<PAGE>

                                                                    Exhibit 10.4

                                 PROMISSORY NOTE

$350,000                                                             May 3, 2004
2.0%

         WSI Industries, Inc., a Minnesota corporation ("Maker"), for value
received, hereby promises to pay to the Monticello Economic Development
Authority, a public body corporate and politic under the laws of Minnesota or
its assigns (Authority and any assigns are collectively referred to herein as
"Holder"), at its designated principal office or such other place as the Holder
may designate in writing, the principal sum of Three Hundred Fifty Thousand and
no/100th Dollars ($350,000) or so much thereof as may be advanced under this
Note, with interest as hereinafter provided, in any coin or currency that at the
time or times of payment is legal tender for the payment of private debts in the
United States of America. The principal of and interest on this Note is payable
in installments due as follows:

         1.       Interest at the rate of two percent (2.0%) per annum shall
accrue from the Loan Closing Date, as defined in the loan agreement of even date
between Borrower and Lender ("Loan Agreement") until the Loan is repaid in full.

         2.       Payments of principal and interest shall commence on June 3,
2004 (the "Initial Payment Date") and continue on the third day of each and
every month thereafter until paid in full. The entire remaining unpaid balance
of principal and interest shall be due and payable on the first day of the
sixtieth (60th) month following the Initial Payment Date..

         3.       The Maker shall have the right to prepay the principal of this
Note, in whole or in part, on any date a principal and interest payment is due
and payable.

         4.       This Note is given pursuant to the Loan Agreement and is
secured by a mortgage of even date herewith delivered by WSI Industries, Inc.
(the "Mortgage") of even date herewith delivered by Borrower. If either the Loan
Agreement or the Mortgage are found to be invalid for whatever reason, such
invalidity shall constitute an Event of Default hereunder.

         All of the agreements, conditions, covenants, provisions, and
stipulations contained in the Loan Agreement, the Mortgage, or any other
instrument securing this Note are hereby made a part of this Note to the same
extent and with the same force and effect as if they were fully set forth
herein. It is agreed that time is of the essence of this Note. If an Event of
Default occurs under the Loan Agreement, the Mortgage, or any other instrument
securing this Note, then the Holder of this Note may at its right and option,
without notice, declare immediately due and payable the principal balance of
this Note and interest accrued thereon, together with reasonable attorneys fees
and expenses incurred by the Holder of this Note in collecting or enforcing
payment hereof, whether by lawsuit or otherwise, and all other sums due
hereunder or any instrument securing this Note. The Maker of this Note

<PAGE>

                                                                    Exhibit 10.4

agrees that the Holder of this Note may, without notice to and without affecting
the liability of the Maker, accept additional or substitute security for this
Note, or release any security or any party liable for this Note or extend or
renew this Note.

         5.       The remedies of the Holder of this Note as provided herein,
and in the Loan Agreement, the Guaranty, or any other instrument securing this
Note shall be cumulative and concurrent and may be pursued singly, successively,
or together, and, at the sole discretion of the Holder of this Note, may be
exercised as often as occasion therefor shall occur; and the failure to exercise
any such right or remedy shall in no event be construed as a waiver or release
thereof.

         The Holder of this Note shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by the Holder and then only to the extent
specifically set forth in the writing. A waiver with reference to one event
shall not be construed as continuing or as a bar to or waiver of any right or
remedy as to a subsequent event. This Note may not be amended, modified, or
changed except only by an instrument in writing signed by the party against whom
enforcement of any such amendment, modifications, or change is sought.

         6.       If any term of this Note, or the application thereof to any
person or circumstances shall, to any extent, be invalid or unenforceable, the
remainder of this Note, or the application of such term to persons or
circumstances other than those to which it is invalid or unenforceable shall not
be affected thereby, and each term of this Note shall be valid and enforceable
to the fullest extent permitted by law.

         7.       It is intended that this Note is made with reference to and
shall be construed as a Minnesota contract and is governed by the laws thereof.
Any disputes, controversies, or claims arising out of this Agreement shall be
heard in the state or federal courts of Minnesota, and all parties to this
Agreement waive any objection to the jurisdiction of these courts, whether based
on convenience or otherwise.

         8.       The performance or observance of any promise or condition set
forth in this Note may be waived, amended, or modified only by a writing signed
by the Maker and the Holder. No delay in the exercise of any power, right, or
remedy operates as a waiver thereof, nor shall any single or partial exercise of
any other power, right, or remedy.

         9.       IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts,
and things required to exist, happen, and be performed precedent to or in the
issuance of this Note do exist, have happened, and have been performed in
regular and due form as required by law.

<PAGE>

                                                                    Exhibit 10.4

         IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed
as of the 3rd day of May, 2004.

                                                  WSI INDUSTRIES, INC.

                                                  By: /s/ Paul D. Sheely
                                                      --------------------------

                                                  Title: Chief Financial Officer

           [SIGNATURE PAGE FOR PROMISSORY NOTE - WSI INDUSTIES, INC. ]