Document:

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                                                                   EXHIBIT 10.34

                                  CONFIDENTIAL
                        SEPARATION AGREEMENT AND RELEASE

         Steve E. Tondera, Jr. ("Tondera") and HEI, Inc. (the "Company") have
reached this Separation Agreement and Release ("Agreement") effective as of the
20 day of June, 2003 (the "Effective Date").

1. RESIGNATION. Tondera has resigned from his employment and all other roles
with the Company, including his positions as Chief Financial Officer and as a
member of the Board of Directors and any Board committee, and from all positions
with any subsidiary of the Company, effective as of June 20, 2003.

2. SEPARATION PAYMENTS AND BENEFITS. In return for entering into this Agreement,
Tondera will receive the following:

         A. The Company will, on or about eighteen (18) days following Tondera's
         signing of this Agreement, pay Tondera a gross lump sum payment of
         Thirty Seven Thousand and No/100 Dollars ($37,000.00).

         B. For the period of June 20,2003 through August 3 1,2003 (the "Premium
         Payment Period"), the Company will pay the monthly health, dental and
         life insurance premiums for Tondera to continue his insurance under the
         Company's group plans subject to these plans' eligibility requirements.
         The Premium Payment Period shall run concurrently with Tondera's COBRA
         and state benefits continuation period. In order to receive the
         benefits described in this Paragraph 2(B), Tondera must execute all
         documentation necessary to elect insurance continuation. Tondera agrees
         he has received appropriate notice regarding his benefits continuation
         rights.

All of the above will be subject to deductions that the Company is obligated, or
believes in good faith it is obligated, by law to deduct. No tax representations
have been made to Tondera.

Tondera will receive the foregoing only if he signs this Agreement and does not
cancel it within the fifteen (15) calendar days described below under
"Opportunity to Rescind." If he chooses to cancel this Agreement, he shall not
be entitled to any of the payments or benefits described in this Agreement.

3. CONSULTING RELATIONSHIP. As further consideration for Tondera entering into
this Agreement, Tondera and the Company agree to the following consulting
arrangement and payments.

         3.1 CONSULTATION SERVICES. Beginning July 1,2003, and continuing for
five (5) months through November 30,2003 (the "Consultation Period"), Tondera
agrees to provide consulting services to the Company as may be requested by the
Company. Such consulting services may include, but are not limited to, reviewing
the Company's financial statements, assisting in the Company's preparation of
its SEC quarterly and annual filings, negotiating lease transactions, assisting
with the Company's transition following the hiring of a Chief Financial Officer,
and other consulting services that may be requested by the Company.

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         Tondera agrees to use his best efforts in providing such consultation
services to the Company, and shall comply with all reasonable requests for said
consultation by the Company. The Company will have the right to immediately
terminate its consulting relationship with Tondera if it determines that he is
not using his best efforts to provide and perform his consulting services for
the Company.

         3.2 CONSULTATION PAYMENTS. For the Consultation Period, provided that
the consulting relationship has continued, the Company shall pay Tondera a
monthly consulting fee on or before the 10th day of the month following the
month for which services were rendered in the amount of Fourteen Thousand Four
Hundred Twenty Five and No/100 Dollars ($14,425.00).

         The Company agrees that it will reimburse Tondera for reasonable
expenses that he incurs as a result of providing consulting services to the
Company, such as travel expenses, provided that Tondera obtains the Company's
advance approval before incurring such expenses and provided that Tondera
submits documentation to the Company verifying such expenses, including but not
limited to original receipts, within forty-five (45) days of incurring the
expense.

         The Company shall issue a Form 1099 with respect to such consultation
payments, and Tondera understands and agrees that he shall be solely responsible
for the payment of any taxes, which he may owe with respect to his receipt of
such consultation payments. Tondera acknowledges and agrees that he has neither
received nor relied upon any advice or representations of the Company or its
legal counsel concerning the taxability of the consulting payments.

         3.3 CONSULTATION PERIOD COMPLETION AND RELEASE AGREEMENT. Upon
Tondera's completion of the consulting services to be provided during the
Consultation Period, and contingent upon him entering into a release agreement
prepared by and in a form acceptable to the Company, the Company shall pay
Tondera the sum of Fourteen Thousand Four Hundred Twenty Five and No/100 Dollars
($14,425.00) as consideration for his execution of such release agreement.

         3.4 INDEPENDENT CONTRACTOR STATUS. Tondera understands and agrees that
he will be an independent contractor and not an employee of the Company during
the Consultation Period. Tondera understands that he will not be treated as an
employee of the Company for federal or state tax purposes, and that he will not
be eligible for or participate in any pension, health, workers compensation or
other fringe benefit plans provided by the Company to its employees. Tondera
agrees that he shall not hold himself out as an employee of the Company, or as
having the power or authority to incur any debt, obligation or liability on
behalf of the Company. The Company will not control or direct the details,
manner or means by which Tondera executes his obligations and responsibilities
with respect to the consulting services described in this Agreement. Unless
otherwise prohibited under this Agreement or any other agreement, Tondera shall
have the right to provide additional services to any other person when not
performing his responsibilities under this Agreement.

         3.5 CONDITION OF RELATIONSHIP. Tondera understands and agrees that he
shall receive the foregoing consulting arrangement and payments only if he signs
this Agreement and does not

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rescind the Agreement within the fifteen (15) calendar days described below
under "Opportunity to Rescind."

4. REPAYMENT OF PROMISSORY NOTE. Tondera shall be obligated to pay the Company
the total amount that Tondera owes to the Company under his Promissory Note,
dated April 2,200 1, as amended on July 17,2002 (the "Note"). During the
Consultation Period and following his execution of the release agreement
contemplated by Section 3.3, Tondera shall make payments on the Note by making
installment payments to the Company in the amount of Nine Thousand One Hundred
Sixty Six and 66/100 Dollars ($9,166.66) each immediately upon his receipt of
each payment he receives from the Company under Sections 3.2 and 3.3 of this
Agreement until the Note has been paid in full. In the event that Tondera has
not paid the Note in full after making the payments required by this Section 4,
Tondera shall be obligated to pay any remaining amount owed under the Note in
accordance with the terms of the Note. A true and correct copy of the Note is
incorporated herein and attached hereto as Exhibit A to this Agreement.

5. STOCK OPTIONS. All stock options that have been granted to Tondera by the
Company shall be governed by the terms of the Company's stock option agreements
with Tondera, a copy of which agreements are attached hereto and incorporated
herein as Exhibit B, and the applicable stock option plans.

6. NO OTHER BENEFITS. Except as set forth in this Agreement, Tondera shall
receive no other benefits and shall no longer participate in the Company's
benefit plans except as required by benefits continuation laws. All of Tondera's
rights shall be governed by the terms of such plans. The Company has provided
Tondera applicable summary plan descriptions for its plans.

7. SURVIVAL OF HEI NONDISCLOSURE AND NONCOMPETE AGREEMENT. Tondera agrees that,
in consideration of his past employment with the Company and the payments and
benefits to be provided to him under this Agreement, his various obligations
under the HE1 Nondisclosure and Noncompete Agreement between him and the
Company, signed by Tondera on January 20, 1999, shall survive his resignation
from his employment and positions with the Company and that he is and shall
remain bound by the provisions of that agreement. A copy of the HE1
Nondisclosure and Noncompete Agreement is incorporated herein and attached
hereto as Exhibit C to this Agreement.

8. RELEASE OF CLAIMS.

         8.1 TONDERA'S RELEASE OF CLAIMS. Tondera agrees he is receiving pay and
benefits under this Agreement that he would not otherwise be entitled to receive
and that are adequate and sufficient consideration for this Agreement. In return
for this pay and benefits, Tondera, for himself and on behalf of all of his
past, present and future heirs, executors, administrators, agents, attorneys,
insurers, subrogees, lienors, trustees, indemnitors, principals, servants,
representatives, employees, partners, predecessors, successors and assigns,
hereby releases the Company, its subsidiaries and any affiliated companies,
businesses or entities and all of their respective current and former officers,
agents, directors, employees, independent contractors, shareholders, attorneys,
accountants, insurers, representatives, predecessors, successors and assigns,
both individually and in any representative capacity (collectively, the
"Released Parties"), from each and every legal claim or demand of any kind,
whether known or unknown,

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existing at any time up to and including the date of this Agreement, including
without limitation any claim or demand (a) in any way arising out of or related
to any action, conduct, decision or omission taking place during his employment
with the Company or its affiliates, (b) in any way arising out of or related to
his service as an officer, director, committee member or employee, or his
service in any other capacity with the Company or its affiliates or in any way
arising out of related to any oral or written agreement between him and the
Company related to or entered into during such service (other than the stock
option agreements attached hereto as Exhibit B), (c) in any way arising out of
or related to his separation from that employment or service with the Company or
its affiliates, (d) in any way arising out of or related to his status as a
shareholder of the Company, or (e) in any way arising out of or related to his
contact with or engagement of any of the Released Parties.

         Tondera understands and agrees that this Agreement is a full, final and
complete settlement and release of the Released Parties of all his claims,
whether known or unknown, including but not limited to any claims or rights he
may have under the Employment Retirement Income Security Act, 29 U.S.C.
Section 1001 et. seq., the Minnesota Human Rights Act, Minn. Stat. Chapter 363,
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e,
et. seq., the Age Discrimination in Employment Act of 1967,29 U.S.C. Section 626
et. seq., the Americans with Disabilities Act, 42 U.S.C. Section 12101, et.
seq., The Family and Medical Leave Act, 29 U.S.C. Section 2601 et. seq., the
Minnesota Employment, Wages, Conditions, Hours, and Restrictions Laws, Minn.
Stat. Chapter 181, the Minnesota Whistleblower Act, Minn. Stat. Section 181.932,
Minnesota Worker's Compensation statute Minn. Stat. Section 176.82, the Fair
Labor Standards Act, 29 U.S.C. Section 201 et. seq., the Equal Pay Act, 29
U.S.C. Section 206 et. seq., the National Labor Relations Act, 29 U.S.C. Section
1501 et. seq., the Minnesota Business Corporations Act, Chapter 302A, and any
other federal, states', or local governments' laws and regulations or any
executive orders governing employment, service as an officer or director of a
corporation, corporate governance, or shareholder matters. Tondera further
understands and agrees that he is releasing any claims he may have, whether
known or unknown, for payment of compensation or benefits of any kind, fraud or
misrepresentation, promissory estoppel, wrongful or constructive discharge,
defamation, invasion of privacy, breach of covenant of good faith and fair
dealing, reprisal or retaliation, breach of contract (including but not limited
to the HE1 Nondisclosure and Noncompete Agreement), unjust enrichment,
negligence, negligent hiring, supervision and retention, intentional or
negligent infliction of emotional distress, and any other claims arising under
any law. Tondera agrees that if any claim he releases in this Agreement is
prosecuted in his name before any court or administrative agency, he will waive
any benefits he obtained through such prosecution and will not take any award of
money or other damages from such suit.

         Tondera represents and warrants that the pay and benefits he is
receiving under this Agreement fully compensates him for any and all claims
against the Released Parties.

         Notwithstanding the foregoing, this Agreement does not release any
rights or claims Tondera may have under the Minnesota Human Rights Act or the
Age Discrimination in Employment Act or any of the Company's benefit plans,
which arise after he signs this Agreement or which arise from acts occurring
after he signs this Agreement, or any claims he may have under applicable law or
any Company insurance policy for defense, indemnification and/or contribution
with respect to claims made against him in connection with his conduct in the
scope of his employment with or services as a director of the Company.

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         8.2 THE COMPANY'S RELEASE OF ANY KNOWN CLAIMS. In return for Tondera
entering into this Agreement, the Company, on behalf of itself and its
subsidiaries and any affiliated companies, businesses or entities, hereby
releases Tondera from each and every legal claim or demand of any kind of which
the Company's Board of Directors, other than Anthony Fant, has actual knowledge
as of the Effective Date of this Agreement including without limitation any such
known claim or demand (a) in any way arising out of or related to any action,
conduct, decision or omission taking place during Tondera's employment with the
Company or its affiliates, or (b) in any way arising out of or related to his
separation from that employment.

         The Company represents and warrants that Tondera's entering into this
Agreement fully compensates the Company for its above release of claims.

9. NO FUTURE LAWSUITS.

         A. Tondera, for himself and on behalf of all of his past, present and
         future heirs, executors, administrators, agents, attorneys, insurers,
         subrogees, lienors, trustees, indemnitors, principals, servants,
         representatives, employees, partners, predecessors, successors and
         assigns, hereby agrees never to commence an action or to authorize
         anyone else to commence an action against the Released Parties with
         respect to any matters released in this Agreement. If Tondera breaches
         this Agreement, he shall pay the Released Parties' reasonable
         attorneys' fees, disbursements and costs in connection with such
         action. Tondera agrees that if such an action is commenced that the
         filing of this Agreement shall constitute sufficient and adequate
         evidence that any such action should be dismissed with prejudice and
         that costs, disbursements and attorneys' fees should be awarded to such
         Release Parties.

         B. Tondera further agrees not to voluntarily aid, assist or cooperate
         with any claimants, plaintiffs, adverse parties or their attorneys or
         agents in any claims or lawsuits commenced against any of the Released
         Parties; provided, however, that nothing in this Agreement shall
         prevent Tondera from testifying in response to a lawfully issued
         subpoena in any litigation or other legal proceeding involving any of
         the Released Parties. In the event that Tondera receives a subpoena
         from a party other than the Company, Tondera shall promptly notify the
         Company and provide it with a copy of the subpoena so that the Company
         has an opportunity to seek to quash or otherwise respond to the
         subpoena. This provision is not intended to affect the substance of any
         testimony that Tondera is required to provide. Rather, Tondera agrees
         to provide truthful testimony in full compliance with all applicable
         laws.

10. NONDISPARAGEMENT. Tondera will not, directly or indirectly, at any time,
make any disparaging remark, either oral or in writing, regarding any of the
Released Parties.

11. LITIGATION. In the event that any litigation or action arises in which the
Company deems Tondera's testimony or participation to be relevant or necessary,
Tondera agrees to cooperate with the Company in connection with the litigation
or action, by providing testimony, through affidavit, in a deposition or at
trial, or otherwise assisting the Company with respect to the litigation or
action. The Company agrees that it will reimburse Tondera for any reasonable
expenses, such as travel expenses, that he incurs in connection with such
cooperation provided

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that Tondera submits documentation to the Company verifying such expenses,
including but not limited to original receipts, within forty-five (45) days of
incurring the expense. This provision is not intended to affect the substance of
any testimony that Tondera is asked to provide. Rather, Tondera agrees to
provide truthful testimony and to otherwise assist the Company in light of and
in full compliance with all applicable laws.

12. CONSULTATION. In the event that any questions arise following the Consulting
Period with regard to any information or subject that Tondera developed, of
which he had knowledge or with which he was otherwise involved during the period
of his various positions with the Company, he agrees to cooperate with and
respond to any request by the Company for advice, opinions or other information
responsive to the question posed.

13. CONFIDENTIALITY OF TERMS. The parties agree that this Agreement and its
terms shall remain completely confidential, and that they shall share them with
no one before or after signing this Agreement, except that (a) Tondera may
disclose this Agreement and its terms to his financial advisors and accountants,
attorneys, and appropriate governmental agencies, and (b) the Company may
disclose this Agreement and its terms to its financial advisors and accountants,
insurers, and attorneys, or to its officers, directors or employees with a need
to know such information in the course of their duties for the Company. In
addition, the Released Parties may disclose this Agreement and its terms to the
extent required by any law or regulation or any applicable stock exchange rules,
or in the event Tondera violates this Agreement.

Tondera recognizes that if he violates his confidentiality obligations under
this Agreement, irreparable damage will result to the Company that could not be
adequately remedied by monetary damages. As a result, he agrees that in the
event of any such breach, or in the event of apparent danger of such breach, the
Company shall be entitled, in addition to any other legal or equitable remedies
available to the Company, to an injunction to restrain the violation of any and
all portions of this Agreement and to its reasonable attorney's fees and costs
in enforcing this Agreement.

14. RETURN OF PROPERTY. Tondera warrants that he has returned the originals and
all copies of all Company files, documents, software, hardware, keys, credit
cards, office equipment, and all other Company property in his possession or
under his control. However, if he should locate any Company property after he
signs this Agreement, he shall promptly return said property.

Notwithstanding the foregoing, the Company agrees that Tondera may keep the
Company-owned desk top computer, mouse, and keyboard in Tondera's possession.

15. PERIOD FOR REVIEW AND CONSIDERATION. Tondera understands that he has been
given a period of 21 days to review and consider this Agreement before signing
it. He further understands that he may use as much of this 21-day period as he
wishes prior to signing this Agreement.

16. OPPORTUNITY TO RESCIND. Tondera may cancel this Agreement for any reason
within fifteen (15) days after signing it. If he decides to do so and to mail
his notice of cancellation, Tondera understands that it must be postmarked
within the fifteen (15) day period and addressed to Mack Traynor at HE1 and sent
by certified mail, return receipt requested.

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17. OPPORTUNITY TO CONSULT. Tondera agrees that he has been advised by the
Company to seek the advice of an attorney of his choosing prior to signing this
Agreement.

18. COMPLETE AGREEMENT. This Agreement and its exhibits incorporated herein
contain the entire agreement between the parties, and there are no other written
or oral agreements.

19. MISCELLANEOUS.

         A. LAW AND VENUE. This Agreement will be construed and interpreted in
accordance with the laws of the state of Minnesota, without regard to its choice
of law provisions, and any action arising out of related to this Agreement shall
be brought only within the state of Minnesota whether or not that forum is then
convenient to Tondera.

         B. NO ADMISSION. Nothing contained in this Agreement is to be construed
by anyone as an admission that the Company has violated any law or engaged in
any wrongdoing. In fact, the Company denies any wrongdoing of any kind.

         C. SEVERABILITY. In the event that any paragraph or provision of this
Agreement is found to be illegal or unenforceable, it shall not affect the
validity or enforceability of the remaining provisions. To the extent that any
provision of this Agreement is unenforceable because it is overbroad, that
provision shall be limited to the extent required by applicable law and enforced
as so limited.

         D. INTENDED THIRD-PARTY BENEFICIARIES. The Released Parties are
intended third party beneficiaries of this Agreement.

20. SIGNATURE. The parties agree that they have read this Agreement, know its
contents and have signed it as a free and voluntary act after having had
adequate opportunity to consider its terms and conditions and consult with an
attorney of their choosing.

Date:
     ------------------------                   --------------------------------
                                                STEVE E. TONDERA, JR.

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Date:                                        HEI, Inc.
     ------------------------

                                             By
                                                --------------------------------
                                             Its
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                                                                   EXHIBIT 10.35

                                    HEI, INC.
                              EMPLOYMENT AGREEMENT

         This Employment Agreement is made and entered into effective as of
October 1, 2003 (the "Effective Date"), by and among HEI, Inc., a Minnesota
corporation (the "Corporation"), and Douglas Nesbit ("Employee").

                                    RECITALS

A. Employee is currently employed by the Company as its Chief Financial Officer
and Employee is a party to an HEI, Inc. Non-Disclosure, Non-Compete and
Inventions Assignment Agreement between Employee and the Company dated July 1,
2003 (the "2003 Employment Agreement")

B. Corporation desires to continue to employ Employee in accordance with the
terms of this Agreement.

C. Employee recognizes that the Corporation operates in a highly competitive
environment and the importance to the Corporation of ensuring Employee's loyalty
and protecting the Corporation's customers, employees, business information and
inventions, and goodwill. Accordingly, Employee has entered into and agrees to
be bound by this Agreement in consideration of Employee's employment with the
Corporation and being given access to the Corporation's confidential
information.

D. The Corporation and Employee desire to enter into this Agreement.

                                    AGREEMENT

         In consideration of the above recitals and the mutual promises set
forth in this Agreement the parties agree as follows:

         1. Termination of 2003 Employment Agreement. The parties agree that the
July 2003 Employment Agreement is terminated as of the Effective Date of this
Agreement and that this Agreement replaces and supersedes the July 2003
Employment Agreement.

         2. Nature and Capacity of Employment. The Corporation hereby agrees to
employ Employee as its Chief Financial Officer, subject to the direction of the
President/Chief Executive Officer and the Board of Directors of the Corporation
and pursuant to the terms and conditions set forth in this Agreement. Employee
hereby accepts employment under the terms and conditions set forth in this
Agreement.

         Employee agrees to perform or be available to perform, on a full-time
basis, the functions of this position, pursuant to the terms of this Agreement.
In addition, Employee will not, during the course of employment by the
Corporation, without prior written approval of the Board of

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Directors of the Corporation, become an employee, director, officer, agent,
partner of or consultant to, or a stockholder of (except a stockholder of a
public company in which Employee owns less than five percent (5%) of the issued
and outstanding capital stock of such company) any company or other business
entity which is, as determined by the Board of Directors in its discretion, a
significant competitor, supplier, or customer of the Corporation.

         2. Term of Employment. Employee's employment hereunder shall commence
as of the Effective Date and shall continue for period of one year thereafter
until October 1, 2004 (the "Term") unless Employee's employment is earlier
terminated pursuant to the terms of Paragraph 5 of this Agreement.

         Unless Employee's employment has earlier terminated pursuant to the
terms of Paragraph 5 of this Agreement, this Agreement shall automatically renew
following the Term for successive terms of one year each (each called a "Renewal
Term") unless the Corporation provides Employee thirty (30) days advance written
notice prior to the expiration of the Term or Renewal Term that this Agreement
shall not be renewed. During any Renewal Term, this Agreement may be terminated
pursuant to the terms of Paragraph 5 of this Agreement.

         3. Compensation.

                  3.1 Base Salary. As of the Effective Date, the Corporation
agrees to pay Employee an annualized base salary of $140,000.00, which amount
shall be earned by Employee on a pro rata basis as Employee performs services
and which shall be paid according to the Corporation's normal payroll practices.
The Corporation may, in its discretion, adjust Employee's base salary from time
to time based on Employee's performance and the Corporation's business and
financial situation.

                  3.2 Incentive or Bonus Compensation. The Corporation may, in
its sole discretion, pay bonuses or other incentive compensation to Employee in
addition to the annual base salary set forth above.

         4. Employee Benefits. During Employee's employment with Corporation,
Employee shall be entitled to participate in the retirement plans, health plans,
and all other employee benefits made available by the Corporation, and as they
may be changed from time to time. Employee acknowledges and agrees that the
Corporation is under no obligation to Employee to establish and maintain any
employee benefit plan in which Employee may participate, and that the terms and
provisions of any employee benefit plan of the Corporation are matters within
the exclusive province of the Corporation's Board of Directors, subject to
applicable law. Upon the termination of Employee's employment, Employee shall be
entitled to continue those benefits as may be required by state or federal law.

         5. Termination of Employment Prior to the End of the Term or Renewal
Term. Employee's employment may be terminated prior to the expiration of the
Term or a Renewal Term as follows:

                  5.1. For Cause Termination, Without Severance. Notwithstanding
anything contained herein to the contrary, the Corporation may discharge
Employee and terminate this

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Agreement immediately upon written notice to Employee. For the purposes of this
Agreement, "Cause" shall mean the occurrence of any of the following:

                  (i) mismanagement or neglect of Employee's duties which the
                  Corporation's Board of Directors determines is (or will be if
                  continued) materially and adversely affecting the business or
                  affairs of the Corporation; or

                  (ii) conduct by Employee which the Corporation's Board of
                  Directors determines is (or will be if continued) demonstrably
                  and materially injurious to the Corporation, monetarily or
                  otherwise; or

                  (iii) fraud, misappropriation or embezzlement by the Employee;
                  or

                  (iv) conviction of a felony crime or a crime of moral
                  turpitude; or

                  (v) conduct in the course of employment that the Corporation's
                  Board of Directors determines is unethical; or

                  (vi) the material breach of this Agreement by Employee.

         If the Corporation terminates Employee's employment for Cause pursuant
to this Paragraph 5.1, Employee shall not be entitled to severance pay under
Paragraph 5.6 or to any bonus or incentive compensation of any kind.

                  5.2. Without Cause, With Severance. The Corporation may
terminate Employee's employment immediately at any time and for any reason
without Cause upon providing notice to Employee. However, in such event the
Corporation shall pay Employee any earned and unpaid bonus or incentive
compensation, if any, on a pro rata basis for the period through the Employee's
termination date. In addition, provided that Employee meets all of the
conditions set forth in this paragraph for receiving severance pay, the
Corporation shall pay Employee severance pay in monthly installments equal to
1/12 of Employee's annualized base salary at the time of termination, less
applicable withholdings, up to the earlier of (i) three (3) months from the date
of Employee's date of termination or (ii) the date on which Employee begins
earning income from self-employment, employment, consulting, independent
contracting, or other work activities. Employee shall only be entitled receive
the severance pay described herein if Employee meets all of the following
conditions:

                  (a) Employee must sign a Separation Agreement at the time of
                  termination in a form prepared by the Corporation that
                  includes adequate provisions for the following: (i) Employee's
                  general release of any and all legal claims; (ii) Employee's
                  return of all of the Corporation's property in Employee's
                  possession; (iii) nondisparagement of the Corporation and its
                  representatives; (iv) confidentiality of terms; and (v)
                  acknowledgement of Employee's continuing contractual
                  obligations to the Corporation, including Employee's
                  continuing noncompetition, confidentiality, return of
                  property, and invention obligations under Paragraphs 6, 7, 8,
                  and 9 of this Agreement; and

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                  (b) Commencing as of Employee's termination date, Employee
                  must diligently search for and try to obtain income producing
                  opportunities through self-employment, employment, consulting,
                  independent contracting or other work opportunities and must,
                  upon request from the Corporation, provide Corporation written
                  proof of such efforts; and

                  (c) Employee must promptly notify the Company in writing of
                  the date(s) on which Employee will and does begin earning
                  income from self-employment, employment, consulting,
                  independent contracting or other work activities.

                  5.3. Resignation by Employee Due to Change of Control, With
Severance. For purposes of this Agreement, "Change of Control" means a change in
ownership or control of the Corporation effected through any of the following
transactions: (a) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities immediately
prior to such transaction; (b) any stockholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets; (c) the
acquisition, directly or indirectly by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board recommends such
stockholders accept; or (d) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.

         Employee shall have the right to terminate Employee's employment for
any reason within six (6) months following a Change of Control in the Company
upon providing thirty (30) days advance written notice to the Corporation. The
Corporation may then elect either (a) to have Employee continue performing work
for the Corporation throughout the 30 day notice period; or (b) to accept
Employee's resignation effective immediately.

         In the event of Employee's termination of employment with the
Corporation following a Change of Control under this Paragraph 5.3, Corporation
shall pay Employee any earned and unpaid bonus or incentive compensation, if
any, on a pro rata basis for the period through the Employee's termination date.
In addition, provided that Employee meets all of the conditions set forth in
this paragraph for receiving severance pay, the Corporation shall pay Employee
severance pay in monthly installments equal to 1/12 of Employee's annualized
base salary at the time of termination, less applicable withholdings, up to the
earlier of (i) twelve (12) months from

                                       4

<PAGE>

the date of Employee's date of termination or (ii) the date on which Employee
begins earning income from self-employment, employment, consulting, independent
contracting, or other work activities. Employee shall only be entitled receive
the severance pay described herein if Employee meets all of the following
conditions:

                  (a) Employee must sign a Separation Agreement at the time of
                  termination in a form prepared by the Corporation that
                  includes adequate provisions for the following: (i) Employee's
                  general release of any and all legal claims; (ii) Employee's
                  return of all of the Corporation's property in Employee's
                  possession; (iii) nondisparagement of the Corporation and its
                  representatives; (iv) confidentiality of terms; and (v)
                  acknowledgement of Employee's continuing contractual
                  obligations to the Corporation, including Employee's
                  continuing noncompetition, confidentiality, return of
                  property, and invention obligations under Paragraphs 6, 7, 8,
                  and 9 of this Agreement; and

                  (b) Commencing as of Employee's termination date, Employee
                  must diligently search for and try to obtain income producing
                  opportunities through self-employment, employment, consulting,
                  independent contracting or other work opportunities and must,
                  upon request from the Corporation, provide Corporation written
                  proof of such efforts; and

                  (c) Employee must promptly notify the Company in writing of
                  the date(s) on which Employee will and does begin earning
                  income from self-employment, employment, consulting,
                  independent contracting or other work activities.

                  5.4 Other Resignation by Employee, Without Severance. The
Employee may resign Employee's position upon providing 90 days advance, written
notice to the Corporation. The Corporation may then elect either (a) to have
Employee continue performing work for the Corporation throughout the 90 day
notice period; or (b) to accept Employee's resignation effective immediately. In
the event of Employee's termination of employment with the Corporation under
this Paragraph 5.4, Employee shall not be paid any severance pay as provided in
Paragraph 5.6, but shall be paid any earned and unpaid bonus or incentive
compensation, if any, on a pro rata basis for the period through Employee's
termination date.

                  5.5 Because of Death, Disability or Incapacity of Employee,
Without Severance. In the event of Employee's death, or if the Employee is
unable to perform Employee's duties and responsibilities for more than 90 days
in any consecutive 12-month period, by reason of physical or mental disability
or incapacity, the Corporation may terminate Employee's employment upon thirty
(30) days advance written notice to Employee. This Paragraph does not relieve
the Corporation of any duty to reasonably accommodate a qualifying disability
under the Americans with Disabilities Act, any legal duty under the Family
Medical Leave Act, or any of its other duties pursuant to applicable law. If
Employee's employment is terminated pursuant to this Paragraph, Employee shall
not be entitled to severance pay under Paragraph 5.6, but shall be paid any
earned and unpaid bonus or incentive compensation, if any, on a pro rata basis
for the period through Employee's termination date.

                                       5

<PAGE>

                  5.6 No Other Payments. Other than any severance payment or
incentive compensation due to Employee under the terms of this Agreement, if
any, Employee shall only be entitled to the following in the event of Employee's
termination of employment for any reason: (i) compensation earned through the
date of termination; (ii) benefits under any employee benefit plan or program to
the extent provided therein; and (iii) continued coverage under Corporation's
health and group term life insurance programs to the extent required under state
or federal continuation coverage laws

         6. Noncompetition/Non-Solicitation.

                  6.1. Acknowledgement by Employee. Employee acknowledges that
(a) Employee's services to be performed for Corporation are of a special and
unique nature; (b) Corporation operates in a highly competitive environment and
would be substantially harmed if Employee were to compete with Corporation or
divulge its confidential information; (c) Employee has received valuable and
sufficient consideration for entering into this Agreement, including but not
limited to employment with the Corporation, the receipt of Confidential
Information and (d) the provisions of this Section 6, including all of its
subparts, are reasonable and necessary to protect Corporation's business.

                  6.2. "Corporate Product" Defined. For purposes of this
Agreement, "Corporate Product" means any product or service (including any
component thereof and any research to develop information useful in connection
with a product or service) that has been or is being designed, developed,
manufactured, marketed or sold by the Corporation or with respect to which
Employee has acquired Confidential Information.

         Employee understands and acknowledges that, at the present time,
Corporate Products include microelectronics, subsystems, systems, connectivity
and software solutions (including, but not limited to, MMIC chip carriers and
packages, high linearity power amplifiers, front end RF modules, micro-circuit
design, production and value-added assembly services, ultra-miniature multi-chip
packaging including chip on flex, ceramic and PWB substrates, and high end flex
and rigid flex fabrication). Employee understands and acknowledges that the
foregoing description of Corporate Products may change, and the provisions of
this Section 6 and all of its subparts shall apply to the Corporate Products of
the Corporation in effect upon the termination of Employee' s employment with
the Corporation.

                  6.3 "Competitive Product" Defined. For purposes hereof,
"Competitive Product" means any product or service (including any components
thereof and any research to develop information useful in connection with the
product or service) that is being designed, developed, manufactured, marketed or
sold by any person or entity other than the Corporation that is of the same
general type, performs similar functions, or is used for the same purpose as a
Corporate Product on which Employee worked or assisted the Corporation during
Employee's employment with the Corporation or about which Employee has acquired
Confidential Information.

                                       6

<PAGE>

                  6.4 Noncompete Obligations. Employee agrees that, during
Employee's employment with the Corporation and for a period of eighteen (18)
months following Employee's termination of employment with the Company,
regardless of the reason for termination, Employee will not, directly or
indirectly, render services to any person or entity that designs, develops,
manufactures, markets or sells a Competitive Product in any geographic area
where the Company designs, develops, manufactures, markets or sells a Corporate
Product.

         Employee understands and acknowledges that, at the present time, the
geographic market of the Company includes the entire United States. Employee
understands and acknowledges that the foregoing description of the Company's
geographic market may change, and the provisions of this section 6 and all of
its subparts shall apply to the geographic market of the Company in effect upon
the termination of Employee's employment with the Company.

                  6.5 No Solicitation of Customers. During Employee's employment
with Corporation and for a period of eighteen (18) months after Employee's
termination of employment with Corporation, regardless of the reason for such
termination, Employee agrees that Employee shall not, directly or indirectly,
solicit business from, work for, or otherwise interfere with or attempt to
interfere with Corporation's relationship with any customer or prospective
customer of Corporation.

                  6.6 No Solicitation of Employees or Business Contacts. During
Employee's employment with Corporation and for a period of eighteen (18) months
after Employee's termination of employment with Corporation, regardless of the
reason for such termination, Employee agrees that Employee shall not, directly
or indirectly, take any action to encourage, solicit or recruit any current or
former employee, consultant, independent contractor, subcontractor, supplier,
vendor, or other business relation of Corporation to terminate their
relationship with Corporation.

                  6.7 Disclosure of Obligations. Employee agrees that, during
Employee's employment with Corporation and for a period of eighteen (18) months
after Employee's termination of employment with Corporation, regardless of the
reason for such termination, Employee shall, prior to accepting employment or
any other business relationship with any other person or entity, inform that
person or entity of Employee's obligations under this Section 6, including all
of its subparts.

         7. Protection of Confidential Information.

                  7.1 Definition of Confidential Information. As used in this
Agreement, the term "Confidential Information" shall mean any information which
Employee learns or develops during Employee's employment with Corporation that
derives independent economic value from being not generally known or readily
ascertainable by other persons who could obtain economic value from its
disclosure or use, and includes, but is not limited to, trade secrets,
Inventions as defined in Paragraph 9 below, financial information, personnel
information, and information relating to such matters as existing or
contemplated products, services, profit margins, fee schedules, pricing, design,
processes, formulae, business plans, sales techniques, marketing techniques,
training manuals and materials, policies or practices related to Corporation's

                                       7

<PAGE>

business, personnel or other matters, computer databases, computer programs,
software and other technology, customer lists and requirements, vendor lists, or
supply information. Confidential Information includes such information of
Corporation, its customers, vendors, and other third parties or entities with
whom Corporation does business. Any information disclosed to Employee or to
which Employee has access during the time of Employee's employment that Employee
reasonably considers to be Confidential Information, or which the Company treats
as Confidential Information, will be presumed Confidential Information.

                  7.2 Restrictions on Use or Disclosure of Confidential
Information. Employee shall keep the Confidential Information in absolute
confidence both during Employee's employment with Corporation and after the
termination of Employee's employment, regardless of the reason for such
termination. Employee agrees that Employee will not, at any time, disclose to
others, use for the benefit of any entity or person other than Corporation, or
otherwise take or copy any such Confidential Information, whether or not
developed by Employee, except as required in Employee's duties to Corporation.

         8. Return of Confidential Information and Corporation's Property. When
Employee's employment terminates with Corporation, regardless of the reason for
such termination, Employee will promptly turn over to Corporation in good
condition all Corporation property in Employee's possession or control,
including but not limited to all originals, copies of, or electronically stored
documents or other materials containing Confidential Information, regardless of
who prepared them. In the case of electronically stored information retained by
Employee outside of Corporation's electronic systems, Employee will promptly
make a hard copy of such information in paper, audio recording, disc format, or
other format as appropriate, turn that hard copy over to Corporation, and then
destroy Employee's electronically stored information. Further, Employee agrees
to execute written confirmation that all Confidential Information in the
Employee's possession, or to which the Employee has access, has been turned over
to Corporation or destroyed.

         9. Inventions.

                  9.1 Definition of Inventions. As used in this Agreement,
"Inventions" means any inventions, improvements, trade names or trademarks,
trade secrets, discoveries, designs, formulae, ideas or original works of
authorship (whether or not reduced to writing, other media or practice and
whether or not patentable or copyrightable), or work product originated,
conceived, developed, discovered or made in whole or in part solely by Employee
or jointly with others that relate (a) to Corporation's business; (b) to
Corporation's actual or demonstrably anticipated research or development; (c)
that are made through the use of any of Corporation's equipment, facilities,
supplies, trade secrets; (d) that result from any work Employee performs for
Corporation; or (e) that are developed on Corporation time.

                  9.2 Ownership of Inventions. With respect to Inventions
originated, conceived, developed, discovered or made in whole or in part solely
or jointly by Employee at any time during Employee's employment with
Corporation, Employee understands and agrees that Corporation will own all
right, title, and interest, including patent rights, copyrights, trade secret
rights and all other intellectual property rights of any sort, throughout the
world related to

                                       8

<PAGE>

all Inventions without further payment beyond Employee's agreed-upon salary or
wage. To the maximum extent permitted by law, all Inventions are deemed "works
made for hire" under the United States Copyright Act and Corporation is deemed
the sole author of any Inventions. To the extent any Inventions are determined
not to constitute "works made for hire," Employee hereby assigns and transfers
to Corporation all right, title and interest in the Inventions.

         Employee further agrees to (a) promptly and fully disclose all such
Inventions to Corporation; (b) keep accurate, complete, and timely records of
all Inventions, which records shall be Corporation's property and shall be
maintained on Corporation's premises; (c) at Corporation's expense, assist
Corporation to perfect, protect, and use its rights to Inventions, including
without limitation, transferring Employee's entire right, title and interest in
Inventions and enabling Corporation to obtain patent, copyright or trademark
protection for Inventions anywhere in the world; and (c) give affidavits and
testimony as to facts within Employee's knowledge in connection with any
Inventions in any administrative proceedings, arbitration, litigation or
controversy relating thereto.

                  9.3 Notice Regarding Exception to Inventions Assignment.
Employee understands that the assignment of Inventions set forth herein does not
apply to any Invention for which no equipment, supplies, facility, or trade
secret information of Corporation was used and which was developed entirely on
Employee's own time, and which does not relate directly to the business of the
Company or to its actual or demonstrably anticipated research or development, or
which does not result from any work performed by Employee for the Company.

         10. Compliance and Remedies. Employee recognizes that if Employee
violates this Agreement, including but not limited to Paragraphs 6, 7, 8, or 9
of this Agreement, irreparable damage will result to Corporation that could not
adequately be remedied by monetary damages. As a result, Employee hereby agrees
that notwithstanding any other dispute resolution provisions of this Agreement,
in the event of any breach by Employee of this Agreement, including but not
limited to Paragraphs 6, 7, 8, or 9 of this Agreement or in the event of
apparent danger of such breach, Corporation shall be entitled, in addition to
any other legal or equitable remedies available to it, to an injunction to
restrain Employee's violation of any portion of this Agreement, as well as
Corporation's attorney's fees and costs incurred in enforcing this Agreement.

         11. Informal Dispute Resolution. Employee and the Corporation agree to
make good faith efforts to resolve internally and without resort to formal
dispute resolution any dispute, which may arise out of or relate to Employee's
recruitment, employment or the termination of Employee's employment with the
Corporation, or any dispute regarding any of the provisions of this Agreement.

         12. Arbitration Clause. In the event that informal efforts to resolve
disputes pursuant to Paragraph 11 are unsuccessful, any dispute between Employee
and the Corporation arising out of or related to Employee's recruitment,
employment or the termination of Employee's employment with the Corporation, and
any dispute between Employee and the Corporation regarding any of the provisions
of this Agreement (other than an action for injunctive relief to enforce
Employee's obligations under paragraphs 6, 7, 8, or 9 of this Agreement), shall
be determined not in a court of law, but instead by arbitration in the United
States, in the State of Minnesota and the County of Hennepin. Such disputes
shall be referred in writing to the

                                       9

<PAGE>

American Arbitration Association for selection of an arbitrator. Selection of
the arbitrator shall be made in accordance with the Rules of the American
Arbitration Association, and the arbitrator's decision shall be final and
binding in all respects.

         Except as otherwise provided in this section, arbitration proceedings
initiated pursuant to this Agreement shall be conducted in accordance with the
Rules of the American Arbitration Association. Prior to the arbitration hearing,
the parties may use the following discovery methods: interrogatories in a form
consistent with Rule 33 of the Federal Rules of Civil Procedure; requests for
production of documents in a form consistent with Rule 34 of the Federal Rules
of Civil Procedure; admissions; depositions of witnesses in accordance with Rule
30 of the Federal Rules of Civil Procedure. The arbitrator shall have the right
to determine the extent of discovery permitted. The arbitrator shall consider
the matter in controversy and may hold hearings regarding the same. The
arbitrator may grant any remedy or relief that he or she deems just and
equitable, including, but not limited to, any remedy or relief that would have
been available to the parties under any applicable statutes or common law. The
arbitrator also has the authority to issue an award or partial award on the
grounds that there is no claim stated on which relief can be granted or that
there is no genuine issue as to any material fact and one party is entitled to
judgment as a matter of law consistent with Federal Rules of Civil Procedure 12
or 56. The arbitrator shall enter an award in writing detailing his or her
consideration of the relevant facts, the basis and reason for the decision, and
his or her adherence to the applicable law. This written decision shall be
entered within thirty days after the matter is finally submitted to the
arbitrator, and a copy thereof shall be delivered to each party by certified
mail. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.

         The Corporation shall pay the expense of the arbitrator; each party
will bear its own attorneys' fees and expenses. All proceedings under this
Paragraph are private and confidential.

         Notwithstanding the foregoing, the Company may bring a court action for
injunctive relief to enforce this Agreement. The parties agree that the
Corporation may elect to venue such action in the federal or state courts of the
State of Minnesota, whether or not such venue is then convenient to Employee,
and that such courts shall have personal jurisdiction over Corporation and
Employee and Employee shall not object to the venue or personal jurisdiction of
such courts.

         Employee understands that by signing this Agreement, Employee is
forever giving up Employee's right to litigate in a court of law any controversy
arising out of Employee's employment relationship with the Corporation, and any
controversy regarding any of the provisions of this Agreement, and that he is
agreeing instead to arbitrate any claims he may choose to pursue against the
Corporation. Nothing in this Agreement, however, prohibits either party from
going to a court of law to enforce an award of an arbitrator.

         13. Miscellaneous.

                  13.1. Integration. This Agreement embodies the entire
         agreement and understanding among the parties relative to subject
         matter hereof and supersedes all prior agreements and understandings
         relating to such subject matter, including but not limited to any
         earlier employment agreements of the Employee.

                                       10

<PAGE>

                  13.2. Applicable Law. This Agreement and the rights of the
         parties shall be governed by and construed and enforced in accordance
         with the laws of the state of Minnesota.

                  13.3. Payments. All amounts paid under this Agreement shall be
         subject to normal withholdings or such other treatment as required by
         law.

                  13.4. Counterparts. This Agreement may be executed in several
         counterparts and as so executed shall constitute one agreement binding
         on the parties hereto.

                  13.5. Binding Effect. Except as herein or otherwise provided
         to the contrary, this Agreement shall be binding upon and inure to the
         benefit of the Corporation and its successors, assigns and personal
         representatives without any requirement of the consent of the employee
         for assignment of its rights or obligations hereunder.

                  13.6. Notices. All notices, requests and other communications
         hereunder shall be given in writing and deemed to have been duly given
         or served if personally delivered, or sent by first class, certified
         mail, return receipt requested, postage prepaid, to the party at the
         address as provided below, or, to such other address as such party may
         hereafter designate by written notice to the other party:

                  (a) If to the Corporation, to the address of its then
                      principal office.

                  (b) If to Employee, to the address last shown in the records
                      of the Corporation.

                  13.7. Modification. This Agreement shall not be modified or
         amended except by a written instrument signed by the parties.

                  13.8. Severability. The invalidity or partial invalidity of
         any portion of this Agreement shall not invalidate the remainder
         thereof, and said remainder shall remain in fully force and effect.

                  13.9. Headings. The section headings contained in this
         Agreement are for reference purposes only and shall not in any way
         affect the meaning or interpretation of this Agreement.

                  13.10. Survival. Employee acknowledges and agrees that
         Employee's noncompetition, confidentiality, return of property, and
         invention obligations under Paragraphs 6, 7, 8, and 9 of this Agreement
         shall survive the Term or any Renewal Term, the non-renewal of this
         Agreement, and the termination of Employee's employment with the
         Corporation, regardless of the reason for termination.

                  13.11. Opportunity to Obtain Advice of Counsel. Employee
         acknowledges that Employee has been advised by the Corporation to
         obtain legal advice prior to executing this Agreement, and that
         Employee had sufficient opportunity to do so prior to signing this
         Agreement.

                                       11

<PAGE>

THIS AGREEMENT was voluntarily and knowingly executed by the parties as of date
and year first set forth above.

                                            HEI, INC.

                                            By:   /s/ MACK TRAYNOR
                                                  ------------------------------
                                                  Mack Traynor, President/CEO

                                            EMPLOYEE:

                                                  /s/ DOUGLAS NESBIT
                                                  ------------------------------
                                                  Douglas Nesbit

                                       12

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