Document:

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                                                                   EXHIBIT 10.14

================================================================================

                          TRANSITION SERVICES AGREEMENT

                                 BY AND BETWEEN

                             PENSON WORLDWIDE, INC.

                                       AND

                              SAMCO HOLDINGS, INC.

                            DATED ____________, 2006

================================================================================

<PAGE>

                          TRANSITION SERVICES AGREEMENT

          This Transition Services Agreement (the "Agreement") is entered into
as of _________________, 2006 by and between SAMCO Holdings, Inc., a Texas
corporation ("SHI") and Penson Worldwide, Inc. ("PWI"), a Delaware corporation.

                                    RECITALS:

          A. SHI is the parent company of SAMCO Capital Markets, Inc. ("SCMI"),
SAMCO BD LLC ("SBD"), SAMCO Financial Advisors, Inc ("SFAI") and SAMCO Financial
Services, Inc. ("SFSI", and collectively with SHI, SCMI, SBD and SFAI, the
"SAMCO Companies").

          B. PWI is the parent of a group of companies including Penson
Financial Services, Inc ("PFSI" and collectively with PWI and its other
subsidiaries, the "Penson Group").

          C. In preparation for the initial public offering of PWI stock (the
"IPO"), PWI and certain of its subsidiaries determined to reorganize certain of
their non-core business operations pursuant to that certain SAMCO Reorganization
Agreement (the "Reorganization Agreement"), of even date herewith, among PWI,
SHI, SCMI and certain other members of the Penson Group. Capitalized terms not
defined herein shall have the meaning provided in the Reorganization Agreement.

          D. As an independent group newly-formed pursuant to the Reorganization
Agreement, the SAMCO Companies do not yet have a full complement of management,
administrative and other services to replace those previously available to them
as subsidiaries of PWI.

          E. In order to support the operations of the SAMCO Companies following
the closing of the reorganization (the "Closing"), the parties are entering into
this Agreement, pursuant to which PWI will provide, or cause to be provided,
certain services that were provided by the Penson Group to the SAMCO Companies
or the SCM Business prior to the Closing.

          G. The parties also propose to enter into certain subleases (the
"Lease Agreements") pursuant to which members of the Penson Group will sublease
certain premises occupied by the SCM Business prior to the Closing.

          NOW, THEREFORE, in furtherance of the foregoing premises and in
consideration of the mutual covenants and obligations set forth in the
Reorganization Agreement and hereinafter, the parties hereto, intending to be
legally bound hereby, do agree as follows:

                                        2

<PAGE>

     1.   EFFECTIVE DATE.

          This Agreement shall become effective immediately upon the Closing and
prior to the S-1 Registration Statement in respect of PWI's IPO becoming
effective.

     2.   SERVICES TO BE PROVIDED BY PWI.

          2.1 List of Services. Subject to the terms and conditions of this
Agreement, PWI shall provide, or procure the provision, to the SAMCO Companies
of the services listed in the Schedules hereto (each a "Service" and
collectively, the "Services") for the periods set forth in the applicable part
of the Schedule therefor (as such Schedules may be revised in accordance with
Section 3 below).

     3.   TERMS OF SERVICE.

          3.1 Amendment of Schedules. The attached Schedules of Services are
subject to change with the parties' mutual written consent.

          3.2 Additional Services. Should SAMCO Companies after the Closing
identify additional services which are necessary to the operation of SAMCO
Companies, SAMCO Companies may request the addition of such services to the
Schedules. PWI shall consider any such request in good faith and may, in its
sole discretion, agree to the addition of such services. Any such additional
services shall be provided on the basis of the terms mutually agreed by the
parties.

          3.3 Provider of Services. PWI agrees that it will provide, or cause to
be provided, the Services called for by this Agreement. In its sole discretion
PWI may cause other members of the Penson Group or third party contractors to
perform any or all of the Services. References to "PWI" in this Agreement in the
context of the provision of Services shall be deemed to include such other
persons to the extent they are providing the Services.

          3.4 Cooperation and Access. Each party agrees to cooperate as
reasonably requested by the other party in order to effectuate the provision of
the Services. SAMCO Companies shall provide PWI's employees, agents and
contractors with access to and accommodations within SAMCO Companies' facilities
as may be reasonably appropriate to enable PWI, its employees, agents and
contractors to perform the Services.

     4.   PERFORMANCE OF SERVICES.

          4.1 PWI will provide the Services hereunder in a manner consistent
with past practice for the provision of such Services to the SAMCO Companies and
SCM Business prior to the Closing.

          4.2 In no event shall PWI, or any other member of the Penson Group, in
providing the Services hereunder be obligated to (i) hire any additional
employees, (ii) maintain the employment of any specific employees, (iii)
maintain any specific level of staffing, or (iv) purchase, lease or license any
additional equipment, software or assets. SAMCO Companies

                                        3

<PAGE>

shall be responsible for providing PWI with reasonable advance notice of its
requirements for Services and for liaising with PWI for the provision thereof.

          4.3 Except as otherwise expressly set forth herein, PWI PROVIDES ALL
SERVICES AND LICENSES ALL SOFTWARE "AS IS," WITHOUT ANY WARRANTY OF ANY KIND.
PWI EXPLICITLY DISCLAIMS ANY OTHER WARRANTIES RELATED TO THE SERVICES AND
SOFTWARE, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT THERETO.

     5.   INDEMNIFICATION.

          5.1 PWI hereby agrees at its own expense to indemnify, defend and hold
harmless SAMCO Companies, their directors, officers, employees, and agents from
and against any and all loss, cost, liability or expense (including reasonable
costs and fees of legal counsel) (collectively "Losses") arising out of, or in
connection with a breach by PWI of this Agreement in the provision of the
Services, to the extent such Losses are caused by the gross negligence or
willful misconduct of PWI, its employees, agents or independent contractors.

          5.2 Each of the SAMCO Companies hereby agrees at its own expense to
indemnify, defend and hold harmless PWI, any other member of the Penson Group
providing Services and any of their respective directors, officers, employees,
agents and independent contractors, from and against any and all Losses arising
out of, or in connection with the provision of Services hereunder (except to the
extent covered by the indemnity from PWI in Section 5.1 above).

     6.   TERM AND TERMINATION.

          6.1 The term of this Agreement shall begin on the Closing Date and
shall continue until December 31, 2008 (the "Initial Term"), unless earlier
terminated by mutual agreement or as otherwise provided in this Agreement. At
the end of the Initial Term (or if applicable a renewal period), this Agreement
shall automatically renew for an additional one (1) year period unless either
party gives written notice of termination to the other at least 30 days prior to
the end of the Initial Term, or the end of any additional one year renewal
period, as applicable.

          6.2 Subject to the provisions of the Schedules, the SAMCO Companies
may terminate all or any Services provided pursuant to this Agreement on thirty
(30) days prior written notice to PWI; provided that to the extent any Services
are expressed to be provided as a package in any Schedule, any such termination
must be as to the full package of Services not individual Services within the
package. SAMCO Companies shall no longer be obligated to pay PWI the fee
attributable to such cancelled Services following the effective termination date
of such Services. SAMCO Companies shall be liable for any outstanding purchase
orders placed with third parties or other out of pocket costs incurred by PWI on
any SAMCO Company's behalf prior to PWI's receipt of the aforesaid written
notice of termination.

                                        4

<PAGE>

          6.3 Subject to the provisions of the Schedules, in the event of a
material breach under this Agreement, the non-defaulting party may terminate the
specific Service(s) to which such breach relates if the defaulting party fails
to cure such breach within thirty (30) days of its receipt of a written notice
from the non-defaulting party of such breach, provided that the duties and
obligations of the defaulting party which have accrued prior to the termination
of such Service shall not be released or discharged by such termination. Should
the SAMCO Companies have failed to pay any amounts payable pursuant to Section 6
and such default shall have continued for 30 days, PWI shall be entitled to
terminate its obligation to provide any Services hereunder.

          6.4 The provisions of Sections 4.3, 5, 7, 8 and 9 shall survive
termination of this Agreement.

          6.5 Upon termination of this Agreement PWI shall return to the SAMCO
Companies any records or information provided by SAMCO Companies to PWI for the
purposes of providing the Services and shall deliver to the SAMCO Companies any
records, to the extent they relate to the SAMCO Companies, generated by PWI in
the course of the provision of the Services. PWI shall be entitled to retain a
copy of any such information or records for its files.

     7.   CONSIDERATION.

          7.1 Price for Services. Prices to be paid by the SAMCO Companies for
Services rendered by PWI hereunder are set forth in the Schedules hereto. Costs
to support the separation of the SAMCO Companies and the Penson Group and for
the implementation of the SAMCO Companies' own independent systems and services
will be paid entirely by SHI.

          7.2 Invoice Processing. PWI shall invoice SHI monthly for the
Services, itemizing the basis for each invoice amount. The amounts payable by
SHI to PWI set forth in the Schedules do not include state or federal sales,
use, excise, personal property, or other Taxes which may be levied or assessed
in connection with this Agreement or the Services provided hereunder. SAMCO
Companies shall be responsible for payment of and shall indemnify PWI against
all such Taxes, excluding only Taxes based on PWI's net income.

          7.3 Expenses Incurred by PWI. Any out-of-pocket expense paid by PWI to
a third party on behalf of any SAMCO Company in the course of providing Services
shall be invoiced separately in reasonable detail and reimbursed by SHI to PWI.
The foregoing reimbursement shall be in addition to the fees provided for in
Section 7.1 above.

          7.4 Payment Terms. Unless otherwise provided in the Schedules, payment
terms are net thirty (30) days from date of invoice and payments shall be made
in United States Dollars in immediately available funds.

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<PAGE>

     8.   CONFIDENTIALITY.

          The exchange and disclosure of confidential, technical and/or
proprietary information of the parties under this Agreement shall be governed by
the terms of the Confidentiality Agreement.

     9.   LIABILITY LIMITATIONS.

          9.1 Total Liability. PWI'S TOTAL LIABILITY FOR ANY KIND OF LOSS,
DAMAGE OR LIABILITY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNDER
ANY THEORY OF LIABILITY, SHALL NOT EXCEED THE AMOUNTS ACTUALLY PAID BY SHI TO
PWI PURSUANT TO SECTION 7.1 OF THIS AGREEMENT.

          9.2 Exclusion of Damages. IN NO EVENT SHALL ANY PARTY BE LIABLE TO THE
OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER
BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR
OTHERWISE, AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE.

          9.3 Failure of Essential Purpose. The limitations specified in this
Article 9 shall survive and apply even if any limited remedy specified in this
Agreement is found to have failed of its essential purpose.

     10.  GENERAL.

          10.1 Amendment. Except as otherwise provided in Section 3.1, this
Agreement may be modified only by a written document signed by duly authorized
representatives of each party.

          10.2 Force Majeure. Each party shall be excused from performance of
its obligations under this Agreement for any period and to the extent that the
party is prevented from performing any such obligation in whole or in part as a
result of delays caused by the other party, an act of God, war, civil
disturbance, court order, labor dispute (other than one between a party and its
staff), third party non-performance or other cause whether similar or dissimilar
beyond that party's reasonable control, including without limitation, failures
or fluctuations in electrical power, heat, light, air-conditioning or
telecommunications equipment and such non-performance shall not be a default.
The party concerned shall use all reasonable efforts to resume full performance
in the event of any such delay.

          10.3 Assignment. This Agreement shall be binding upon and shall inure
to the benefit of each party's successors and assigns. SAMCO Companies may not
assign any of their rights or obligations hereunder without the prior written
consent of PWI. Any purported assignment or delegation in violation of this
Section 10.3 shall be void.

                                        6

<PAGE>

          10.4 Joint and Several Liability. The liability of the SAMCO Companies
with respect to the Services and this Agreement shall be joint and several.

          10.5 Choice of Law. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES, SHALL BE INTERPRETED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS, WITHOUT REFERENCE TO PROVISIONS REGARDING CONFLICTS OF LAW.

          10.6 Waiver. Should either of the parties fail to exercise or enforce
any provision of this Agreement, or waive any right in respect thereto, such
failure or waiver shall not be construed as constituting a waiver or a
continuing waiver of its rights to enforce any other provision or right.

          10.7 Severability. If any provision of this Agreement or the
application thereof to any situation or circumstance shall be invalid or
unenforceable, the remainder of this Agreement shall not be affected, and each
remaining provision, or portion thereof, shall be valid and enforceable to the
fullest extent.

          10.8 Effect of Headings. The headings and sub-headings contained
herein are for information purposes only and shall have no effect upon the
intended purpose or interpretation of the provisions of this Agreement.

          10.9 Integration. This Agreement and Schedules hereto and thereto,
along with the Reorganization Agreement and Ancillary Agreements (as defined in
the Reorganization Agreement), constitute the entire agreement and understanding
between the parties with respect to the subject matter of this Agreement and
integrate all prior discussions and proposals (whether oral or written) between
them related to the subject matter hereof. To the extent that there is any
conflict between this Agreement and the Reorganization Agreement, the provisions
of this Agreement shall prevail. To the extent there is any conflict between
this Agreement and an Ancillary Agreement, the provisions of the Ancillary
Agreements shall prevail.

          10.10 No Partnership or Agency Created. The relationship of the Penson
Group and the SAMCO Companies shall be that of independent contractors only.
Nothing in this Agreement shall be construed as (i) making one party an agent or
legal representative of the other or otherwise (except to the extent part of the
Services) as having the power or authority to bind the other in any manner
(except to the extent part of the Services), or (ii) creating any partnership,
joint venture or other joint commercial enterprise between the Penson Group and
the SAMCO Companies.

          10.11 Notices. Any notice to be made in connection with this
Agreement, shall be provided to the address and in the manner, and shall be
effective as, provided for in Section 10.01 of the Reorganization Agreement.

          10.12 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.

                                        7

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                            (Signature Page Follows)

                                        8

<PAGE>

          IN WITNESS WHEREOF, the parties have had this Transition Services
Agreement executed by their respective authorized officers on the date written
below.

PENSON WORLDWIDE, INC.                  SAMCO HOLDINGS, INC.

By:                                     By:
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------
Date:                                   Date:
      -------------------------------         ----------------------------------

                [Signature Page to Transition Services Agreement]

<PAGE>

                                  SCHEDULE 1.1

                   NETWORKING AND ENTERPRISE SUPPORT SERVICES

The Penson Financial Services, Inc. Information Technology department will
continue to provide support, maintenance and monitoring of all desktop and
infrastructure equipment within the following SAMCO Company offices: Austin,
Phoenix, Memphis, San Antonio, Boston, Houston, New York, Dallas and Oklahoma.
Calling Card and Cell Phone services are not included in the services provided
hereunder

All equipment and resources belonging to PFSI and other Penson Group companies
shall not be moved, modified, or otherwise tampered with in any way by SAMCO
Companies, including though the administration of these systems.

PFSI and other members of the Penson Group may establish such firewalls or other
access restrictions as may be necessary to safeguard the proprietary or
confidential information of PFSI and the Penson Group companies and their
customers.

To the extent costs are directly allocable to SAMCO Companies (such as for
desktop computers, WAN connectivity, network equipment, etc.) costs will be
directly expensed to the applicable SAMCO Company. General services to SAMCO
Companies will include the following at a cost of $17,500 per month:

Information Technology Services

-    Directory Services (User/Computer Accounts, DNS, DHCP, DFS...)

-    Email Services (MAPI, Webmail, Content Filtering, Mail Archiving)

-    Server Hardware/Software/Maintenance (Purchasing, Building, Loading &
     Maintaining)

-    External DNS

-    Blackberry Services

-    Rightfax Fax Services

-    Help Desk (Samco Remote Offices, Rocky)

-    Web Proxy (Web Filtering/Reporting)

-    Printers (Printer Setup/Maintenance)

-    SyndTrak App

-    File/Print Services

-    Backup/Restore

-    Citrix (Rocky)

-    Firewall Services

-    Internet Access

Enterprise Support

1.)  Device support:

-    Desktop

-    Laptops

<PAGE>

-    Printers

-    Fax machines

-    Blackberry devices

-    Wireless data devices

-    Security cameras

-    Security proximity cards

-    Scanners

2.)  Software support:

-    ACT

-    Adobe

-    Windows 2000 and XP OS

-    Windows Office 2000, XP, and 2003

-    Argus

-    Bloomberg

-    NASDAQ

-    Adobe

-    AxisPro

-    RadiusPro

-    OmniPro

-    Paperport

-    Phase3

-    Reuters

-    EmailExtender for compliance personnel

3.)  Server support:

-    SNL

-    Anti-virus

-    CSA - Cisco Security Agent

-    Time Clocks

4.)  New equipment order & configurations. (Not including acquisition costs)

5.)  Software installation & licensing. (Not including acquisition costs)

6.)  Facilities

-    Data lines

-    Server Rooms/Closets

-    Physical Wiring

-    Equipment moves

-    Electrical

-    A/C

<PAGE>

Networking and Security

1.)  Management of WAN & Internet transport agreements

-    Sprintlink for connectivity to PWW

-    Cogent, MCI, OnRamp for Internet connectivity for NY, Phoenix & Austin

2.)  WAN Routing Support

-    Router HW delivery, configuration, management & monitoring

3.)  LAN Switching Support

-    Switch HW delivery, configuration, management & monitoring

4.)  Firewall Support

-    Firewall HW delivery, configuration, management & monitoring.

<PAGE>

                                  SCHEDULE 1.2

                             LEGAL SUPPORT SERVICES

The Penson Worldwide Inc. Legal Department will continue to provide legal
support services and advice as determined appropriate by the Legal Department.
Unless the Legal Department agrees other specific arrangements for given
projects, Legal Services will be charged on a time basis at rates of $425 per
hour for the General Counsel and $300 per hour for other internal counsel
together in each cases with any associated expenses and costs. Any fees, costs
or expenses incurred in respect of external counsel employed by the Legal
Department to provide Legal Services will be charged to the SAMCO Entites on a
pass through basis.exv10w1

 

Exhibit 10.1

	 	 	 	 	 	 	 
	 	 
	 
	 	BORROWER NAME AND ADDRESS	 	LENDER NAME AND ADDRESS	 	LOAN DESCRIPTION
	 
	 	HEI, INC,	 	BEACON BANK	 	 
	 
	 	1495 STEIGER LAKE LANE	 	19765 HIGHWAY SEVEN	 	Number
 1041890                 
	 
	 	VICTORIA, MN 55386	 	SHOREWOOD, MN 55331	 	Amount  $
2,000,000.00       
	 
	 	 	 	 	 	Date
 04-18-2006                   

Refer to the attached Signature Addendum, incorporated herein, for additional Borrowers and their signatures.

 

COMMERCIAL LOAN AGREEMENT

 

LOAN STRUCTURE. This Commercial Loan Agreement (Agreement)
contemplates              a single
advance term Loan              a
multiple advance draw Loan
      X       a revolving multiple advance draw
Loan. The principal balance will not exceed
$                    
2,000,000.00                     .

Borrower will pay down a
revolving draw Loan’s outstanding Principal to $               
       (Pay Down Balance)              
                      
      (Time Period). This Loan is
for
             agricultural
      X       business purposes.

            
Borrower may not voluntarily prepay the Loan in full at any time.
      X      
Borrower
may prepay the Loan under the following terms and conditions (Any partial prepayment will not
excuse any later scheduled payments until the Loan is paid in full.):

      X      
LATE
CHARGES. If a payment is made more than
      10       days after
it is due, Borrower will pay a late charge of
      5.000% OF THE LATE
AMOUNT                                      
                      
                     
                     
                      

              

               
                     

 

FEES. Borrower agrees to pay the following fees in connection with this Loan at closing or as
otherwise requested by Lender

REQUESTS FOR ADVANCES. Borrower authorizes Lender to honor a request for an
advance from Borrower
or any person authorized by Borrower. The requests for an advance
must be in writing, by telephone,
or any other manner agreed upon by Borrower and Lender, and must specify the requested amount and
date and be accompanied with any agreements, documents, and instruments that Lender requires for
the Loan. Lender will make same day advances, on any day that Lender is open for business, when the
request is received before
      1:00       (Advance
Cut-Off Time). Lender will
disburse the advance into Borrower’s demand deposit account (if any),
account number       1024856      , or in any
other agreed upon manner. All advances will be made in United States
dollars.

    X    These requests must be made by at least
      1       (Number Required To
Draw) persons,
acting together, of those persons authorized to act on Borrower’s behalf.

           
Advances will be
made in the amount of at least  $                
                      
   (Minimum Amount Of Advance).

           
Advances will be made no more frequently than                 
                      
   (Minimum Frequency Of Advance).

           
Discretionary Advances. Lender will make all Loan advances at Lender’s sole discretion,

           
Obligatory Advances. Lender will make all Loan advances subject to this Agreement’s terms and
conditions.

FINANCIAL INFORMATION. Borrower will prepare and maintain Borrower’s financial records using
consistently applied generally accepted accounting principles then in effect. Borrower will provide
Lender with financial information in a form acceptable to Lender and under the following terms.

	 	A.	 	Frequency. Annually, Borrower will provide to Lender Borrower’s financial statements,
tax returns, annual internal audit reports or those prepared by independent accountants
within
      120      
days after the close of each fiscal year. Any annual financial
statements that Borrower provides will be
      X      
audited statements.
            
reviewed statements.              compiled statements. 

      X       Borrower will provide
Lender with interim financial reports on a
      AS AND WHEN REQUESTED BY
LENDER       (Monthly, Quarterly) basis, and within
             
days after the close of this business period. Interim financial statements will be             
audited             
reviewed       X       compiled statements.
	 
	 	B.	 	Requested
Information. Borrower will provide Lender with any other information
about Borrower’s operations, financial affairs and condition
within              days after Lender’s
request.

	 
	o	C.	 	Leverage
Ratio. Borrower will maintain at all times a ratio of total liabilities to
tangible net worth, determined under consistently applied generally accepted accounting
principles, of              (Total Liabilities to Tangible Net Worth Rato) or less.

	 
	o	D.	 	Minimum
Tangible Net Worth. Borrower will maintain at all times a
total tangible net worth, determined under consistently applied generally accepted accounting
principles, of $                                           (Minimum Tangible Net Worth) or more. Tangible net worth is the amount by
which total assets exceed total liabilities. For determining tangible net worth, total assets will exclude
all intangible assets, including without limitation goodwill, patents, trademarks, trade names, copyrights, and franchises, and will also exclude any accounts receivable that do not
provide for a repayment schedule.

	 
	o	E.	 	Minimum
Current Ratio. Borrower will maintain at all times a ratio of current assets to
current liabilities, determined under consistently applied generally accepted accounting
principles, of                                            (Minimum Current Ratio) or more.

	 
	o	F.	 	Minimum
Working Capital. Borrower will maintain at all times a working capital, determined
under consistently applied generally accepted accounting
principles by subtracting current liabilities from current assets, of $            
                      
         (Minimum Working
Capital) or more. For this
determination, current assets exclude                  
                      
                                      
                      
                      
 (Excluded Current Assets). Likewise, current liabilities include (1) all obligations payable
on demand or within one year after the date on which the determination is made, and (2) final
maturities and sinking fund payments required to be made within one
year after the date on
which the determination is made, but exclude all liabilities or obligations that Borrower may
renew or extend to a date more than one year from the date of this determination.

ATTACHMENTS. The following documents are incorporated by
reference into this Agreement.
      X      
Asset Based Financing Agreement addenum dated
      04-18-2006      

   X    Commercial
Security Agreement addendum dated
      04-18-2006      
      X
       Other       ADDENDUM      .

ADDITIONAL TERMS:

	ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS
BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU
(BORROWER) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING
SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY
LATER AGREE IN WRITING TO MODIFY IT. BY SIGNING THIS AGREEMENT,
THE PARTIES AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN THEM.

SIGNATURES. By signing under seal, I agree to all the terms and conditions beginning on page 1
through the bottom of page 2 of this Agreement. Borrower also acknowledges receipt of a copy of
this Agreement.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	BORROWER
	 	 
	
 
HEI, INC.

	Entity Name
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	(Seal)	 	 
	(Seal)
	Signature
	 	 	 	Date	 	 	 	Signature	 	 	 	Date
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	(Seal)	 	
 
	(Seal)
	Signature
	 	 	 	Date	 	 	 	Signature	 	 	 	Date
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
LENDER:
 

 BEACON BANK

	Entity Name

	
 
	(Seal)	 	 	 	 	 	 	 
	Signature
	CRAIG DBOECKERS, BUSINESS BANKING OFFICER	Date	 	 	 	 	 	 	 	 
	 
		 	 	 	 
	COMMERCIAL LOAN AGREEMENT: to be used with Form COMM-NOTE	 	NOT TO BE USED FOR LOANS SUBJECT TO CONSUMER LENDING LAWS

(page
1 of 2)

 

 

DEFINITIONS.
In this Agreement, the following terms have the following meanings.

Accounting Terms. Accounting terms that are not specifically defined will have their customary
meanings under consistently applied generally accepted accounting principles.

Loan. Loan refers to all advances made under the terms of this Agreement.

Loan
Documents. Loan Documents include this Agreement and all documents prepared pursuant to the
terms of this Agreement including all present and future promissory notes (Notes), security
instruments, guaranties, and supporting documentation as modified, amended or supplemented.

Property.
Property is any collateral, real, personal or intangible, that secures Borrowers
performance of the obligations of this Agreement.

ADVANCES. To the extent permitted by law, Borrower will indemnify Lender and hold Lender harmless
for reliance on any request for advance that Lender reasonably believes to be genuine. Lender’s
records are conclusive evidence as to the number and amount of advances and the Loan’s unpaid
principal and interest. If any advance results in an overadvance (when the total amount of the Loan
exceeds the principal balance) Borrower will pay the overadvance, as requested by Lender. Regarding
Borrower’s demand deposit account(s) with Lender, Lender may, at its option, consider presentation
for payment of a check or other charge exceeding available funds as a request for an advance under
this Agreement. Any such payment by Lender will constitute an advance on the Loan.

CONDITIONS. Borrower will satisfy all of the following conditions before Lender makes any advances
under this Agreement. If this Agreement provides for discretionary advances, satisfaction of these
conditions does not commit Lender to making advances.

No Default. There has not been a default under the Loan Documents nor would a default result from
making the advance.

Information. Borrower has provided all required documents, information, certifications and
warranties, all properly executed on forms acceptable to Lender.

Inspections. Borrower has
accommodated, to Lender’s satisfaction, all inspections.

Conditions and Covenants. Borrower has
performed and compiled with all conditions required for an advance and all covenants in the Loan
Documents.

Warranties and Representations. The warranties and representations contained in this
Agreement are true and correct at the time of making the advance. Financial Statements. Borrowers
most recently delivered financial statements and reports are current, complete, true and accurate
in all material respects and fairly represent Borrower’s financial condition.

Bankruptcy
Proceedings. No proceeding under the United States Bankruptcy Code has been commenced by
or against Borrower or any of Borrowers affiliates.

WARRANTIES AND REPRESENTATIONS. Borrower makes
these warranties and representations which will continue as long as
this Agreement is in effect.

Power. Borrower is duly organized, validly existing and in
good standing in all jurisdictions in
which Borrower operates. Borrower has the power and authority to
enter into this transaction and to
carry on its business or activity as it is now being conducted. All persons who are required by
applicable law and the governing documents of Borrower have executed and delivered to Lender this
Agreement and other Loan Documents.

Authority. The execution, delivery and performance of this Agreement and the obligation evidenced
by the Loan Documents are within Borrower’s duly authorized powers, has received all necessary
governmental approval, will not violate any provision of law or order of court or governmental
agency, and will not violate any agreement to which Borrower is a party or to which Borrower or
Borrower’s property is subject.

Name and Place of Business. Other than previously disclosed in writing to Lender, Borrower has not
changed its name or principal place of business within the last ten years and has not used any
other trade or fictitious name. Without Lender’s prior written consent, Borrower will not use any
other name and will preserve Borrower’s existing name, trade names and franchises.

No Other Liens. Borrower owns or leases all property that is
required for its business and except
as disclosed, the property is free and clear of all liens, security interests, encumbrances and
ether adverse interests.

Compliance With Laws. Borrower is not violating any laws, regulations, rules, orders, judgments or
decrees applicable to Borrower or its property, except as disclosed to Lender.

Financial Statements. Borrower represents and warrants that all financial statements
Borrower provides fairly represent Borrower’s financial
condition for the stated periods, are
current, complete, true and accurate in all material respects, include all direct or contingent
liabilities, and that there has been no material adverse change in Borrower’s financial condition,
operations or business since the date the financial information was prepared.

COVENANTS. Until the Loan and all related debts, liabilities and obligations under the Loan
Documents are paid and discharged, Borrower will comply with the
following terms, unless Lender
waives compliance in writing.

Inspection and Disclosure. Borrower will allow Lender or its agents to enter any of Borrower’s
premises during mutually agreed upon times, to do the following:
(1) inspect, audit, review and
obtain copies from Borrower’s books, records, orders, receipts, and other business related data;
(2) discuss Borrower’s finances and business with anyone
who claims to be Borrower’s creditor; (3) inspect Borrower’s Property, audit for the use and disposition of the Property’s proceeds; or do
whatever Lender decides is necessary to preserve and protect the
Property and Lender’s interest in
the Property. As long as this Agreement is in effect, Borrower will direct all of Borrower’s
accountants and auditors to permit Lender to examine and make copies of Borrower’s records in their
possession, and to disclose to Lender any other information that they know about Borrower’s
financial condition and business operations. Lender may provide Lender’s regulator with required
information about Borrower’s financial condition, operation and business or that of Borrower’s
parent, subsidiaries or affiliates.

Business Requirements. Borrower will preserve and maintain its present existence and good standing
in jurisdictions where Borrower is organized and operates. Borrower will continue its business or
activities as presently conducted, by obtaining licenses, permits and bonds where needed. Borrower
will obtain Lender’s prior written consent before ceasing business or engaging in any line of
business that is materially different from its present business.

Compliance with Laws. Borrower will not violate any laws, regulations, rules, orders, judgments or
decrees applicable to Borrower or Borrower’s property, except for those which Borrower challenges
in good faith through proper proceedings after providing adequate reserves to fully pay the claim
and its appeal should Borrower lose. On request, Borrower will provide Lender with written evidence
that Borrower has fully and timely paid taxes, assessments and other governmental charges levied or
imposed on Borrower and its income, profits and property. Borrower will adequately provide for the
payment of taxes, assessments and other charges that have accrued but
are not yet due and payable.

New Organizations. Borrower will obtain Lender’s written
consent before organizing, merging into, or
consolidating with an entity; acquiring all or substantially all of
the assets of another; or
materially changing legal structure, management, ownership or financial condition.

Other Liabilities. Borrower will not incur, assume or permit any debt evidenced by notes, bonds or
similar obligations except debt in existence on the date of this Agreement and fully disclosed to
Lender, debt subordinated in payment to Lender on terms acceptable to
Lender; accounts payable
incurred in the ordinary course of business and paid under customary
trade terms or contested in
good faith with reserves satisfactory to Lender; or as otherwise agreed to by Lender.

Notice. Borrower will promptly notify Lender of any material
change in financial condition, a
default under the Loan Documents, or a default under any agreement with a third party which
materially and adversely affects Borrower’s property, operations or financial condition.

Dispose of No Assets. Without Lender’s prior written consent, Borrower will not sell, lease,
assign, or otherwise distribute all or substantially all of its assets.

Insurance. Borrower will
obtain and maintain insurance with insurers in amounts and coverages that are acceptable to Lender
and customary with industry practice. This may include without limitation credit insurance,
insurance policies for public liability, fire, hazard and extended risk, workers compensation, and,
at Lender’s request, business interruption and/or rent loss insurance. Borrower may obtain
insurance from anyone Borrower wants that is acceptable to Lender.
Borrower’s choice of insurance
provider will not affect the credit decision or interest rate. At Lender’s request, Borrower will
deliver to Lender certified copies of all of these insurance
policies, binders or certificates.
Borrower will obtain and maintain a mortgagee or loss payee endorsement for Lender when these
endorsements are available. Borrower will require all insurance policies to provide at least 10
days prior written notice to Lender of cancellation or modification. Borrower consents to Lender
using or disclosing information relative to any contract of insurance required for the Loan for the
purpose of replacing this insurance. Borrower also authorizes its insurer and Lender to exchange
all relevant information related to any contract of insurance executed as required by any
Loan Documents.

Property Maintenance. Borrower will keep property that is
necessary or useful in its
business in good working condition by making all needed repairs,
replacements and improvements and
by making payments due on the property.

DEFAULT. If the Loan is payable on demand, Lender may demand payment at any time whether or not any
of the following events have occurred. Borrower will be in default if any one or more of the
following occur. (1) Borrower fails to make a payment in full
when due. (2) Borrower makes an
assignment for the benefit of creditors or becomes insolvent, either because Borrower’s liabilities
exceed its assets or Borrower is unable to pay debts as they became due; or Borrower petitions for
protection under any bankruptcy, insolvency or debtor relief laws, or
is the subject of such a
petition or action and fails to have the petition or action dismissed within a reasonable period of
time. (3) Borrower fails to perform any condition or to keep any promise or covenant on this
Agreement or any debt or agreement Borrower has with Lender. (4) A default occurs under the terms
of any instrument evidencing or pertaining to this Agreement.
(5) If Borrower is a producer of
crops, Borrower fails to plant, cultivate and harvest crops in due season. (6) Any loan proceeds
are used for a purpose that will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further explained by federal law.
(7) Anything else happens that either significantly impairs the value of the Properly or, unless
controlled by the New Jersey Banking Law, causes Lender to reasonably believe that Lender will have
difficulty collecting the Loan.

REMEDIES. After Borrower defaults, and after Lender gives any legally required notice and
opportunity to cure, Lender may at its option use any and all
remedies Lender has under state or
federal law or in any of the Loan Documents, including, but not limited to, terminating any
commitment or obligation to make additional advances or making all or any part of the amount owing
immediately due. Lender may set-off any amount due and payable under the terms of the Loan against
Borrower’s right to receive money from Lender, unless prohibited by applicable law. Except as
otherwise required by law, by choosing any one or more of these remedies Lender does not give up
Lender’s right to use any other remedy. Lender does not waive a
default if Lender chooses not to
use a remedy, and may later use any remedies if the default continues or occurs again.

COLLECTION EXPENSES AND ATTORNEYS’ FEES. To the extent
permitted by law, Borrower agrees to pay all
expenses of collection, enforcement and protection of Lender’s rights and remedies under this
Agreement. Expenses include, but are not limited to, reasonable
attorneys’ fees including attorney fees
as permitted by the United States Bankruptcy Code, court costs and other legal expenses. These
expenses will bear interest from the date of payment until paid in
full at the contract interest
rate then in effect for the Loan. FL: Attorneys’ fees will be 10 percent of the principal sum due
or a larger amount as the court judges as reasonable and just. GA: Attorneys’ fees will be 15
percent of the principal and interest owing.

GENERAL PROVISIONS. This Agreement is governed by the laws of the jurisdiction where Lender is
located, the United States of America and to the extent required, by the laws of the jurisdiction
where the Property is located.

Joint And Individual Liability And Successors. Each Borrower, individually, has the duty of fully
performing the obligations on the Loan. Lender can sue all or any of the Borrowers upon breach of
performance. The duties and benefits of this Loan will bind and benefit the successors and assigns
of Borrower and Lender.

Amendment, Integration And Severability. The Loan Documents may not be amended or modified by oral
agreement. Borrower agrees that any party signing this Agreement as Borrower is authorized to modify
the terms of the Loan Documents. Borrower agrees that Lender may inform any party who guarantees
this Loan of any Loan accommodations, renewals, extensions, modification, substitutions, or future
advances. The Loan Documents are the complete and final expression of the understanding between
Borrower and Lender. If any provision of the Loan Documents is unenforceable, then the
unenforceable provision will be severed and the remaining provisions
will be enforceable.

Waivers And Consent. Borrower, to the extent permitted by law, consents to certain actions Lender
may take, and generally waives defenses that may be available based on these actions or based on the
status of a party to the Loan. Lender may renew or extend payments on the Loan. Lander may release
any borrower, endorser, guarantor, surety, or any other co-signer. Lender may release, substitute,
or impair any Property securing the Loan. Lender’s course of dealing, or Lender’s forbearance from,
or delay in, the exercise of any of Lender’s rights, remedies, privileges, or right to insist upon
Borrower’s strict performance of any provisions contained in the Loan Documents, will not be
construed as a waiver by Lender, unless the waiver is in writing and
signed by Lender. Lender may
participate or syndicate the Loan and share any information that Lender decides is necessary about
Borrower and the Loan with the other participants.

Interpretation. Whenever used, the singular includes the
plural and the plural includes the
singular. The section headings are for convenience only and are not to be used to interpret or
define the terms of this Agreement. Unless otherwise indicated, the terms of this Agreement shall
be construed in accordance with the Uniform Commercial Code.

Notice. Unless otherwise required by law, any notice will be
given by delivering it or mailing it
by first class mail to the appropriate party’s address listed in this Agreement, or to any other
address designated in writing. Notice to one party will be deemed to
be notice to all parties. Time
is of the essence.

(page 2 of 2)

 

 

ADDENDUM A

     This document is an Addendum to a $2,000,000.00 Note and Commercial Loan Agreement dated
April 18, 2006 between HET, Inc. and Beacon Bank. This Addendum is further governed by the terms
and conditions of the Commercial Loan Agreement, where applicable and supplements and amends the
Loan Structure and Covenants section.

	I)	 	Asset Based Line of Credit:

	 	 	This is an Asset Based Line of credit:

	 	a)	 	To be used for payment of short term working capital operating needs associated with
the Borrower’s operation.
	 
	 	b)	 	Loan proceeds may be disbursed up to the lesser of $2,000,000.00 or the sum of:

	 	a)	 	90% of eligible Foreign Accounts Receivable, payable in U.S.
dollars, less than 120 days past the date of invoice and
	 
	 	b)	 	75% of foreign related inventory calculated at 28% of overall inventory.

	2)	 	PRIOR TO CLOSING, BORROWER WILL PROVIDE THE FOLLOWING ITEMS TO THE LENDER:

	 	a)	 	Articles or Certificate of Incorporation (with amendments), any By-laws, Certificate
of Good Standing (or equivalent), Corporate Borrowing Resolution, and, if a foreign
corporation, current authority to do business within this state.
	 
	 	b)	 	Documentation that Borrower has complied with state requirements for registration of
Borrower’s trade name (or fictitious name), if one is used.
	 
	 	 	 	Evidence that ownership and management has not substantially changed without Lender’s
approval since the application was submitted.

	3)	 	PRIOR TO INITIAL DISBURSEMENT OF ANY LOAN FUNDS OR
ISSUANCE OF STANDBY LETTERS OF
CREDIT, BORROWER WILL PROVIDE THE FOLLOWING ITEMS TO THE LENDER:

	 	a)	 	Evidence that the Borrower has an Employer Identification Number and all insurance,
licenses, permits and other approvals necessary to lawfully operate the business.
	 
	 	b)	 	Evidence that the Borrower is current on all Federal and State taxes,
including but not limited to income taxes, payroll taxes, and sales taxes.

 

 

	4)	 	PRIOR TO EACH DISBURSEMENT OF LOAN FUNDS, BORROWER WILL PROVIDE THE LENDER WITH THE
FOLLOWING:

	 	a)	 	An aging of foreign accounts receivable and/or export inventory schedule from Borrower
	 
	 	b)	 	A borrowing base certificate in a form acceptable to Lender so that Lender may
reconcile the borrowing base.
	 
	 	c)	 	Verification that Borrower has made appropriate withholding tax deposits on advances
for payroll. No Loan proceeds maybe used to pay delinquent withholding taxes or other
similar trust funds (state sales tax, etc.).
	 
	 	d)	 	An assignment(s) of any Letter of Credit, Export Credit Insurance policy (foreign
receivables insurance), or contract proceeds appropriate to the transactions being
financed, and written acknowledgement of all assignments.
	 
	 	e)	 	Control of incoming funds through use of a controlled account or other mechanism to
capture payment of the foreign receivables.
	 
	 	f)	 	A copy of valid export license or a letter stating a valid export license is not required, citing
the authority for this statement. This license or letter must be obtained once for each
different product and each different country.
	 
	 	g)	 	Evidence that Borrower has complied with state requirements for registration of Borrower’s trade
name (or fictitious name), if one is used.
	 
	 	h)	 	Evidence that ownership and management has not substantially changed without Lender’s
approval since the application was submitted.

	5)	 	BORROWER CERTIFIES TO LENDER THAT THE FOLLOWING IS TRUE:

	 	(1)	 	Receipt of Authorization — Borrower has received a copy of SBA
Authorization #EWCP 173438 6000 and SBA Form 793, Notice to New SBA Borrower, from
Lender; and acknowledges that:

	 	(a)	 	The Authorization is not a commitment by Lender to make a
loan to Borrower;
	 
	 	(b)	 	The Authorization is between Lender and SBA and creates no
third party rights or benefits to Borrower;
	 
	 	(c)	 	The Note will require Borrower to give Lender prior notice of
intent to prepay the loan.
	 
	 	(d)	 	If Borrower defaults on Loan, SBA may be required to pay
Lender under the SBA guarantee. SBA may then seek recovery of these funds from
Borrower. Under SBA regulations, 13 CFR Part 101, Borrower may not claim or
assert against SBA any immunities or defenses available under local law to
defeat, modify or otherwise limit Borrower’s obligation to repay to SBA any
funds advanced by Lender to Borrower.
	 
	 	(e)	 	Payments by SBA to Lender under SBA’s guarantee will not
apply to the Loan account of Borrower, or diminish the indebtedness of
Borrower under the Note or the obligations of any personal guarantor of the
Note.

 

 

	 	(2)	 	Child Support — No principal who owns at least 50% of the ownership or
voting interest of the company is delinquent more than 60 days under the terms of
any (a) administrative order, (b) court order, or (c) repayment agreement requiring
payment of child support.
	 
	 	(3)	 	Current Taxes — Borrower is current on all federal, state, and local
taxes, including but not limited to income taxes, payroll taxes, real estate
taxes, and sales taxes.
	 
	 	(4)	 	Reimbursable Expenses — Borrower will reimburse Lender for
reasonable expenses incurred in the making and administration of the Loan.
	 
	 	(5)	 	Books, Records, and Reports-

	 	(a)	 	Keep proper books of account in a manner satisfactory to Lender;
	 
	 	(b)	 	Furnish year-end statements to Lender within 120 days of fiscal year end;
	 
	 	(c)	 	Furnish additional financial statements or reports whenever Lender requests
them;
	 
	 	(d)	 	Allow Lender or SBA, at Borrower’s expense, to:

	 	(i)	 	Inspect and audit books, records and papers relating
to Borrower’s financial or business condition;
	 
	 	(ii)	 	Inspect and appraise any of Borrower’s assets; and
	 
	 	(iii)	 	Allow all government authorities to furnish reports of examinations, or
any records pertaining to Borrower, upon request by Lender or SBA.

	 	(e)	 	Provide Lender with a monthly cash flow projection of all
known operational activity on at least an annual basis for the term of the
loan.
	 
	 	(f)	 	Provide Lender with a monthly borrowing base certificate, in
a form satisfactory to Lender, so that Lender may reconcile the borrowing base
certificates at least monthly.
	 
	 	(g)	 	Provide Lender with a monthly aging report of foreign
accounts receivable and export inventory schedule, in a form satisfactory to
Lender, so that Lender may determine the appropriate amount to advance.
	 
	 	(h)	 	Review and execute the CAP-1050, Semi-Annual Funds
Disbursement Report when directed by the Lender.

	 	(6)	 	Equal Opportunity — Post SBA Form 722, Equal Opportunity Poster, where
it is clearly visible to employees, applicants for employment and the general
public, and comply with the requirements of SBA Form 793, Notice to New SBA
Borrowers.
	 
	 	(7)	 	American-made Products — To the extent practicable, purchase only
American-made equipment and products with the proceeds of the Loan.
	 
	 	(8)	 	Taxes -— Pay all federal, state, and local taxes, including income,
payroll, real estate and sales taxes of the business when they come due.

	6)	 	BORROWER CERTIFIES TO LENDER THAT IT WILL NOT, WITHOUT LENDERS PRIOR WRITTEN CONSENT

	 	(1)	 	Distributions — Make any significant distribution of company assets
that will adversely affect the financial condition of Borrower.
	 
	 	(2)	 	Ownership Changes — Significantly change the ownership structure or
interests in the business during the term of the Loan.
	 
	 	(3)	 	Transfer of Assets — Sell, lease, pledge, encumber (except by purchase
money liens on property acquired after the date of the Note), or otherwise dispose
of any of Borrower’s property or assets, except in the ordinary course of business.

 

 

			
	 	 	 
	
	 	U.S. Small Business Administration

NOTE
	 	 	 

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	SBA Loan #
	 	 	EWCP 173438 6000	 
	 	 	 	 	 	 
	 	SBA Loan Name
	 	 	HEI, Inc.	 
	 	 	 	 	 	 
	 	Date
	 	 	April 18, 2006	 
	 	 	 	 	 	 
	 	Loan Amount
	 	 	$2,000,000.00	 
	 	 	 	 	 	 
	 	Interest Rate
	 	 	Variable, equal to the Wall Street Journal Prime Rate + 2.75%	 
	 	 	 	 	 	 
	 	Borrower
	 	 	HEI, Inc.	 
	 	 	 	 	 	 
	 	Operating
	 	 	NIA	 
	 	Company
	 	 	 	 
	 	 	 	 	 	 
	 	Lender
	 	 	Beacon Bank	 
	 	 	 	 	 	 

	1.	 	PROMISE TO PAY:
	 
	 	 	In return for the Loan, Borrower promises to pay to the order of Lender the amount of
	 
	 	 	Two Million and no/100                     Dollars,

	 	 	interest on the unpaid principal balance, and
all other amounts required by this Note.
	 
	2.	 	DEFINITIONS:
	 
	 	 	“Collateral” means any property taken as security for payment of this Note or any
guarantee of this Note. “Guarantor” means each person or entity that signs a
guarantee of payment of this Note.
	 
	 	 	“Loan” means the loan evidenced by this Note.
	 
	 	 	“Loan Documents” means the documents related to this loan signed by Borrower, any
Guarantor, or anyone who pledges collateral.
	 
	 	 	“SBA” means the Small Business Administration, an Agency of the United States of America.

			
	 	 	 
	SBA Form 147 (10/22/98) Previous editions obsolete
	 	Page 1/6

 

 

	3.	 	PAYMENT TERMS:

Borrower must make all payments at the place Lender designates. The payment terms for this Note
are:

1.
Maturity: This is a revolving Loan. The required SBA Form 147 Note is the master note.
This Note will mature in 1 year from date of Note. Sub-notes, if used, will mature based on
the Borrower’s collection of the proceeds from the transaction financed by each draw. No
sub-note may have a maturity date later than the Note.

2. Repayment Terms:

a. The interest rate on this Note will fluctuate. The initial interest rate is 10.50% per
year. This initial rate is the prime rate on the date SBA received the loan application,
plus 2.75%.

b. Interest rate computations are based on the average daily outstanding balance.

c. Borrower must pay interest on the disbursed principal balance every month beginning one
month from the month this Note is dated; monthly interest payments must be made on the same
day as the date of this Note. Borrower must make additional payments as follows:

(1) Principal payments to be made upon receipt of proceeds from sale of inventory and
collection of accounts financed with the loan proceeds. Lender will apply 100% of each
payment first to interest accrued to the date of receipt of payment, and the balance to
principal.

d. The interest rate will be adjusted monthly (the “change period”).

e. The adjusted interest rate will be 2.75% above the Lender’s Prime Rate. Lender will adjust
the interest rate on the first calendar day of each change period. The change in interest rate
is effective on that day whether or not Lender gives Borrower notice of the change.

f. If SBA purchases the guaranteed portion of the unpaid principal balance, the interest rate
becomes fixed at the rate in effect at the time of the earliest uncured payment default. If
there is no uncured payment default, the rate becomes fixed at the rate in effect at the time
of purchase.

g. All remaining principal and accrued interest is due and payable 1 year from date of Note.

h. Lender will have no obligation to advance funds under this Note if Lender determines: (a)
there is any default as defined in this Note; (b) there has been an unremedied adverse change
in the financial condition, organization, management, operation, or assets of Borrower which
would warrant withholding or not making further disbursement; or (c) Borrower has used Loan
funds for unauthorized purposes; or (d) Borrower has not complied with Lender’s conditions for
disbursements or other agreements.

i. Lender may charge servicing fees.

j. Late Charge: If a payment is made more than 10 days past the due date, the Borrower
agrees to pay a late charge of 5.00% of the late payment amount.

k. Processing Fee: Borrower will pay a processing fee to the bank. The processing fee will
be paid on a monthly basis equal to .65% of the average daily outstanding funded balance
relating to foreign inventory and foreign accounts receivable balances.

l. This Note secured by collateral as described in the Business Security Agreement dated April
18, 2006 between Beacon Bank and HEI, Inc.

m. Commercial Loan Agreement: This Note is additionally supported by the terms and
conditions as set forth in a Commercial Loan Agreement dated April 18, 2006.

n. Borrower agrees to reimburse lender for expenses incurred in the making and administration
of the Loan. These costs include but are not limited to the SBA Guaranty Fee of $4,583.83.

			
	 	 	 
	SBA Form 147 (10/22/98) Previous editions obsolete
	 	Page 2/6

 

 

	4.	 	RIGHT TO PREPAY:

Borrower may prepay this Note. Borrower may prepay 20 percent or less of the unpaid
principal balance at any time without notice. If Borrower prepays more than 20 percent and
the Loan has been sold on the secondary market, Borrower must:

	 	A.	 	Give Lender written notice;
	 
	 	B.	 	Pay all accrued interest; and
	 
	 	C.	 	If the prepayment is received less than 21 days from the date Lender receives the
notice, pay an amount equal to 21 days’ interest from the date lender receives the notice,
less any interest accrued during the 21 days and paid under subparagraph B.

If Borrower does not prepay within 60 days from the date Lender receives the notice,
Borrower must give Lender a new notice.

	5.	 	DEFAULT:

Borrower is in default under this Note if Borrower does not make a payment when due under
this Note, or if Borrower or Operating Company:

	 	A.	 	Fails to do anything required by this Note and other Loan Documents;
	 
	 	B.	 	Defaults on any other loan with Lender;
	 
	 	C.	 	Does not preserve, or account to Lender’s satisfaction for, any of the Collateral or its
proceeds;
	 
	 	D.	 	Does not disclose, or anyone acting on their behalf does not disclose, any material fact to
Lender or SBA;
	 
	 	E.	 	Makes, or anyone acting on their behalf makes, a materially false or misleading
representation to Lender or SBA;
	 
	 	F.	 	Defaults on any loan or agreement with another creditor, if Lender believes the default may
materially affect Borrower’s ability to pay this Note;
	 
	 	G.	 	Fails to pay any taxes when due;
	 
	 	H.	 	Becomes the subject of a proceeding under any bankruptcy or insolvency law;
	 
	 	I.	 	Has a receiver or liquidator appointed for any part of their business or property;
	 
	 	J.	 	Makes an assignment for the benefit of creditors;
	 
	 	K.	 	Has any adverse change in financial condition or business operation that Lender
believes may materially affect Borrower’s ability to pay this Note;
	 
	 	L.	 	Reorganizes, merges, consolidates, or otherwise changes ownership or business
structure without Lender’s prior written consent; or
	 
	 	M.	 	Becomes the subject of a civil or criminal action that Lender believes may
materially affect Borrower’s ability to pay this Note.

	6.	 	LENDER’S RIGHTS IF THERE IS A DEFAULT:

Without notice or demand and without giving up any of its rights, Lender may:

	 	A.	 	Require immediate payment of all amounts owing under this Note;
	 
	 	B.	 	Collect all amounts owing from any Borrower or Guarantor;
	 
	 	C.	 	File suit and obtain judgment;
	 
	 	D.	 	Take possession of any Collateral; or
	 
	 	E.	 	Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or
without advertisement.

			
	 	 	 
	SBA Form 147 (10/22/98) Previous editions obsolete
	 	Page 3/6

 

 

	7.	 	LENDER’S GENERAL POWERS:

Without notice and without Borrower’s consent, Lender may:

	 	A.	 	Bid on or buy the Collateral at its sate or the sale of another lienholder, at any price it
chooses;
	 
	 	B.	 	Incur expenses to collect amounts due under this Note, enforce the terms of this
Note or any other Loan Document, and preserve or dispose of the Collateral. Among other
things, the expenses may include payments for property taxes, prior liens, insurance,
appraisals, environmental remediation costs, and reasonable attorney’s fees and costs.
If Lender incurs such expenses, it may demand immediate repayment from Borrower or add
the expenses to the principal balance;
	 
	 	C.	 	Release anyone obligated to pay this Note;
	 
	 	D.	 	Compromise, release, renew, extend or substitute any of the Collateral; and
	 
	 	E.	 	Take any action necessary to protect the Collateral or collect amounts owing on this Note.

	8.	 	WHEN FEDERAL LAW APPLIES:

When SBA is the holder, this Note will be interpreted and enforced under federal law,
including SBA regulations. Lender or SBA may use state or local procedures for filing papers,
recording documents, giving notice, foreclosing liens, and other purposes. By using such
procedures, SBA does not waive any federal immunity from state or local control, penalty,
tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or
state law to deny any obligation, defeat any claim of SBA, or preempt federal law.

	9.	 	SUCCESSORS AND ASSIGNS:

Under this Note, Borrower and Operating Company include the successors of each, and Lender
includes its successors and assigns.

	10.	 	GENERAL PROVISIONS:

	 	A.	 	All individuals and entities signing this Note are jointly and severally liable.

	 
	 	B.	 	Borrower waives all suretyship defenses.
	 
	 	C.	 	Borrower must sign all documents necessary at any time to comply with the Loan
Documents and to enable Lender to acquire, perfect, or maintain Lender’s liens on
Collateral.
	 
	 	D.	 	Lender may exercise any of its rights separately or together, as many times and in
any order it chooses. Lender may delay or forgo enforcing any of its rights without
giving up any of them.
	 
	 	E.	 	Borrower may not use an oral statement of Lender or SBA to contradict or alter the written
terms of this Note.
	 
	 	F.	 	If any part of this Note is unenforceable, all other parts remain in effect.
	 
	 	G.	 	To the extent allowed by law, Borrower waives all demands and notices in connection
with this Note, including presentment, demand, protest, and notice of dishonor.
Borrower also waives any defenses based upon any claim that Lender did not obtain any
guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired
Collateral; or did not obtain the fair market value of Collateral at a sale.

			
	 	 	 
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	11.	 	STATE-SPECIFIC PROVISIONS:

			
	 	 	 
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	12.	 	BORROWER’S NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated under this Note as Borrower.

Borrower agrees to the terms contained in this Note (including those on pages 1,2,3,4,5 and
6). Borrower acknowledges receipt of a copy of this Note.

	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 
	 	 	HEI, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	
	 

	 	 	 	Mack V. Traynor
	 

	 	 	 	Its: President & CEO
	 
	 	 	 	 
	 

	 	By:
	 	
	 

	 	 	 	Timothy C. Clayton
	 

	 	 	 	Its: CFO

			
	 	 	 
	SBA Form 147 (10/22/98) Previous editions obsolete
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