exv10w3



 





Exhibit 10.3




WAIVER




Dated as of January 12, 2007




HEI, Inc.

1495 Steiger Lake Lane

Victoria, MN 55386




Attn: Mark Thomas, CEO



Dear Mr. Thomas:




     Reference is made to that certain Master Equipment Lease No. 0512231 (the “Master Lease”),
dated as of December 23, 2005, by and between HEI Inc., a Minnesota corporation (the “Lessee”) and
Commerce Leasing Corporation, a division of Commerce Financial Group, Inc., a Minnesota corporation
(the “Lessor”), as amended by that certain Waiver dated as of May 27, 2006, between the Lessee and
the Lessor; those certain lease commitments (the “Lease Commitments”) between the Lessor and the
Lessee dated as of December 5, 2005, December 8, 2005, February 23, 2006 and February 24, 2006; and
those certain lease supplements (individually, a “Supplement”, and, collectively, the
“Supplements”) delivered by the Lessee to the Lessor pursuant to the terms of the Master Lease (the
Master Lease, together with the Lease Commitments, the Supplements, and all other lease schedules
and agreements between the Lessee and the Lessor executed and delivered in connection with the
Master Lease are collectively, the “Lease”).



     The Lessee has advised the Lessor that preliminary financial results for the Lessee’s
quarterly reporting period ended December 2, 2006, indicate that as of such date the Lessee failed
to comply with the Debt Service Coverage Ratio covenant and the Minimum Total Tangible
Stockholders’ Equity covenant set forth in the Lease, and, consequently, the Lessee would be deemed
to have been in default under the Lease as of December 2, 2006. The Lessee has further advised the
Lessor that the Lessee is likely to be in default under said Debt Service Coverage Ratio covenant
until completion of the Lessee’s quarterly reporting period ending December 1, 2007, and the Lessee
is likely to be in default under said Minimum Total Tangible Stockholders’ Equity covenant until
completion of the Lessee’s quarterly reporting period ending November 29, 2008. The Lessee has
accordingly requested certain waivers relating to the covenants set forth in the Lease.



     In consideration of the promises herein set forth, and subject to the provisions of Sections
13 and 27 of the Master Lease, the Lessee and the Lessor hereby agree as follows:



     1. The Lessor hereby waives the Lessee’s default existing as of the date hereof under the Debt
Service Coverage Ratio covenant and the Minimum Total Tangible Stockholders’ Equity covenant under
the Lease.



 









 





HEI, Inc.

Waiver

Dated as of December 2, 2006

page 2 of 2




     2. The Lessor hereby waives the Lessee’s compliance with the Debt Service Coverage Ratio
covenant under the Lease, to and including the Lessee’s reporting period ending September 1, 2007.
Lessee will be required to comply with the Debt Service Coverage Ratio covenant under the Lease as
of the reporting period ending December 1, 2007, and thereafter.



     3. The Lessor hereby waives the Lessee’s compliance with the Minimum Total Tangible
Stockholders’ Equity covenant under the Lease, to and including the Lessee’s reporting period
ending August 30, 2008. Lessee will be required to comply with the Minimum Total Tangible
Stockholders’ Equity covenant under the Lease as of the reporting period ending November 29, 2008,
and thereafter.



     4. As a condition to the effectiveness of the waivers by the Lessor contained herein, the
implied economic interest rate for each Supplement under the Master Lease shall remain at the
adjusted rate that is 2.0% above the original economic interest rate implied in each such
Supplement and the monthly rental payments for each such Supplement shall remain adjusted
accordingly until November 29, 2008.



     The Lease shall remain in full force and effect, without modification except as set forth
herein or in any amendments entered into in accordance with the requirements of the Lease, as
applicable.



     This Waiver may be executed simultaneously in two or more counterparts, each of which shall be
an original, but all of which constitute but one agreement.



     If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed
counterpart of this Waiver and return the same to the Lessor, whereupon this Waiver shall become a
binding agreement between the Lessor and the Lessee.



	 	 	 	 	 
	 	Sincerely,



COMMERCE FINANCIAL GROUP, INC.

 	 
	 	          /s/ James E. Senske
 	 
	 	By:         James E. Senske 	 
	 	Its:          President 	 
	 


Acknowledged as of the date first written above.




	 	 	 	 	 
	 	HEI, INC.

 	 
	 	          /s/ Mark Thomas
 	 
	 	By:           Mark Thomas 	 
	 	Its:            CEO