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This Loan Agreement involves WSI INDUSTRIES INC. A Loan Agreement details the terms around an obligation by a Borrower to repay principal and interest provided by one or more lending parties. The loan agreement will frequently contain and provide for a number of representations and warranties of the borrower, along with other conditions, covenants and restrictions in relation to that loan.

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WSI INDUSTRIES INC Loan Agreement

Exhibit 10.3 LOAN AGREEMENT This Loan Agreement ("Agreement") is made this 3rd day of May, 2004, by and among WSI Industries, Inc., a Minnesota corporation, having the address described in section VII.F hereof ("Borrower"), Excel Bank Minnesota, having a principal business address of 50 South Sixth Street, Suite 1000, Minneapolis MN 55402 ("Lender"). WITNESSETH: WHEREAS, Borrower seeks to obtain a loan from Lender in the amount of One Million Three Hundred and Sixty Thousand and 00/100 ($1,360,000.00) Dollars to acquire title to the real property located in Wright County, Minnesota which property is legally described on the attached Exhibit A ("Mortgaged Premises"); and WHEREAS, the Lender desires to loan One Million Three Hundred and Sixty Thousand and 00/100 ($1,360,000.00) Dollars to Borrower pursuant to and subject to the terms and conditions of this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows: I. THE LOAN. The Lender shall loan to Borrower the sum of One Million Three Hundred and Sixty Thousand and 00/100 ($1,360,000.00) Dollars ("Loan") pursuant to the terms and conditions of a promissory note ("Promissory Note") in form and substance acceptable to Lender. The Loan shall bear interest and all payments shall be made as described in the Promissory Note. A. The parties acknowledge and agree that the sole purpose of the Loan is to enable Borrower to acquire title to the Mortgaged Premises. Borrower shall be in default under this Agreement if any of the proceeds from the Promissory Note are used for any purpose other than as described above. B. Borrower shall, on or before the execution hereof, provide Lender a Phase I Environmental Investigation Report regarding the Mortgaged Premises. The Loan shall be conditioned upon Lender, in Lender's sole discretion, being satisfied with the results of the Phase I Environmental Investigation Report. C. The Lender may maintain from time to time, at its discretion, liability records as to any and all loans made or repaid and interest accrued or repaid under this Agreement. All entries made on any such record shall be presumed correct until Borrower establishes the contrary. On demand by the Lender, Borrower will admit and certify in writing the exact principal balance that Borrower then asserts to be outstanding to the Lender for the Loan. Any billing statement or accounting rendered by the Lender shall be conclusive and fully binding on Borrower unless specific written notice of exception is given to the Lender at its address described above by Borrower within thirty (30) days after its receipt by Borrower. D. Borrower shall, on or before the execution hereof, reimburse Lender for all of Lender's reasonable attorneys' fees and all related costs incurred by the Lender in drafting this Agreement, the related documents, negotiating its terms with the parties hereto and establishing Lender's collateral position, including title insurance costs. Borrower agrees that Lender may at any time or from time to time, without further request by or notice to Borrower, make a loan to Borrower in the sum of such attorneys' fees and costs and add such indebtedness to other indebtedness of Borrower under the Promissory Note or the Lender may apply proceeds of the Promissory Note directly to pay such attorneys' fees and costs. E. Prior to the execution hereof, Borrower shall cause to be delivered to the Lender, at Borrower's expense an appraisal certified to the Lender for the Mortgaged Premises by an M.A.I. appraiser acceptable to the Lender, engaged by the Lender. The appraisal shall be satisfactory to Lender in all respects. The initial appraisal shall provide for a current, as is market value of the Mortgaged Premises not to exceed seventy-two (72.00%) percent loan to value based on the total principal amount of the Loan on the date hereof. F. Borrower acknowledges and agrees that Borrower shall pay an origination fee to the Lender of Six Thousand Eight Hundred ($6,800.00) Dollars, which origination fee shall be paid in certified funds or cash on or before the closing of the Loan. II. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to the Lender that: A. Borrower is a corporation duly organized and existing in good standing under the laws of the State of Minnesota. It has the power to own its property and to carry on its 2 business as now conducted and is duly qualified to do business in all states in which such qualification is required. B. Borrower is duly authorized and empowered to execute, deliver and perform this Agreement and to borrow money from the Lender. C. The execution and delivery of this Agreement and the performance by Borrower of its obligations hereunder do not and will not violate or conflict with any provisions of law or the Articles of Incorporation or Bylaws of Borrower and do not and will not violate or conflict with or cause any default or event of default to occur under any agreement binding upon Borrower. D. The execution and delivery of this Agreement have been duly approved by all necessary action of the Board of Directors of Borrower; and this Agreement has in fact been duly executed and delivered by Borrower and constitutes its la