exv10w1



 





Exhibit 10.1




WAIVER AND AMENDMENT




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 Term Loan Agreement (the “Loan Agreement”), dated October
28, 2003, by and between HEI Inc., a Minnesota corporation (the “Borrower”) and Commerce Bank, a
Minnesota banking corporation (the “Lender”), as amended by those certain Waiver and Amendment
agreements dated as of November 30, 2004 and May 26, 2006, between Borrower and Lender; and that
certain Promissory Note (the “Promissory Note”), dated October 28, 2003, made by the Borrower in
favor of the Lender.



     The Borrower has advised the Lender that preliminary financial results for the Borrower’s
quarterly reporting period ended December 2, 2006, indicate that as of such date the Borrower
failed to comply with the Debt Service Coverage Ratio covenant set forth in Section 6.10 of the
Loan Agreement, and, consequently Borrower would be deemed to have been in default under Section
6.10 of the Loan Agreement as of December 2, 2006. The Borrower has further advised the Lender
that the Borrower is likely to be in default under Section 6.10 of the Loan Agreement until
completion of the Borrower’s quarterly reporting period ending December 1, 2007. The Borrower has
accordingly requested certain waivers relating to Sections 6.10 of the Loan Agreement.



     In consideration of the promises herein set forth, and subject to Sections 9.1 and 9.2 of the
Loan Agreement and, the Borrower and the Lender hereby agree as follows:



     1. The Lender hereby waives the Borrower’s default existing as of the date hereof under
Section 6.10 of the Loan Agreement.



     2. The Lender hereby waives the Borrower’s compliance with the Debt Service Coverage Ratio
covenant under Section 6.10 of the Loan Agreement, to and including Borrower’s reporting period
ending September 1, 2007. Borrower will be required to comply with the Debt Service Coverage Ratio
under Section 6.10 of the Loan Agreement as of the reporting period ending December 1, 2007.



 









 





HEI, Inc.

Waiver and Amendment

Dated as of December 2, 2006

page 2 of 2




     3. As a condition to the effectiveness of the waivers by the Lender contained herein, the
Borrower shall continue to maintain a Payment Reserve Account with Lender in the amount of $100,000
pursuant to the provisions of Section 6.9 of the Loan Agreement, except that the release provisions
set forth in the second paragraph of Section 6.9 of the Loan Agreement are hereby amended and
restated as follows:




“Notwithstanding the foregoing, provided that there is not then an Event of Default
(as defined in the Mortgage) which has occurred and is continuing under the Loan, the
amount held by Lender in the Payment Reserve Account will be released by the Lender to the
Borrower upon the earlier of (i) Borrower’s successful compliance with the Debt Service
Coverage Ratio covenant under Section 6.10 of the Loan Agreement for six consecutive
quarterly reporting periods beginning with the quarterly reporting period ending December
1, 2007, or (ii) the payoff date of the Loan.”



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



     This Waiver and Amendment 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 Amendment and return the same to the Borrower, whereupon this Waiver
and Amendment shall become a binding agreement between the Lender and the Borrower.



	 	 	 	 	 
	 	Sincerely,





COMMERCE BANK

 	 
	 	            /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 	 
	 




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