, the interest rate on this Note shall be increased
by adding a 2.000 percentage point margin (“Default Rate Margin”) to the then applicable Note Rate. The Default Rate
Margin shall also apply to each succeeding interest rate change that would have applied had there been no occurrence of an Event
of Default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

 

10.Waivers.
Borrower waives and renounces presentment, protest, demand and notice of dishonor and any and all lack of diligence or delay in
collection or endorsement hereof, and expressly consents to any extension of time, release of any party liable for this obligation,
release of any security which may have been or which may hereafter be granted in connection herewith, or any other indulgence
or forbearance which may be made without notice to Borrower and without in any way affecting the liability of Borrower. In all
circumstances, the indebtedness due hereunder shall be repaid without relief from any valuation or appraisement laws, which Borrower
hereby waives.

 

11.Late
Payments. If any installment of principal and/or interest due under this Note or any payment required under the Loan Documents
is not fully paid within ten (10) days after the due date thereof, Borrower shall pay to Lender a late charge equal to five percent
(5%) of such installment or payment, to compensate Lender for the extra cost of handling delinquent payments. Neither the requirement
that such late charge be paid, nor the payment of the late charge, will be deemed to be a waiver of a default arising from the
late payment. In addition, Borrower will pay a fee to Lender of Thirty Dollars ($30.00) if Borrower makes a payment on this Note
and the check or preauthorized charge with which Borrower pays is later dishonored.

 

12.Maximum
Interest Rate. Nothing contained herein nor any transaction related hereto shall be construed or shall so operate either presently
or prospectively: (a) to require the payment of interest at a rate greater than is now lawful in such case to contract for, but
shall require payment of interest only to the extent of such lawful rate; or (b) to require the payment or the doing of any act
contrary to law; but if any clause or provision herein contained shall otherwise so operate to invalidate this Note and/or the
transaction related hereto, in whole or in part, then only such clause(s) and provision(s) shall be held for naught as though
not contained herein (or if allowed by applicable law, limited to the extent necessary to make such clause(s) or provision(s)
enforceable, but then only to the extent such limited or modified enforcement is more beneficial to Lender than having such clause(s)
or provision(s) deemed struck) and the remainder of this Note shall remain operative and in full force and effect.

 

If
for any reason interest in excess of the amount as limited in the foregoing paragraph shall have been paid hereunder, whether
by reason of acceleration or otherwise, then in that event any such excess interest shall constitute and be treated as a payment
of principal hereunder and shall operate to reduce such principal by the amount of such excess, or if in excess of the then principal
indebtedness, such excess shall be refunded.

 

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13.General
Provisions. The terms of this Note shall be binding upon Borrower, upon Borrower’s heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. Whenever used, the singular shall
include the plural, the plural the singular, and the use of any gender shall include all genders. The rights and remedies of Lender
as provided in this Note or any document securing this Note shall be cumulative and concurrent, and may be pursued singularly,
successively or together against Borrower, the property described in the Security Documents or any document securing this Note
or any other security for the debt evidenced by this Note, at the discretion of Lender. If any part of this Note cannot be enforced,
this fact will not affect the rest of this Note. Lender may delay or forego enforcing any of its rights or remedies under this
Note without losing them. 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 expressly
stated in writing, no party who signs this Note, whether as maker, any 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 any 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 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. In the event of any inconsistencies between this Note and any of the Loan Documents, any
loan commitment or term sheet issued by Lender in connection with the making of this Note, or other documents executed in connection
with the making of this Note, the terms of this Note shall control. Capitalized terms used and not defined herein shall have the
meanings given to them in the Loan Agreement.

 

14.Governing
Law. This Note shall be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the
laws of the State of Minnesota without regard to conflicts of laws provisions. This Note has been accepted by Lender in the State
of Minnesota.

 

15.Attorney’s
Fees. Borrower agrees that if, and as often as, this Note is placed in the hands of an attorney for collection, or to defend
or enforce any of Lender’s rights hereunder or under any document securing this Note, whether or not litigation is commenced,
the undersigned shall pay to Lender (subject to any limits under applicable law) Lender’s reasonable attorney’s fees,
together with all court costs and other expenses incurred or paid by Lender in connection therewith.

 

16.CHOICE
OF VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY
OUT OF THIS NOTE OR THE LOAN DOCUMENTS SHALL BE LITIGATED IN THE DISTRICT COURT OF HENNEPIN COUNTY, MINNESOTA, OR AT LENDER’S
DISCRETION IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN SUCH COURT. BORROWER WAIVES ANY CLAIM THAT HENNEPIN
COUNTY, MINNESOTA OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME
IN ANY OTHER APPROPRIATE JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT, IF ANY, TO COLLATERALLY ATTACK ANY SUCH JUDGMENT
OR ACTION.

 

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17.WAIVER
OF JURY TRIAL. 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.

 

18.Notices.
Any notice or election required or permitted to be given or served by Lender or Borrower hereunder to the other party shall be
given in accordance with the Loan Agreement.

 

19.Automatic
Payments; Right of Setoff. Borrower hereby authorizes Lender automatically to deduct from Borrower’s account the amount
of any payment due under this Note. If the funds in the account are insufficient to cover any payment, Lender shall not be obligated
to advance funds to cover the payment. At any time and for any reasons, Lender may voluntarily terminate such automatic payments.
To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether
checking, savings, or other account). This includes all accounts Borrower holds jointly with a third party 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, and, at Lender’s option, to administratively freeze all such accounts
to allow Lender to protect Lender’s charge and setoff rights provided in this Section.

 

20.Amended
and Restated Note. This Note amends and restates in its entirety that certain Amended and Restated Revolving Credit Promissory
Note dated January 30, 2013, as previously amended, made by Borrower in favor of M&I Marshall & Ilsley Bank, a Wisconsin
banking corporation, predecessor in interest to Lender, and is not in payment thereof.

 

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IN
WITNESS WHEREOF, the undersigned Borrower has executed this Note as of the date first above written.

 

	 	BORROWER:
	 	 	 
	 	WSI
    Industries, Inc.
	 	 	 
	 	By:	/s/
    Paul D. Sheely
	 	Name:	Paul
    D. Sheely
	 	Title:	CFOExhibit
10.4

 

ACKNOWLEDGMENT
OF GUARANTORS

 

Pursuant
to the terms of certain Guaranties dated February 1, 2011 and May 8, 2013 (collectively, the “Guaranties”),
executed by each of the undersigned in favor of BMO HARRIS BANK N.A., a national banking association, successor by merger to M&I
Marshall & Ilsley Bank (the “Bank”), the undersigned have jointly and severally unconditionally guaranteed
the prompt payment and full performance of all of the debts, liabilities and obligations of WSI INDUSTRIES, INC., a Minnesota
corporation (the “Borrower”) to the Bank, which debts, liabilities and obligations include, without limitation,
the obligations of the Borrower under (i) that certain Loan Agreement dated as of February 1, 2011, by and between the Bank and
the Borrower (as previously amended, the “Revolving Loan Agreement”) and (ii) that certain Loan Agreement dated
as of May 8, 2013, by and between the Bank and the Borrower (as previously amended, the “Term Loan Agreement”
and, together with the Revolving Loan Agreement, the “Loan Agreements”). Each of the undersigned acknowledges
receipt of a copy of the proposed amendments to the Loan Agreements to be dated on or about the date hereof (collectively, the
“Amendments”). Each of the undersigned agrees and acknowledges that the Amendments shall in no way impair or
limit the rights of the Bank under the Guaranties or any other Loan Document (as such term is defined in the Loan Agreements)
to which either of the undersigned is a party, and confirms that by the Guaranties the undersigned continue to jointly, severally
and unconditionally guarantee the prompt payment and full performance of all of the debts, liabilities and obligations of the
Borrower to the Bank, including without limitation obligations under the Loan Agreements as amended pursuant to the Amendments.
In addition, each of the undersigned represents that no events have taken place and no circumstances exist at the date hereof
which would give the undersigned grounds to assert a defense, offset or counterclaim to the obligations of the undersigned under
the Guaranties or any of the other Loan Documents to which either of the undersigned is a party and 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 undersigned 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 the Amendments, including, without limitation, any claims, liabilities or obligations arising with respect
to the Guaranties or indebtedness incurred pursuant to the Loan Agreements. In consideration of the mutual covenants and conditions
set forth above and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the undersigned hereby joins in the release of rights and claims set forth in Section 10 of the Amendments. Each of the undersigned
hereby confirms that the Guaranties and all other Loan Documents to which either of the undersigned is a party remain in full
force and effect, enforceable against the undersigned in accordance with their terms.

 

This
Acknowledgment shall not be construed, by implication or otherwise, as imposing any requirement that Bank notify or seek the consent
of either of the undersigned relative to any past or future extension of credit, or modification, extension or other action with
respect thereto, in order for any such extension of credit or modification, extension or other action with respect thereto to
be subject to the Guaranties, it being expressly acknowledged and reaffirmed that each of the undersigned has under the Guaranties
consented to modifications, extensions and other actions with respect thereto without any notice thereof.

 

    	 

     

    

 

Dated
as of November 27, 2015.

 

	WSI
    INDUSTRIES CO.,	 	WSI
    ROCHESTER, INC.,
	a
    Minnesota corporation	 	a
    Minnesota corporation
	 	 	 	 	 
	By:	/s/
    Paul D. Sheely	 	By:	/s/
    Paul D. Sheely
	 	Paul
    D. Sheely, Chief Financial Officer	 	 	Paul
    D. Sheely, Chief Financial Officer

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