exv10w1



 






Exhibit 10.1




WAIVER AND AMENDMENT




Dated as of November 30, 2004




Commerce Bank

7650 Edinborough Way

Suite 150

Edina, MN 55435



Dear Sir or Madam:



     Reference is made to that certain Term Loan Agreement (the “Loan
Agreement”), dated October 14, 2003, by and between HEI Inc., a Minnesota
corporation (the “Borrower”) and Commerce Bank, a Minnesota banking corporation
(the “Lender”) and that certain Promissory Note (the “Promissory Note”), dated
October 14, 2003, made by the Borrower in favor of the Lender.



     The Borrower has advised the Lender that due to adjustments to its books
of record and account made in connection with the audit of its annual financial
statements for its fiscal year ended August 31, 2004, it may be deemed to have
been in default under Section 6.4 of the Loan Agreement. The Borrower has
further advised the Lender that the audit of its annual financial statements
for its fiscal year ended August 31, 2004, has not yet been completed and, as a
result, the Borrower is at present in default under Section 6.5(a) of the Loan
Agreement. The Borrower has further advised the Lender that beginning as of
its fiscal quarter ending February 28, 2005, the Borrower is likely to be in
default under Section 6.10 of the Loan Agreement. The Borrower has accordingly
requested certain waivers and amendments relating to Sections 6.4, 6.5(a) and
6.10 of the Loan Agreement, and the Lender has requested certain amendments to
the Promissory Note.



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



     1. The Lender hereby waives all past defaults under Section 6.4 of the
Loan Agreement.



     2. The Lender hereby waives the default existing as of the date hereof
under Section 6.5(a) of the Loan Agreement.



 









 





     3. Section 6.5(a) of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:




	 	(a)	 	As soon as available and in any event within one hundred
twenty (120) days after the close of each of its fiscal years, a
copy of the annual financial statements of Borrower, including
balance sheet, related statements of earnings, stockholders’ equity
and statements of cash flow for such year, prepared in accordance
with GAAP, and audited by an independent certified public accountant
of recognized standing selected by Borrower and acceptable to
Lender;




     4. Section 6.10 of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:




     6.10
Debt Service Coverage Ratio. Beginning as of Borrower’s fiscal
quarter ended February 28, 2006, and at all times thereafter during the
term of the loan, maintain a Debt Service Coverage Ratio equal to or
greater than 1.20:1, which ratio shall be calculated based on Borrower’s
10-Q and 10-K Reporting and measured as of the last day of each fiscal
quarter of Borrower for the immediately preceding twelve-month period.



     5. Section 1(a) of the Promissory Note is hereby amended and restated in
its entirety to read as follows:




     (a) Commencing on October 14, 2003, to and including February 28,
2005, interest shall accrue on the outstanding principal balance hereof
at a rate of interest equal to 6.50% per annum, and commencing on March
1, 2005, to and including October 31, 2006, interest shall accrue on the
outstanding principal balance hereof at a rate of interest equal to 7.50%
per annum; and



     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.

	 	 	 	 	 
	 	Very truly yours,





HEI, INC.

 	 
	 	/s/ Mack V. Traynor, III
 	 
	 	By:               Mack V. Traynor, III 	 
	 	Its:              CEO and President 	 
	 





 









 





     Acknowledged as of the date first written above.

	 	 	 	 	 
	 	COMMERCE BANK

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