Document:

exv10w56

 

Exhibit 10.56

[Beacon Bank Letterhead]

July 1, 2004

Mr. Mack Traynor, President & CEO

HEI, Inc.

1495 Steiger Lake Lane

Victoria, MN 55386

Dear Mack:

     Thank you for the on-going opportunity to provide a revolving credit facility
for HEI, Inc. This letter serves to confirm the continuing availability of the
credit facility provided to HEI, Inc. by Beacon Bank pursuant to the Accounts
Receivable Agreement dated May 29, 2003, on the following terms and conditions:

	 	 	 
	Maximum Client Account Limit:
	 	$3,000,000
	 
	Discount:

	 	Immediate
discount of .50% and a daily discount
of 1/25 of 1%

	 
	Part Payment:

	 	80% of invoice
amount, subject to the completion
of appropriate verification due diligence

	 
	Terms of Contract:

	 	January 1, 2005

	 
	Account Relationship:

	 	That the primary deposit relationship for
HEI, Inc.
be maintained with
Beacon Bank while this credit
facility is in place

	 
	Credit Guarantee:

	 	90-day recourse

	 
	Collateral:

	 	First security interest in all accounts, inventory,
and general intangibles

	 
	Guaranty:

	 	Validity guaranty are required from:

	

	 	     • Mack Traynor, President & CEO

	

	 	     • Doug Nesbit, Chief Financial Officer

 

 

July 1, 2004

HEI, Inc. Commitment Letter

Page 2 of 2

     It has been our pleasure working with you and your staff during the last year.
We congratulate your accomplishments this year, and look forward to future
successes for HEI.

     As you know, we will also continue to provide HEI, Inc. accounts receivable
credit and collection services, including the management of outstanding
accounts receivable balances, assistance in the development of underwriting
policies, credit approval procedures, and a full complement of accounts
receivable and cash receipts reporting.

     All terms and conditions are covered in the Accounts Receivable Agreement.
Please let me know if you have any questions, or if I can be of any further
assistance. As always, we appreciate your business!

	 	 	 	 	 
	 	Sincerely,

 	 
	 	/s/ Dave L. Peterka
 	 
	 	Dave L. Peterka 	 
	 	Executive Vice Presidentexv10w61

 

Exhibit 10.61

HEI, INC.

EMPLOYMENT AGREEMENT

     This Employment Agreement is made and entered into effective as of April
19, 2004 (the “Effective Date”), by and among HEI, Inc., a Minnesota
corporation (the “Corporation”), and Mack Traynor (“Employee”).

RECITALS

A. The Corporation desires to employ Employee in accordance with the terms of
this Agreement.

B. 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 his
employment with the Corporation and being given access to the Corporation’s
confidential information and the Company’s payment to Employee of One Thousand
and No/100 Dollars ($1,000.00) upon Employee’s signing of this Agreement, the
receipt and sufficiency of which consideration is hereby acknowledged by
Employee.

C. 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. Nature and Capacity of Employment. The Corporation hereby agrees to
employ Employee as its Chief Executive Officer and President, subject to the
direction of 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 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 three years thereafter
until April 19, 2007,

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(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 Two Hundred Thousand and No/100 Dollars
($200,000), which amount shall be earned by Employee on a pro rata basis as he
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 Signing Bonus. As of the Effective Date, the Corporation has paid
Employee a signing bonus in the gross amount, before applicable withholdings,
of Twenty-Five Thousand and No/100 Dollars ($25,000).

          3.3 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.

          3.4 Stock Options. The Corporation will recommend to the Board of
Directors of the Corporation that Employee be granted, under the terms of the
Corporation’s 1998 Incentive Stock Option Plan (the “Plan”), incentive stock
options (the “Options”) to purchase up to 100,000 shares of the Company’s
common stock if available under the Plan. The grant of these Options will be
conditioned on the Board of Directors approving the grant of the Options and
Employee entering into a separate stock option agreement with respect to the
Options in a form acceptable to the Corporation.

     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.

     In addition to the foregoing, the Corporation will provide Employee a
monthly automobile allowance in the amount of Five Hundred Dollars ($500.00).
The Corporation may adjust or terminate this monthly automobile allowance in
its discretion
based on Employee’s performance and the Corporation’s business and
financial
situation and needs.

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

(i) 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) intentional or reckless 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) 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 severance pay as provided in Paragraph 5.6 and 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.

          5.3. Resignation by Employee Due to Change of Control. 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

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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 his 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 under this Paragraph 5.3,
Corporation shall pay Employee severance pay as provided in Paragraph 5.6 and
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.

          5.4 Other Resignation by Employee. The Employee may resign his 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 the duties and responsibilities of his 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 5.5, 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.

          In addition, if Employee’s employment is terminated pursuant to this
Paragraph 5,5 due to a physical or mental disability or incapacity, the Company
shall pay the monthly health, dental and life insurance premiums for Employee
to continue his insurance under the

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Company’s group plans, subject to these plans’ eligibility requirements,
for a period of up to eighteen (18) months following his termination date (the
“Premium Payment Period.”) The Premium Payment Period shall run concurrently
with Employee’s COBRA and state benefits continuation period, and, in order to
receive the insurance premium payments described in this Paragraph 5.5,
Employee must execute all documentation necessary to elect insurance
continuation coverage.

          5.6. Severance Pay. In the event of Employee’s termination of employment
by the Company without Cause under Paragraph 5.2. or by the Employee due to a
Change of Control under Paragraph 5.3 prior to the expiration of the Term or a
Renewal Term, the Corporation shall pay severance pay to Employee in a gross
amount equal to the sum of eighteen (18) months of Employee’s annualized base
salary at the time of termination less the amount of any debt then owed by
Employee to the Corporation, whether or not such debt is then due or payable,
and less applicable withholdings (the “Severance Amount”). Any Severance
Amount owed to Employee under this Paragraph 5.6 shall be paid to Employee in
equal monthly installments over the course of eighteen months following his
termination of employment, with the first payment to be made on or about
eighteen (18) days following Employee’s signing of the Separation Agreement
described in this Paragraph 5.6 and subsequent payments to be made on a monthly
basis thereafter until the Severance Amount is paid in full.

          Notwithstanding the foregoing, Employee shall only be entitled receive the
Severance Amount described herein if Employee signs 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.

          5.7 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 a
payment of One Thousand and No/100 ($1,000.00) upon his signing of this Agreement; and (d) the provisions of this
Section 6, including all of its
subparts, are reasonable and necessary to protect Corporation’s business.

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          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. 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
his employment with the Corporation or about which Employee has acquired
Confidential Information.

          6.4 Noncompete Obligations. Employee agrees that, during his employment
with the Corporation and for a period of eighteen (18) months following his
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.

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          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 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,

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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
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.

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     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 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

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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 his right to litigate in a court of law any controversy arising out
of his 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 Employee’s employment with
the Corporation and the subject matter set forth in this Agreement and
supersedes and replaces all prior agreements and understandings relating
to such matters, including but not limited to any earlier employment
agreements of the Employee (including, but not limited to, the HEI, Inc.
Employment Agreement between Employee and the Corporation dated July 26,
2000).

     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

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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 and 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.

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

	 	 	 	 	 	 	 
	 	 	HEI, INC.
	 
	 	 	 	 	 	 
	 	 	By: /S/ Dennis Leisz
	

	 	 	 	
	 	 
	

	 	 	 	Dennis Leisz, Chairman of the Board	 	 
	 
	 	 	 	 	 	 
	 	 	EMPLOYEE:
	 
	 	 	 	 	 	 
	 	 	/S/ Mack Traynor
	 	 	

	 	 	Mack Traynor

11

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