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PROMISSORY NOTE




			
	$5,000,000.00
	 	Minneapolis, Minnesota
	 
	 	November 3rd, 2006






1. FOR VALUE RECEIVED, HEI, Inc., a Minnesota corporation (the “Borrower”), hereby promises to pay
to the order of Thomas F. Leahy (the “Lender”), at such address as the Lender may designate from
time to time, the principal sum of Five Million and 00/100 DOLLARS ($5,000,000.00), in lawful money
of the United States and immediately available funds, together with interest on the unpaid balance
accruing as of the date hereof at a rate initially equal to fifteen percent (15%) per annum,
increasing by one percent (1.0%) per annum as of the first day of January, 2007 and the first day
of each calendar month thereafter (e.g. increasing to 16% per annum on January 1, 2007, to 17% per
annum on February 1, 2007, and so on); provided however, that in no event shall the applicable rate
hereunder exceed 20% per annum at any time (except to the extent due to application of the Default
Rate).



2. The outstanding principal balance hereof shall be payable in full on November 2nd,
2007 (the “Maturity Date”). Accrued interest on such principal balance shall be due and payable on
the first day of each calendar month, commencing with December 1, 2006, and shall be payable in
full on the Maturity Date.



3. The outstanding principal balance of this Note may be prepaid at any time at the option of the
Borrower without premium or penalty. Any payment(s) on this Note using the proceeds of any
insurance award or from a refinancing or from the sale of any collateral securing this Note
(whether such sale is made with or without the consent of the Lender), and any payment(s) made
after any event of default has occurred under this Note, and any other payment(s) on this Note from
any other source in excess of the principal payments scheduled pursuant to Paragraph 2 above, shall
be deemed a prepayment for purposes of this Paragraph 3 and Paragraph 5 below.



4. If any installment of principal or interest on this Note, including without limitation the
payment required on the Maturity Date, is not paid within fifteen (15) days of the due date
thereof, the Borrower shall pay to the Lender a late charge equal to five percent (5.0%) of the
amount of such installment.



5. All payments and prepayments shall, at the option of the Lender, be applied first to any costs
of collection, second to any late charges, third to accrued interest on this Note, and lastly to
principal (and, in the case of any prepayments, to installments of principal in the inverse order
of their maturity).



6. Notwithstanding anything to the contrary contained herein, if the rate of interest, late payment
fee, prepayment penalties or any other charges or fees due hereunder are determined by a court of
competent jurisdiction to be usurious, then said interest rate, fees and/or charges shall be
reduced to the maximum amount permissible under applicable Minnesota law.



7. Upon the occurrence of an Event of Default or at any time thereafter, at the option of the
Lender, the outstanding principal balance hereof shall bear interest at a rate equal to two percent
(2.0%) per annum in excess of the rate of interest otherwise applicable pursuant to Section 1
hereof (the “Default Rate”), in order to compensate the Lender for administrative expenses and
increased risk to the Lender associated with the occurrence of an Event of Default.



 









 





8. Upon the occurrence of an Event of Default or at any time thereafter, the outstanding principal
balance hereof and accrued interest and all other amounts due hereon shall, at the option of the
Lender, become immediately due and payable, without notice or demand.



9. Upon the occurrence of an Event of Default or anytime thereafter, the Lender shall have the
right to set off any and all amounts due hereunder by the Borrower to the Lender against any
indebtedness or obligation of the Lender to the Borrower.



10. Upon the occurrence at any time of an Event of Default or at any time thereafter, the Borrower
promises to pay all costs of collection of this Note, including but not limited to attorneys’ fees,
paid or incurred by the Lender on account of such collection, whether or not suit is filed with
respect thereto and whether such cost or expense is paid or incurred, or to be paid or incurred,
prior to or after the entry of judgment.



11. This Note is secured by the “Security Agreement” (as defined below) and is entitled to all of
the benefits provided for in said agreement.



12. As used herein, the term “Event of Default” shall mean (i) the Borrower’s failure to pay, as
and when due hereunder, any principal, interest or other amount payable pursuant to this Note,
and/or (ii) any breach of, default or event of default under that certain Security Agreement dated
of even date herewith, executed by the Borrower in favor the Lender, as amended from time to time
(the “Security Agreement”).



13. Demand, presentment, protest and notice of nonpayment and dishonor of this Note are hereby
waived.



14. This Note shall be governed by and construed in accordance with the laws of the State of
Minnesota.



15. Borrower hereby irrevocably submits to the jurisdiction of any Minnesota state court or federal
court over any action or proceeding arising out of or relating to this Note, the Security
Agreement, and any instrument, agreement or document related thereto, and Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding may be heard and
determined in such Minnesota state or federal court. Borrower hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. Borrower irrevocably consents to the service of copies of the summons
and complaint and any other process which may be served in any such action or proceeding by the
mailing by United States certified mail, return receipt requested, of copies of such process to
Borrower’s last known address. Borrower agrees that judgment final by appeal, or expiration of
time to appeal without an appeal being taken, in any such action or proceeding shall be conclusive
and may be enforced in any other jurisdictions by suit on the judgment or in



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any other manner provided by law. Nothing in this Paragraph shall affect the right of Lender to
serve legal process in any other manner permitted by law or affect the right of Lender to bring any
action or proceeding against Borrower or its property in the courts of any other jurisdiction to
the extent permitted by law.



	 	 	 	 	 
	 	HEI, Inc.

 	 
	 	By     /s/ Mark B. Thomas
 	 
	 	Mark B. Thomas 	 
	 	Its: Chief Executive Officer and Chief
Financial
      Officer 	 
	 



[SIGNATURE PAGE TO PROMISSORY NOTE]





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