S-3

As filed with the Securities and Exchange Commission on May 28, 2004

Registration No.           -                    

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

HEI, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Minnesota	41-0944876
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

P.O. Box 5000, 1495 Steiger Lake Lane

Victoria, Minnesota 55386

(952) 443-2500

(Address, Including Zip Code, and Telephone Number, Including

Area Code, of Registrant’s Principal Executive Offices)

Mack V. Traynor III
Chief Executive Officer and President
HEI, Inc.
PO Box 5000, 1495 Steiger Lake Lane
Victoria, Minnesota 55386
(952) 443-2500
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of Agent for Service) Copies to:

Mark D. Williamson, Esq.
Jean M. Davis, Esq.
Gray, Plant, Mooty, Mooty & Bennett, P.A.
500 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
(612) 632-3000

     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

      If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.     o

      If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.     þ

      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for same offering.     o

      If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for same offering.     o

      If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.     o

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum
Title of Each Class of	Amount to Be	Offering Price Per	Aggregate Offering	Amount of
Securities to Be Registered	Registered	Share	Price(1)	Registration Fee
Common Stock, $.05 par value	631,524	$2.31(1)	$1,458,820(1)	$185(1)

(1)  Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of Regulation C and based upon the average of the high and low sales price for such common stock on May 21, 2004, as reported on the Nasdaq National Market.

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this Prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 28, 2004

PROSPECTUS

HEI, Inc.

631,524 Shares of

Common Stock

        This Prospectus relates to 631,524 shares of common stock of HEI, Inc., which may be offered from time to time by the selling shareholders named in this Prospectus. We will not receive any of the proceeds from the offer and sale of the shares. Rather, the selling shareholders will receive all of the net proceeds from any sale of the shares.

      We have been advised that the selling shareholders may from time to time sell the common stock to or through brokers or dealers in one or more transactions, in the Nasdaq National Market or other over-the-counter market or otherwise, at market prices prevailing at the time of sale, at prices relating to prevailing prices, or at negotiated prices.

      Our common stock is listed on the Nasdaq National Market under the symbol HEII. On May 24, 2004, the closing sales price of our common stock as reported by the Nasdaq National Market was $2.40.

       Investing in our common stock involves certain risks. See “Risk Factors” beginning on page 4 of this Prospectus.

       Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is                     , 2004

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      Some of the information included in this Prospectus contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “continue,” and similar words. You should read statements that contain these words carefully for the following reasons: such statements discuss our future expectations, such statements contain projections of future earnings or financial condition and such statements state other forward-looking information. Although it is important to communicate our expectations, there may be events in the future that we are not accurately able to predict or over which we have no control. The risks factors included in this Prospectus provide examples of such risks, uncertainties and events that may cause actual results to differ materially from our expectations and the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, as we undertake no obligation to update these forward-looking statements to reflect ensuing events or circumstances, or subsequent actual results.

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SUMMARY

      The following summary is qualified by, and should be read in conjunction with, the more detailed information included in this Prospectus and the documents incorporated by reference into this Prospectus.

HEI, Inc.

      HEI, Inc. (Nasdaq: HEII) (“HEI” or the “Company”) provides a comprehensive range of engineering, product design, automation and test, manufacturing and fulfillment services and solutions to our customers in the hearing, medical device, medical equipment, communications, computing and industrial equipment industries. We provide these services and solutions on a global basis through integrated facilities in North America. These services and solutions support our customers’ products from initial product development and design through manufacturing to worldwide distribution and aftermarket support. HEI uses the leverage created by its various technology platforms to provide bundled solutions to the markets served. In doing so, the Company uses much of its internal manufacturing capacity to create these solutions. For example, the “Link-it^TM connectivity solution” uses circuit board assembly, radio frequency (“RF”), software code and engineering services developed and delivered by our internal capabilities. All of our facilities are ISO 9001:2000 certified.

      In our Victoria, Minnesota facility we design and manufacture ultra miniature microelectronic devices and high technology products incorporating these devices. These custom microelectronic devices typically consists of placing or assembling one or more integrated circuits (“IC”) commonly referred to as “chips,” and other passive electrical components onto a ceramic or organic substrate. The microelectronic assembly typically embodies the primary functions of the end products of our customers, such as hearing aids, defibrillators and communication components. For example, in hearing aids the microelectronic assemblies we design and make are contained within a shell and connected to a microphone, receiver and battery. For some customers, we may procure the microphone, receiver and battery from outside vendors and assemble all of the components into further assemblies; or we may sell only the microelectronic assembly to other customers. Our custom-built microelectronics are employed in the hearing, medical, telecommunications and ultra miniature radio frequency markets. Our microelectronics facilities achieved ISO 9001:2000 certification in August 2003. We refer to our Victoria operations in this Prospectus as our “Microelectronics Operations.”

      Certain proprietary technology employed in our Victoria facility allows us to manufacture miniature packages that are specially designed to hold and protect high frequency chips for broadband communications. This package, with the enclosed chip, may then be easily and inexpensively attached to a circuit board without degrading the high-frequency performance of the chip. These packages, and the high-frequency chips that they contain, are specially designed for applications in high-speed optical communication devices — the individual parts of the fiber-optic telecommunications network that companies and individuals use to transmit data, voice and video across both short and very long distances. We manufacture our products by fabricating a substrate and placing integrated circuits and passive electrical components onto that substrate. Substrates are made of multi-layer ceramic or laminate materials. The process of placing components onto the substrate is automated using sophisticated equipment that picks an IC from a wafer or waffle pack and places it onto a substrate with very high precision. Many of the components require wire bonding to electrically connect them to the substrate. We then electrically test the microelectronic assemblies to ensure required performance.

      In our Boulder, Colorado facility we provide four primary products and services. First, we provide custom design and development outsourcing services for customers ranging from large medical device original equipment manufacturers (“OEMs”) to emerging medical device companies worldwide. Our design and development projects generally include product concept definition, development of specifications for product features and functions, product engineering specifications, instrument design, development, prototype production and testing, and development of test specifications and procedures. We also perform various forms of verification and validation testing for software application and medical devices. We maintain a technical staff of engineers with backgrounds focused in electrical, mechanical, software and manufacturing disciplines. Second, Boulder’s medical imaging group designs, develops and manufactures a broad range of advanced application software and major subsystem hardware. Our work includes the development of leading edge MRI

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software, cardiac and vascular diagnostic application software and high-density RF amplifier systems. Contracts in this business are undertaken with major OEMs in the medical imaging system market that integrate the power subsystems into their imaging systems. Third, we provide medical device manufacturing outsourcing services. We manufacture complex electronic and electromechanical medical devices. We are a registered device manufacturer with the Food and Drug Administration (the “FDA”) and are required to meet the FDA’s Quality System Regulation (“QSR”). This facility’s quality system is certified to, and meets, ISO 9001:1994 and ISO 13485 standards. Our manufacturing projects include pre-production engineering and commercialization services, turnkey manufacturing of FDA Class I, Class II and Class III devices and system test services. Our manufacturing outsourcing services generally involve complex high-end devices, as opposed to commodity or high-volume products. In providing outsourcing services, we manufacture products for use in blood analysis, women’s health therapies, and cancer detection systems. Fourth, Boulder provides a connectivity solution consisting of both hardware and software. This technology enables medical device OEMs and Health Care Information Technology (“HCIT”) vendors to add wired and wireless web server connectivity to their products quickly and cost-effectively. We refer to our Boulder operations in this Prospectus as our “Advanced Medical Operations.”

      In our Tempe, Arizona facility, we manufacture and design high density, high quality flex circuits and high-performance laminate-based substrates. We utilize specialized tooling strategies and advanced procedures to minimize circuit handling and ensure that consistent processing parameters are maintained throughout the assembly process. Significant portions of the substrates produced at this facility are transformed into custom-built microelectronics at our facility in Victoria, Minnesota.

      Our Chanhassen, Minnesota facility manufactures wireless smart cards and other ultra-miniature RF applications. Ultra miniature electronic modules are connected to an RF coil, creating an assembly. This assembly is contained within a smart card or wireless card (about the same size as a credit card) that is used for financial, security access and identification or tracking applications. We are developing a plan to move the production activity from this site to our facility in Boulder, Colorado. This plan will not be completed until resolution of all matters related to the negotiation with the landlord of the Colorado facility over the disposition of our deposit with the landlord discussed further below in “Recent Developments.”

Recent Developments

      Second quarter financial results were softer than expected because of our inability to deliver product on a timely basis due to persistent problems in our operations. We had adequate orders in house to exceed prior period revenue levels but were unable to capitalize on this opportunity because of operational issues encountered with ramping up new hearing and medical programs. The third quarter results continue to be negatively impacted by a combination of operational issues and material supply shortages. The operating loss for the third quarter is expected to improve from the second quarter but approximate the results of the first quarter which was an operating loss of $1,659,000. The new Vice President of Operations for HEI has assembled an operations team focused on rapid resolution of these issues. The second quarter results were also negatively impacted by expenses associated with the investigation of Anthony J. Fant, our former Chairman, Chief Executive Officer and President.

      HEI has taken a number of steps to replace high cost short-term debt and acquire equity capital to address long-term capital requirements. In October 2003, we replaced our subordinated promissory note payable to CMED (and acquired by Whitebox Hedged High Yield Partners) with less onerous term debt vehicles with Commerce Bank and, its affiliate, Commerce Financial Group, Inc., that allowed us to take advantage of a substantial discount. In addition to this step, we will receive an extension on our line of credit that will take it through January 2005. We continue to pursue opportunities to strengthen our balance sheet as related to improvement of our liquidity position. The successful private placement in February 2004 of 1,180,000 shares added $3,327,600 to our cash reserves. In March 2004, we demanded repayment of our deposit of $1,430,000 that the landlord of the Colorado facility holds on our behalf. We are now in negotiations with the landlord and a potential buyer for the property over the disposition of the deposit with a possible result of change of ownership of the property including modification of lease terms. While the impact of this transaction could result in a charge to earnings, we expect the renegotiation of the lease and potential sublease

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of excess space at the Colorado facility would produce positive cash flow impacts. We continue to pursue collection efforts against the judgments received from the courts against Mr. Fant, our former Chairman, Chief Executive Officer and President. The shares acquired by the selling shareholders named in this Prospectus were owned by Mr. Fant, but were sold to the selling shareholders named in this Prospectus pursuant to court order, to reduce our judgments against Mr. Fant. The sale of Mr. Fant’s shares to the selling shareholders named in this Prospectus resulted in net additional cash to HEI of $520,929. Ongoing efforts are being maintained to monetize other assets that are expected to add to liquidity. Management believes that these actions will satisfy our liquidity needs for the next twelve months.

Our Executive Office

      We are incorporated under the laws of the State of Minnesota. Our executive offices are located at 1495 Steiger Lake Lane, Victoria, Minnesota 55386, telephone number (952) 443-2500. Our website address is www.heii.com. Information contained on or accessible from our website does not constitute part of this Prospectus.

The Offering

Securities:	631,524 shares of common stock offered by the selling shareholders identified in this Prospectus.
Use of Proceeds:	We will not receive any proceeds from the sale of common stock by the selling shareholders.

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RISK FACTORS

      An investment in shares of our common stock involves a high degree of risk. Prospective investors should carefully consider the following risks and speculative factors set forth below prior to a purchase of shares of common stock.

If we are unable to effectively initiate and manage multiple new programs simultaneously at our Microelectronics Operations, our operating results and business condition may be impaired.

      In the first quarter of fiscal 2004, a number of new programs were initiated simultaneously with the operating results being negatively impacted. This results in unsatisfied orders and backlog that has gone unfulfilled. These operational issues have persisted throughout the first three quarters of fiscal 2004. We may not be able to successfully implement numerous programs at the same time at our Microelectronics Operations. The inability to effectively initiate these programs could impair our revenue opportunity and significantly impact our liquidity. The resolution of these production issues could take longer than anticipated which would impact our relationships with our customers, cause continuing operating losses and negatively impact the strength of our balance sheet.

If we are unable to integrate, operate and manage the Advanced Medical Operations, our operating results and business condition may be reduced.

      On January 24, 2003, we acquired our Boulder, Colorado business unit from Colorado MEDtech, Inc. (“CMED”). While the Advanced Medical Operations have been managed by HEI for the past sixteen months efforts still continue to integrate its business activities into the Company. Plans are underway to integrate common operating system platforms, further consolidate duplicative activities and fill the sales pipeline. We may not be able to successfully and profitably integrate, operate, maintain and manage our Advanced Medical Operations in a competitive environment. In addition, we may not be able to integrate the newly hired employees, and operational issues may arise as a result of a lack of integration or our lack of familiarity with issues specific to this operation. Further, certain of our assumptions relating to the timing of the integration and the use of the leased facility in Boulder, Colorado, may not prove to be accurate, causing increased costs at this facility. The inability to integrate the operations could impair our combined revenue opportunity and reduce the return on the assets purchased. The consolidated integration technology could take longer than anticipated, limiting the speed of the business combination, not allowing costs to be removed as quickly as originally forecasted.

If the components that we design and manufacture are the subject of product recalls or a product liability claim, our business may be damaged, we may incur significant legal fees and our results of operations and financial condition may be adversely affected.

      Certain of the components we design or manufacture are used in medical devices, several of which may be used in life-sustaining or life-supporting roles. The tolerance for error in the design, manufacture or use of these components and products may be small or nonexistent. If a component we designed or manufactured is found to be defective, whether due to design or manufacturing defects, improper use of the product or other reasons, the product may need to be recalled, possibly at our expense. Further, the adverse effect of a product recall on our business might not be limited to the cost of the recall. Recalls, especially if accompanied by unfavorable publicity or termination of customer contracts, could result in substantial costs, loss of revenues and damage to our reputation, each of which would have a material adverse effect on our business, results of operations and financial condition.

      The manufacture and sale of the medical devices involves the risk of product liability claims. Although we generally obtain indemnification from our customers for components that we manufacture to the customers’ specifications and we maintain product liability insurance, there can be no assurance that the indemnities will be honored or the coverage of our insurance policies will be adequate. Further, we generally provide a design defect warranty and indemnity to our customers for failure of a product to conform to design specifications and against defects in materials and workmanship. Product liability insurance is expensive and

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in the future may not be available on acceptable terms, in sufficient amounts, or at all. A successful product liability claim in excess of our insurance coverage or any material claim for which insurance coverage was denied or limited and for which indemnification was not available could have a material adverse effect on our business, results of operations and financial condition.

Our customer base is highly concentrated and the loss of a key customer may reduce our operating results and financial condition.

      Our customer base is highly concentrated. In the first two quarters of fiscal 2004 and during fiscal 2003, fiscal 2002, and fiscal 2001, our three largest customers, Siemens, Inc., Sonic Innovations, Inc., and GE Medical Systems, in the aggregate accounted for 36%, 45%, 65%, and 51%, respectively, of net sales. Each of these customers has multiple programs in production with us. Although we are reducing this concentration, we expect that sales to a relatively small number of OEMs will continue to account for a substantial portion of net revenues for the foreseeable future. The loss of, or a decline in orders from, any one of our key customers would materially adversely affect our operating results and financial condition. We are working for diversification such that no one market would account for 40% or more in revenue, no one customer at 10% or greater revenue and no one program at 25% or greater.

As our customer base becomes more diversified it may reduce our ability to effectively manage all of our customer relationships.

      While our customer base is currently highly concentrated, we are working for diversification such that no one market would account for 40% or more in revenue, no one customer at 10% or greater in revenue and no one program at 25% or greater in revenue. New customers and programs can have a significant ramp up effort associated with getting the product ready for delivery. The efforts associated with managing a more diversified customer base and projects could prove to be more difficult than previously thought and could result in loss of customers and/or revenues.

If we are unable to develop new products and services our revenue could decrease.

      Our products are subject to rapid obsolescence and our future success will depend upon our ability to develop new products and services that meet changing customer and marketplace requirements. Our products are based upon specifications from our customers. We may not be able to satisfactorily design and manufacture customer products based upon these specifications.

If we fail to properly anticipate the market for new products and service we may lose revenue.

      Even if we are able to successfully identify, develop and manufacture as well as introduce new products and services, there is no assurance that a market for these products and services will materialize to the size and extent that we anticipate. If a market does not materialize as we anticipate, our business, operating results and financial condition could be materially adversely affected. The following factors could affect the success of our products and services in the microelectronic and other marketplaces:

•  the failure to adequately equip our manufacturing plant in anticipation of increasing business;

•  the failure of our design team to develop products in a timely manner to satisfy our present and potential customers; and

•  our limited experience in specific market segments in marketing our products and services, specifically in the telecom industry.

We may fail to have enough liquidity to operate our business because we may not adequately adjust our expenses to predicted revenue in any given period, which may dramatically and negatively impact our cash flow.

      Our basis for determining our ability to fund our operations depends on our ability to accurately estimate our revenue streams and our ability to accurately predict, our related expenditures. Due to the large nature of

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fixed expenses in our operations a shortfall in revenues can produce systemic losses that are difficult to reverse and result in significant negative cash flow impacts. Furthermore, our borrowing base is fixed. As a result, we may fail to adequately adjust our expenses to actual revenue in any given period, sustain sizable losses due to falling below break even revenue or we may experience significant fluctuations in quarterly revenue, all of which may dramatically and negatively affect our cash flow.

Future quarterly and annual operating results may fluctuate substantially due to a number of factors, many of which are beyond our control, which may cause our stock price to decline.

      We have experienced substantial fluctuations in our annual and quarterly operating results, and such fluctuations may continue in future periods. Our operating results are affected by a number of factors, many of which are beyond our control, including the following:

•  we may manufacture products that are custom designed and assembled for a specific customer’s requirement in anticipation of the receipt of volume production orders from that customer, which may not always materialize to the degree anticipated, if at all;

•  we may incur significant start-up costs in the production of a particular product, which costs are expensed as incurred and for which we attempt to seek reimbursement from the customer;

•  we may experience fluctuations and inefficiencies in managing inventories, fixed assets, components and labor, in the degree of automation used in the assembly process, in the costs of materials, and the mix of materials, labor, manufacturing, and overhead costs;

•  we may experience unforeseen design or manufacturing problems, price competition or functional competition (other means of accomplishing the same or similar packaging end result);

•  we may be unable to pass on cost overruns;

•  we may not be unable to gain the benefits expected out of “lean-flow” manufacturing at our Victoria, Minnesota facility;

•  we may not have control over the timing of expenditures in anticipation of increased sales, customer product delivery requirements and the range of services provided; and

•  we may experience variance in the amount and timing of orders placed by a customer due to a number of factors, including inventory balancing, changes in manufacturing strategy, and variation in product demand attributable to, among other things, product life cycles, competitive factors, and general economic conditions.

      Any one of these factors, or a combination of one or more factors, could adversely affect our annual and quarterly operating results, which in turn may cause our stock price to decline.

We may fail to adequately adjust our expenses to predicted revenue in any given period or we may experience significant fluctuations in quarterly revenue because the sales cycle for our products and services is lengthy and unpredictable.

      While our sales cycle varies from customer to customer, it historically has ranged from two to 12 months. Our pursuit of sales leads typically involves an analysis of our prospective customer’s needs, preparation of a written proposal, one or more presentations and contract negotiations. Our sales cycle may also be affected by the complexity of the product to be developed and manufactured as well as a prospective customer’s budgetary constraints and internal acceptance reviews, over which we have little or no control. As a result of these things combined with the fact that our expenses are fixed, we may fail to adequately adjust our expenses to predicted revenue in any given period or we may experience significant fluctuations in quarterly revenue.

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Our business may suffer and cause our stock price to decline if we are unable to protect our intellectual property rights.

      Intellectual property rights are important to our success and our competitive position. It is our policy to protect all proprietary information through the use of a combination of nondisclosure agreements and other contractual provisions and patent, trademark, trade secret and copyright law to protect our intellectual property rights. There is no assurance that these agreements, provisions and laws will be adequate to prevent the imitation or unauthorized use of our intellectual property. Policing unauthorized use of proprietary systems and products is difficult and, while we are unable to determine the extent to which infringement of our intellectual property exists, we expect infringement to be a persistent problem. In addition, the laws of some foreign countries do not protect our products to the same extent that the laws of the United States protect our products. If our intellectual property rights are not protected our business may suffer as a competitor could use our technology to capture our business, which could cause our stock price to decline. Furthermore, even if the agreements, provisions and intellectual property laws prove to be adequate to protect our intellectual property rights, our competitors may develop products or technologies that are both non-infringing and substantially equivalent or superior to our products or technologies.

Third-party intellectual property infringement claims may be costly and may prevent the future sale of our products.

      Substantial litigation and threats of litigation regarding intellectual property rights exist in our industry. Third parties may claim that our products infringe upon their intellectual property rights. In particular, defending against third-party infringement claims may be costly and divert important management resources. Furthermore, if these claims are successful, we may have to pay substantial royalties or damages, remove the infringing products from the marketplace or expend substantial amounts in order to modify the products so that they no longer infringe on the third party’s rights.

We may pursue future acquisitions and investments that may adversely affect our financial position or cause our earnings per share to decline.

      In the future we may continue to make acquisitions of and investments in businesses, products and technologies that could complement or expand our business. Such acquisitions, though, involve certain risks:

•  we may not be able to negotiate or finance the acquisition successfully;

•  the integration of acquired businesses, products or technologies into our existing business may fail; and

•  we may issue equity securities, incur debt, assume contingent liabilities or have amortization expenses and write-downs of acquired assets which could cause our earnings per share to decline.

If our customers are unable to gain market acceptance for the products that we develop or manufacture for them, we may lose revenue.

      We design and manufacture components for other companies. We also sell proprietary products that contain components to other companies and end-user customers. For products we manufacture (manufactured for others or those we sell directly), our success is dependent on the acceptance of those products in their markets. We have no control over the products or marketing of products that we sell to our customers. Market acceptance may depend on a variety of factors, including educating the target market regarding the use of a new procedure. Market acceptance and market share are also affected by the timing of market introduction of competitive products. Some of our customers, especially emerging growth companies, have limited or no experience in marketing their products and may be unable to establish effective sales and marketing and distribution channels to rapidly and successfully commercialize their products. If our customers are unable to gain any significant market acceptance for the products we develop or manufacture for them, our business will be adversely affected.

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If we fail to comply with environmental laws and regulations we may be fined and prohibited from manufacturing products.

      As a small generator of hazardous substances, we are subject to local governmental regulations relating to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances, such as waste oil, acetone and alcohol that are used in very small quantities to manufacture our products. While we are currently in compliance with applicable regulations, if we fail to comply with these regulations substantial fines could be imposed on us and we could be required to suspend production, alter manufacturing processes or cease operations.

We are dependent on two industry segments and adverse trends in these industry segments may reduce our revenues.

      During the past several years, we have been significantly dependent on two markets. In the first two quarters of fiscal 2004 and during fiscal 2003, fiscal 2002, and fiscal 2001, 85%, 82%, 76%, and 61%, respectively, of our net sales came from the hearing instrument and medical device manufacturers. These industries are characterized by intense competition, relatively short product life cycles, rapid technological change, significant fluctuations in product demand and significant pressure on vendors to reduce or minimize cost. Accordingly, we may be adversely affected by these industry trends to the extent that they reduce our revenues. In particular, if the hearing instrument manufacturers develop new technologies that do not incorporate our products, or if our competitors offer similar products at a lower cost to such manufacturers, our revenues may decrease and our business would be adversely affected.

      Although we are attempting to reduce our dependence on a single industry, we do not expect this historic dependence to change dramatically or quickly. Moreover, a significant amount of our non-hearing instrument industry sales are made in the medical products industry, which is characterized by trends similar to those in the hearing instrument manufacturer industry.

      In certain circumstances, our customers are permitted to cancel their orders, change production quantities, delay production and terminate their contracts and any such event or series of events may adversely affect our gross margins and operating results. We, as a medical device development and manufacturing service provider, must provide product output that matches the needs of their customers, which can change from time to time. We generally do not obtain long-term commitments from our customers and we continue to experience reduced lead times in customer orders. Customers may cancel their orders, change production quantities, delay production, or terminate their contracts for a number of reasons. In certain situations, cancellations, reductions in quantities, delays or terminations by a significant customer could adversely affect our operating results. Such cancellations, reductions or delays have occurred and may continue to occur in response to slowdowns in our customers’ businesses or for other reasons. In addition, we make significant decisions, including determining the levels of business that we will seek and accept, production schedules, parts procurement commitments, and personnel needs based on our estimates of customer requirements. Because many of our costs and operating expenses are relatively fixed, a reduction in customer demand or a termination of a contract by a customer could adversely affect our gross margins and operating results.

      Inventory risk and production delay may adversely affect our financial performance. Most of our contract manufacturing services are provided on a turnkey basis, where we purchase some or all of the materials required for product assembling and manufacturing. We bear varying amounts of inventory risk in providing services in this manner. In manufacturing operations, we need to order parts and supplies based on customer forecasts, which may be for a larger quantity of product than is included in the firm orders ultimately received from those customers. While many of our customer agreements include provisions that require customers to reimburse us for excess inventory which we specifically order to meet their forecasts, we may not actually be reimbursed or be able to collect on these obligations. In that case, we could have excess inventory and/or cancellation or return charges from our suppliers. Our imaging and medical device manufacturing customers continue to experience fluctuating demand for their products, and in response they may ask us to reduce or delay production. If we delay production, our financial performance may be adversely affected.

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We may lose business and revenues if we fail to successfully compete for our customers’ business.

      We face competition from the internal operations of our current and potential OEM customers and from offshore contract manufacturers, which, because of their lower labor rates and other related factors, may enjoy a competitive advantage over us with respect to high-volume production. We expect to continue to encounter competition from other electronics manufacturers that currently provide or may begin to provide contract design and manufacturing services.

      A number of our competitors may have substantially greater manufacturing, financial, technical, marketing, and other resources than we have, and may offer a broader scope and presence of operations on a worldwide basis. Significant competitive factors in the microelectronics market include price, quality, design capabilities, responsiveness, testing capabilities, the ability to manufacture in very high volumes and proximity to the customers final assembly facilities. While we have competed favorably in the past with respect to these factors, this is a particularly fast changing market, and there can be no assurance that we will continue to do so in the future.

      We are often one of two or more suppliers on any particular customer requirement and are, therefore, subject to continuing competition on existing programs. In order to remain competitive in any of our markets, we must continually provide timely and technologically advanced design capabilities and manufacturing services, ensure the quality of our products, and compete favorably with respect to turnaround and price. If we fail to compete favorably with respect to the principal competitive factors in the markets we serve, we may lose business and our operating results may be reduced.

Fluctuations in the price and supply of components used to manufacture our products may reduce our profits.

      Substantially all of our manufacturing services are provided on a turnkey basis in which we, in addition to providing design, assembly and testing services, are responsible for the procurement of the components that are assembled by us for our customers. Although we attempt to minimize margin erosion as a result of component price increases, in certain circumstances we are required to bear some or all of the risk of such price fluctuations, which could adversely affect our profits. To date, we have generally been able to negotiate contracts that allow us to shift much of the impact of price fluctuations to the customer; however, there can be no assurance that we will be able to do so in all cases.

      In order to assure an adequate supply of certain key components that have long procurement lead times, such as ICs, we occasionally must order such components prior to receiving formal customer purchase orders for the assemblies that require such components. Failure to accurately anticipate the volume or timing of customer orders can result in component shortages or excess component inventory, which in either case could adversely affect our operating results and financial condition.

      Certain of the assemblies manufactured by us require one or more components that are ordered from, or which may be available from, only one source or a limited number of sources. Delivery problems relating to components purchased from any of our key suppliers could have a material adverse impact on our financial performance. From time to time, our suppliers allocate components among their customers in response to supply shortages. In some cases, supply shortages will substantially curtail production of all assemblies using a particular component. In addition, at various times there have been industry-wide shortages of electronic components. While we have not experienced sustained periods of shortages of components in the recent past, there can be no assurance that substantial component shortages will not occur in the future. Any such shortages could reduce our operating results.

Our costs may increase significantly if we are unable to forecast customer orders and production schedules.

      The level and timing of orders placed by customers vary due to the customers’ attempts to balance their inventory, changes in customers’ manufacturing strategies, and variations in demand for the customers’ products. Due in part to these factors, most of our customers do not commit to firm production schedules more

9

than several weeks in advance of requirements. Our inability to forecast the level of customers’ orders with certainty makes it difficult to schedule production and optimize utilization of manufacturing capacity. This uncertainty could also significantly increase our costs related to manufacturing product. In the past, we have been required to increase staffing and incur other expenses in order to meet the anticipated demands of our customers. From time to time, anticipated orders from some of our customers have failed to materialize and delivery schedules have been deferred as a result of changes in a customer’s business needs, both of which have adversely affected our operating results. On other occasions, customers have required rapid increases in production that has placed an excessive burden on our resources. There can be no assurance that we will not experience similar fluctuations in customer demand in the future.

We may be unable to realize revenue from our backlog.

      We compute our backlog from purchase orders received from our customers and from other contractual agreements. Our backlog is typically not a firm commitment from the customers. As such, even though we may have contractual agreements or purchase orders for future shipments, there is no guarantee that this backlog will be realized as revenue.

We may have a significant accounts receivable or inventory write-off due to the inability of our customers to pay their accounts.

      We may carry significant accounts receivable and inventory in connection with providing manufacturing services to our customers. If one or more of our principal customers were to become insolvent, or otherwise fail to pay for the services and materials provided by us, our operating results and financial condition would be adversely affected.

We may have significant write-offs due to end of life programs and other customer relationship issues.

      We may carry significant inventory in connection with providing manufacturing services to our customers. While our contracts are crafted to protect us against inventory exposures, certain situations could demand the write-off of inventories in order to keep customer relationships in place. Additionally, if one or more of our principal customers were to become insolvent, or otherwise fail to pay for the services and materials provided by us, our operating results and financial condition would be adversely affected.

Our business success may be adversely affected by our ability to hire and retain employees.

      Our continued growth and success depend to a significant extent on the continued service of senior management and other key employees and the hiring of new qualified employees. We rely upon the acquisition and retention of employees with extensive technological experience. Competition for skilled business, product development, technical and other personnel is intense. There can be no assurance that we will be successful in recruiting new personnel and retaining existing personnel. Our executive officers are subject to employment agreements that can be terminated upon providing 90 days advance, written notice by either party. The loss of one or more key employees may materially adversely affect our growth.

We operate in a regulated industry, and our products and revenue are subject to regulatory risk.

      We are subject to a variety of regulatory agency requirements in the United States and foreign countries relating to many of the products that we develop and manufacture. The process of obtaining and maintaining required regulatory approvals and otherwise remaining in regulatory compliance can be lengthy, expensive and uncertain.

      The FDA inspects manufacturers of certain types of devices before providing a clearance to manufacture and sell such device, and the failure to pass such an inspection could result in delay in moving ahead with a product or project. We are required to comply with the FDA’s QSR for the development and manufacture of medical products. In addition, in order for devices we design or manufacture to be exported and for us and our customers to be qualified to use the “CE” mark in the European Union, we maintain ISO 9001/ EN 46001 certification which, like the QSR, subjects our operations to periodic surveillance audits. To ensure

10

compliance with various regulatory and quality requirements, we expend significant time, resources and effort in the areas of training, production and quality assurance. If we fail to comply with regulatory or quality regulations or other FDA or applicable legal requirements, the governing agencies can issue warning letters, impose government sanctions and levy serious penalties.

      Noncompliance or regulatory action could have a negative impact on our business, including the increased cost of coming into compliance, and an adverse effect on the willingness of customers and prospective customers to do business with us. Such noncompliance, as well as any increased cost of compliance, could have a material adverse effect on our business, results of operations and financial condition.

If our customers do not promptly obtain regulatory approval for their products, our projects and revenue may be adversely affected.

      The FDA regulates many of our customers’ products, and requires certain clearances or approvals before new medical devices can be marketed. As a prerequisite to any introduction of a new device into the medical marketplace, our customers must obtain necessary product clearances or approvals from the FDA or other regulatory agencies. This can be a slow and uncertain process, and there can be no assurance that such clearances or approvals will be obtained on a timely basis, if at all. In addition, products intended for use in foreign countries must comply with similar requirements and be certified for sale in those countries. A customer’s failure to comply with the FDA’s requirements can result in the delay or denial of approval to proceed with the product. Delays in obtaining regulatory approval are frequent and, in turn, can result in delaying or canceling customer orders. There can be no assurance that our customers will obtain or be able to maintain all required clearances or approvals for domestic or exported products on a timely basis, if at all. The delays and potential product cancellations inherent in the regulatory approval and ongoing regulatory compliance of products we develop or manufacture may have a material adverse effect on our projects and revenue, as well as our business, reputation, results of operations and financial condition.

If government or insurance company reimbursements for our customers’ products change, our products, revenues and profitability may be adversely affected.

      Governmental and insurance industry efforts to reform the healthcare industry and reduce healthcare spending have affected, and will continue to affect, the market for medical devices. There have been several instances of changes in governmental or commercial insurance reimbursement policies that have significantly impacted the markets for certain types of products or services or that have had an impact on entire industries, such as recent policies affecting payment for nursing home and home care services. Adverse governmental regulation relating to our components or our customers’ products that might arise from future legislative, administrative or insurance industry policy cannot be predicted and the ultimate effect on private insurer and governmental healthcare reimbursement is unknown. Government and commercial insurance companies are increasingly vigorous in their attempts to contain healthcare costs by limiting both coverage and the level of reimbursement for new therapeutic products even if approved for marketing by the FDA. If government and commercial payers do not provide adequate coverage and reimbursement levels for uses of our customers’ products, the market acceptance of these products and our revenues and profitability would be adversely affected.

We have customers located in foreign countries and our unfamiliarity of the laws and business practices of such foreign countries could cause us to incur increased costs.

      We currently have customers located in foreign countries and anticipate additional customers located outside the United States. Our lack of knowledge and understanding of the laws of, and the customary business practices in, foreign counties could cause us to incur increased costs in connection with disputes over contracts, environmental laws, collection of accounts receivable, holding excess and obsolete inventory, duties and other import and export fees, product warranty exposure and unanticipated changes in governmental regimes.

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The price of our common stock may be adversely affected by significant price fluctuations due to a number of factors, many of which are beyond our control.

      The market price of our common stock has experienced significant fluctuations and may continue to fluctuate in the future. The market price of the common stock may be significantly affected by many factors, including:

•  changes in requirements or demands for our services;

•  the announcement of new products or product enhancements by us or our competitors;

•  technological innovations by us or our competitors;

•  quarterly variations in our or our competitors’ operating results;

•  changes in prices of our or our competitors’ products and services;

•  changes in our revenue and revenue growth rates;

•  changes in earnings estimates by market analysts, and speculation in the press or analyst community; and

•  general market conditions or market conditions specific to particular industries.

      The stock prices for many companies in the technology sector have experienced wide fluctuations that often have been unrelated to their operating performance. Such fluctuations may adversely affect the market price of our common stock.

Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws, as amended, may discourage lawsuits and other claims against our directors.

      Our articles of incorporation provide, to the fullest extent permitted by Minnesota law, that our directors shall have no personal liability for breaches of their fiduciary duties to us. In addition, our bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Minnesota law. These provisions may reduce the likelihood of derivative litigation against directors and may discourage shareholders from bringing a lawsuit against directors for a breach of their duty.

We have issued numerous options to acquire our common stock that could have a dilutive effect on our common stock.

      As of May 24, 2004, we had options outstanding to acquire 1,354,600 shares of our common stock, exercisable at prices ranging from $1.680 to $20.375 per share, with a weighted average exercise price of $5.277 per share. During the terms of these options, the holders will have the opportunity to profit from an increase in the market price of our common stock with resulting dilution to the holders of shares who purchased shares for a price higher than the respective exercise price. In addition, the increase in the outstanding shares of our common stock as a result of the exercise or conversion of these options could result in a significant decrease in the percentage ownership of our common stock by the purchasers of our common stock.

The market price of our common stock may be reduced by future sales of our common stock in the public market.

      Sales of substantial amounts of common stock in the public market that are not currently freely tradable, or even the potential for such sales, could have an adverse effect on the market price for shares of our common stock and could impair the ability of purchasers of our common stock to recoup their investment or make a profit. As of May 24, 2004, these shares consist of:

•  approximately 13,700 shares beneficially owned by our executive officers and directors; and

•  approximately 1,826,900 shares issuable to option and warrant holders.

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      Unless the shares of our outstanding common stock owned by our executive officers and directors are further registered under the securities laws, they may not be resold except in compliance with Rule 144 promulgated by the SEC, or some other exemption from registration. Rule 144 does not prohibit the sale of these shares but does place conditions on their resale that must be complied with before they can be resold.

The trading dynamics of our common stock makes it subject to large fluctuations in the per share value.

      Our common stock is a micro-stock that is thinly traded on the NASDAQ National Market. In some cases, our common stock may not trade during any given day. Small changes in the demand for shares of our common stock can have a material impact, both negatively and positively, in the trading share price of our stock.

Our Amended and Restated Articles of Incorporation contain provisions that could discourage or prevent a potential takeover, even if such transaction would be beneficial to our shareholders.

      Our Amended and Restated Articles of Incorporation authorize our Board of Directors to issue up to 11,000,000 shares of common stock and 4,000,000 shares of undesignated stock, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by our shareholders. Undesignated stock authorized by the Board of Directors may include voting rights, preferences as to dividends and liquidation, conversion and redemptive rights and sinking fund provisions that could affect the rights of the holders of our common stock and reduce the value of our common stock. The issuance of preferred stock could also prevent a potential takeover because the terms of any issued preferred stock may require the approval of the holders of the outstanding shares of preferred stock in order to consummate a merger, reorganization or sale of substantially all of our assets or other extraordinary corporate transaction.

      Our Amended and Restated Articles of Incorporation provide for a classified Board of Directors with staggered, three-year terms. Our Amended and Restated Articles of Incorporation also require the affirmative vote of a supermajority (80%) of the voting power for the following matters:

•  to approve the merger or consolidation of HEI or any subsidiary with or into any person that directly or indirectly beneficially owns, or owned at any time in the preceding 12 months, five percent or more of the outstanding shares of our stock entitled to vote in elections of directors (a “Related Person”);

•  to authorize the sale of substantially all of our assets to a Related Person;

•  to authorize the issuance of any of our voting securities in exchange or payment for the securities or assets of any Related Person, if such authorization is otherwise required by law or any agreement;

•  to adopt any plan for the dissolution of HEI; and

•  to adopt any amendment, change or repeal of certain articles of the Amended and Restated Articles of Incorporation, including the articles that establish the authority of the Board of Directors, the supermajority voting requirements and the classified Board of Directors.

      These provisions may have the effect of deterring a potential takeover or delaying changes in control or our management.

USE OF PROCEEDS

      The selling shareholders are offering all of the shares to be sold under this Prospectus. We will not receive any of the proceeds from the offer and sale of the shares.

SELLING SHAREHOLDERS

      The selling shareholders acquired the shares being offered under this Prospectus in a private transaction completed on May 7, 2004. The shares acquired by the selling shareholders were previously owned by Anthony J. Fant, our former Chairman, Chief Executive Officer and President, but were sold to the selling

13

shareholders pursuant to court order to reduce our judgments against Mr. Fant. The sale of Mr. Fant’s shares to the selling shareholders named in this Prospectus resulted in net additional cash to HEI of $520,929. The selling shareholders have indicated that the shares offered by this Prospectus may be sold from time to time by them or by their pledgees, donees, transferees or other successors in interest. The following table shows as of May 24, 2004:

•  The name of each of the selling shareholders,

•  The number of shares of our common stock beneficially owned by each of the selling shareholders, and

•  The number of securities offered by this Prospectus that may be sold from time to time by each of the selling shareholders.

      There is no assurance that the selling shareholders will sell the shares offered by this Prospectus.

										Percentage of
	Shares of			Shares of			Shares of			Shares of
	Common Stock			Common Stock			Common Stock			Common Stock
	Owned Beneficially			Offered by			Owned Beneficially			Owned Beneficially
Name of Selling Shareholder	Before Offering			This Prospectus			After Offering(1)			After Offering(1)
Robert G. Allison		22,000	(2)		17,500			4,500	(2)		*
Robert W. Nuebel Revocable Trust		14,500			2,000			12,500			*
Robert W. Mehlhouse		14,000			10,000			4,000			*
Kenton D. Kelly		7,000			2,000			5,000			*
Dean M. Cocker and Cathy Cocker		15,000			15,000			0			*
Donald Walczak and Kathleen Walczak		15,000			15,000			0			*
Mike Laydon		20,000			20,000			0			*
Bradley W. Nye		10,000			10,000			0			*
James P. Welbourn		10,000			10,000			0			*
Richard E. Lewis		10,000			10,000			0			*
Ralph Klein		10,000			10,000			0			*
Harry L. and Patricia J. Marriot Revocable Trust		10,000			10,000			0			*
Gerald Egge		15,316			10,000			5,316			*
Michael H. McLaughlin		12,000			10,000			2,000			*
Mark D. Mara		10,000			10,000			0			*
Glenn M. Eriksen		13,000			5,000			8,000			*
Dennis J. Hanish		122,700	(3)		80,000	(3)		42,700			*
Mark H. Ravich		18,582			10,000			8,582			*
Dennis Hanish as Custodian for Windsor Hanish		13,000	(4)		10,000	(4)		3,000			*
Karyl Hanish as Custodian for Rockne Hanish		15,000	(5)		10,000	(5)		5,000			*
Karyl Hanish as Custodian for Maxwell Hanish		26,000	(6)		10,000	(6)		16,000			*
Lavine Staller PSP		50,000			50,000			0			*
Mary Goldenberg		10,000			10,000			0			*
Robert Scibienski Revocable Trust		50,000			50,000			0			*
Steven Rutzick		10,000			10,000			0			*
Douglas Breidel		18,000			18,000			0			*
Jaswinder Sikka and D.J. Sikka		10,000			10,000			0			*
Stephen Gessner and Carol Gessner		20,000			20,000			0			*

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									Percentage of
	Shares of			Shares of			Shares of		Shares of
	Common Stock			Common Stock			Common Stock		Common Stock
	Owned Beneficially			Offered by			Owned Beneficially		Owned Beneficially
Name of Selling Shareholder	Before Offering			This Prospectus			After Offering(1)		After Offering(1)
Paul J. Breidel and Betty J. Breidel Trust		4,000			4,000			0		*
W. Bruce Erickson		65,000			10,000			55,000		*
Marion C. Hall		30,000	(7)		10,000	(7)		20,000		*
Karl Walstrom and Barbara Walstrom		4,000			4,000			0		*
Ilo Leppik		32,450			6,000			26,450		*
Harold Wahlquist		20,000			20,000			0		*
Paul L. Heibel		29,000			10,000			19,000		*
Robert Odegard and Carolyn Odegard		10,000			10,000			0		*
David Larkin		10,000			10,000			0		*
Daniel B. Ahlberg and Linda O. Ahlberg JTWROS		15,000			15,000			0		*
Piper Jaffray as Custodian FBO Robert H. Clayburgh IRA		20,000			10,000			10,000		*
E. Terry Skone		17,500			7,500			10,000		*
John C. Feltl(8)		10,000	(9)		10,000	(9)		0		*
Elizabeth Feltl Frye(8)		5,524	(10)		5,524	(10)		0		*
John E. Feltl and Mary Joanne Feltl(8)		25,000	(11)		25,000	(11)		0		*
Allan Strunc		30,000			20,000			10,000		*

* Represents beneficial ownership of less than 1% of the outstanding shares of our common stock.

(1)	The number of shares owned after the offering assumes the sale of all the shares of common stock offered in this Prospectus.
(2)	Includes 4,500 shares of common stock that Robert G. Allison may acquire under outstanding warrants.
(3)	Dennis J. Hanish is a registered representative with Feltl and Company, which is a registered broker-dealer. Dennis J. Hanish has informed the Company that he acquired the 80,000 shares of common stock offered by this Prospectus in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.
(4)	Dennis Hanish is a registered representative with Feltl and Company. Dennis Hanish has informed the Company he acquired the 10,000 shares of common stock offered by this Prospectus as custodian for Windsor Hanish in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.
(5)	Karyl Hanish’s husband, Dennis J. Hanish is a registered representative with Feltl and Company. Karyl Hanish has informed the Company she acquired the 10,000 shares of common stock offered by this Prospectus as custodian for Rockne Hanish in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.
(6)	Karyl Hanish’s husband, Dennis J. Hanish is a registered representative with Feltl and Company. Karyl Hanish has informed the Company she acquired the 10,000 shares of common stock offered by this Prospectus as custodian for Maxwell Hanish in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.
(7)	Marion C. Hall’s husband, Donald M. Hall, is a registered representative with Feltl and Company. Marion C. Hall has informed the Company that she acquired the 10,000 shares of common stock offered

15

	by this Prospectus in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.
(8)	John E. Feltl and Mary Joanne Feltl are the parents of John C. Feltl and Elizabeth Feltl Frye.
(9)	John C. Feltl is a firm principal with Feltl and Company, which is a registered broker-dealer. John C. Feltl has informed the Company that he acquired the 10,000 shares of common stock offered by this Prospectus in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.

(10)

Elizabeth Feltl Frye is licensed with Feltl and Company, which is a registered broker-dealer. Elizabeth Feltl Frye has informed the Company that she acquired the 5,524 shares of common stock offered by this Prospectus in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.

(11)

Mary Joanne Feltl is the President of Feltl and Company, which is a registered broker-dealer. Mr. and Mrs. Feltl have informed the Company that they acquired the 25,000 shares of common stock offered by this Prospectus in the ordinary course of business and, at the time of purchase of such shares, had no agreements or understandings, directly or indirectly, with any person to distribute such shares.

PLAN OF DISTRIBUTION

      The sale of the shares offered by this Prospectus may be made in the Nasdaq National Market or other over-the-counter markets at prices and at terms then prevailing or at prices related to the then current market price or in negotiated transactions. These shares may be sold by one or more of the following:

•  A block trade in which the broker or dealer will attempt to sell shares as agent but may position and resell a portion of the block as principal to facilitate the transaction.

•  Purchases by a broker or dealer as principal and resale by a broker or dealer for its account using this Prospectus.

•  Ordinary brokerage transactions and transactions in which the broker solicits purchasers.

•  In privately negotiated transactions not involving a broker or dealer.

•  In any method permitted pursuant to applicable law.

      Each sale may be made either at market prices prevailing at the time of such sale, at negotiated prices, at fixed prices that may be changed, or at prices related to prevailing market prices.

      In effecting sales, brokers or dealers engaged to sell the shares may arrange for other brokers or dealers to participate. Brokers or dealers engaged to sell the shares will receive compensation in the form of commissions or discounts in amounts to be negotiated immediately prior to each sale. These brokers or dealers and any other participating brokers or dealers may be deemed to be underwriters within the meaning of the Securities Act of 1933 in connection with these sales. We will receive no proceeds from any resales of the shares offered by this Prospectus, and we anticipate that the brokers or dealers, if any, participating in the sales of the shares will receive the usual and customary selling commissions.

      In connection with distributions of the shares or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of the shares registered hereunder in the course of hedging the positions they assume with the selling shareholders. The selling shareholders may also sell shares short and deliver the shares to close out such short positions. The selling shareholders may also enter into option, swaps, derivatives or other transactions with broker-dealers that require the delivery to the broker-dealer of the shares covered by this Prospectus, which the broker-dealer may resell pursuant to this Prospectus. The selling shareholders may also pledge the shares registered hereunder to a broker or dealer and upon a default, the broker or dealer may effect sales of the pledged shares pursuant to this Prospectus.

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      From time to time the selling shareholders may be engaged in short sales, short sales against the box, puts and calls and other hedging transactions in our securities, and may sell and deliver the shares covered by this Prospectus in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions. In addition, from time to time, a selling shareholder may pledge its shares pursuant to the margin provisions of its customer agreements with its broker-dealer. Upon delivery of the shares or a default by a selling shareholder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time.

      To comply with the securities laws of some states, if applicable, the shares will be sold in those states only through brokers or dealers. In addition, in some states, the shares may not be sold in those states unless they have been registered or qualified for sale in those states or an exemption from registration or qualification is available and is satisfied.

      If necessary, the specific shares of our common stock to be sold, the names of the selling shareholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this Prospectus is a part.

      Under applicable rules and regulations under Regulation M under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the common stock generally may not simultaneously engage in market making activities with respect to the common stock for a specified period set forth in Regulation M prior to the commencement of such distribution and until its completion. In addition, the selling shareholders will be subject to the applicable provisions of the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, which may limit the timing of purchases and sales of shares of the common stock by the selling shareholders. The foregoing may affect the marketability of the common stock.

      The selling shareholders will pay any applicable underwriting commissions and expenses, brokerage fees and transfer taxes. We will bear all other expenses in connection with the offering and sale of the shares. We have agreed to indemnify and hold harmless the selling shareholders from certain liabilities under the Securities Act of 1933. The selling shareholders also have agreed to indemnify us against certain liabilities in connection with the registration and the offering and sale of the shares.

DESCRIPTION OF SECURITIES

General

      Our articles of incorporation authorize our Board of Directors to issue 15,000,000 shares of capital stock, which consist of 11,000,000 shares of common stock, $0.05 par value, and 4,000,000 shares of undesignated stock, with rights, preferences and privileges as are determined by our board of directors.

Common Stock

      As of May 24, 2004, we had 8,356,805 shares of common stock outstanding. All outstanding shares of our common stock are fully paid and nonassessable. The following is a summary of the material rights and privileges of our common stock.

      Voting. Holders of our common stock are entitled to cast one vote for each share held at all shareholder meetings for all purposes, including the election of Directors. The holders of more than 50% of the voting power of our common stock issued and outstanding and entitled to vote and present in person or by proxy, together with any preferred stock issued and outstanding and entitled to vote and present in person or by proxy, constitute a quorum at all meetings of our shareholders. The vote of the holders of a majority of our common stock present and entitled to vote at a meeting, together with any preferred stock present and entitled to vote at a meeting, will decide any question brought before the meeting, except when Minnesota law, our articles of incorporation or our bylaws require a greater vote and except when Minnesota law requires a vote of any

17

preferred stock issued and outstanding, voting as a separate class, to approve a matter brought before the meeting. Holders of our common stock do not have cumulative voting for the election of directors.

      Dividends. Holders of our common stock are entitled to dividends when, as and if declared by the board of directors out of funds available for distribution. The payment of any dividends may be limited or prohibited by loan agreement provisions or priority dividends for preferred stock that may be outstanding.

      Preemptive Rights. The holders of our common stock have no preemptive rights to subscribe for any additional shares of any class of our capital stock or for any issue of bonds, notes or other securities convertible into any class of our capital stock.

      Liquidation. If we liquidate or dissolve, the holders of each outstanding share of our common stock will be entitled to share equally in our assets legally available for distribution to our shareholders after payment of all liabilities and after distributions to holders of preferred stock legally entitled to be paid distributions prior to the payment of distributions to holders of our common stock.

Minnesota Business Corporation Act

      We have opted out of the control share acquisition provisions of the Minnesota Business Corporation Act. The control share acquisition provisions generally prohibits any business combination by us or our subsidiary with any shareholder that purchases ten percent or more of our voting shares within four years following such interested shareholder’s share acquisition date, unless the business combination is approved by a committee of all the disinterested members of our Board of Directors before the interested shareholder’s share acquisition date.

LEGAL MATTERS

      Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, Minnesota, has issued an opinion about the legality of the shares registered by this Prospectus.

EXPERTS

      The consolidated financial statements and schedule of HEI, Inc. and subsidiaries as of August 31, 2003 and 2002 and for each of the years in the three-year period ended August 31, 2003, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

      We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC’s public reference rooms located at its regional offices in New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the operation of public reference rooms. You can also obtain copies of these materials from the SEC’s Internet web site located at http://www.sec.gov.

      The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this Prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.

•  Our Annual Report on Form 10-K for the fiscal year ended August 31, 2003, filed with the SEC on December 16, 2003.

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•  Our Current Report on Form 8-K, filed with the SEC on September 24, 2003.

•  Our Current Report on Form 8-K, filed with the SEC on October 21, 2003.

•  Our Current Report on Form 8-K, filed with the SEC on October 30, 2003.

•  Our Current Report on Form 8-K, filed with the SEC on December 2, 2003.

•  Our Current Report on Form 8-K, filed with the SEC on December 16, 2003.

•  Our Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2003, filed with the SEC on January 13, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on January 14, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on January 20, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on February 12, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on February 18, 2004, as amended by Amendment No. 1 to our Current Report on Form 8-K/ A, filed with the SEC on February 19, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on April 7, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on April 8, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on May 11, 2004.

•  Our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2004, filed with the SEC on April 13, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on April 13, 2004.

•  Our Current Report on Form 8-K, filed with the SEC on April 14, 2004.

•  The description of our common stock is contained in our Registration Statement on Form 10, filed on December 29, 1981, and Amendment No. 1 to such Registration Statement, filed on December 24, 1984.

      You may request a copy of these filings, at no cost, by writing, telephoning or sending an electronic message to us at the following:

HEI, Inc.

Shareholder Relations

1495 Steiger Lake Lane

Victoria, Minnesota 55386

(952) 443-2500

www.heii.com

      This Prospectus is part of a registration statement we filed with the SEC. You should rely only on the information or representations provided in this Prospectus. We have authorized no one to provide you with different information. The selling shareholders will not make an offer of these shares in any state where the offer is not permitted. You should not assume that the information in this Prospectus is accurate as of any date other than the date on the front page of this Prospectus.

INDEMNIFICATION

      We are subject to the Minnesota Business Corporation Act (the “MBCA”). Section 302A.521 of the MBCA provides that we shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to any employee benefit plan, settlements and reasonable expenses, including attorneys’ fees and disbursements, incurred by such person in

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connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person:

•  has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys’ fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions;

•  acted in good faith;

•  received no improper personal benefit and Section 302A.255 of the MBCA, if applicable, has been satisfied;

•  in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and

•  reasonably believed that the conduct was in our best interests in the case of acts or omissions in such person’s official capacity for us or reasonably believed that the conduct was not opposed to our best interests in the case of acts or omissions in such person’s official capacity for other affiliated organizations.

      Article VIII of our articles of incorporation further provide that our directors shall not be personally liable to us or our shareholders for breach of fiduciary duty, except for:

•  any breach of the director’s duty of loyalty;

•  acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

•  liability resulting from the authorization of an improper distribution;

•  any transaction from which the director received an improper personal benefit; or

•  any act or omission occurring prior to December 31, 1987.

Article VIII of our articles of incorporation further provides that we shall indemnify our directors to the fullest extent permitted under the MBCA, and that any repeal or modification of Article VIII by our shareholders will be prospective only and will not adversely affect any limitation on the personal liability of a director existing at the time of such repeal or modification.

      Article IX of our bylaws provides that each person who was or is made a party or is threatened to be made a party to or is involved, as a non-party witness or otherwise, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a proceeding by or in the right of us, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was our director or officer or, while our director or officer, is or was serving at our request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, where the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, will be indemnified and held harmless by us to the fullest extent authorized by the MBCA, as may be amended, by common law or by administrative or judicial interpretation, against all expense, liability and loss reasonably incurred or suffered by such person in connection with such proceeding.

      We also maintain a director and officer insurance policy to cover ourselves, our directors and our officers against certain liabilities.

      Although indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons under these provisions, we have been advised that, in the opinion of the SEC, indemnification for liabilities arising under the Securities Act of 1933 is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

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          No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer made by this Prospectus and, if given or made, the information or representations must not be relied upon as having been authorized by us. This Prospectus does not constitute an offer to sell or the solicitation of any offer to buy any security other than the securities offered by this Prospectus, nor does it constitute an offer to sell or a solicitation of any offer to buy the securities offered by this Prospectus by anyone in any jurisdiction in which the offer or solicitation is not authorized, or in which the person making the offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make an offer or solicitation. Neither the delivery of this Prospectus nor any sale made under this Prospectus shall, under any circumstances, create any implication that information contained in this Prospectus is correct as of any time subsequent to the date of this Prospectus.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	i
SUMMARY	1
RISK FACTORS	4
USE OF PROCEEDS	13
SELLING SHAREHOLDERS	13
PLAN OF DISTRIBUTION	16
DESCRIPTION OF SECURITIES	17
LEGAL MATTERS	18
EXPERTS	18
WHERE YOU CAN FIND MORE INFORMATION	18
INDEMNIFICATION	19

631,524 Shares

HEI, Inc.

Common Stock

PROSPECTUS

                    , 2004

PART II

INFORMATION NOT REQUIRED TO BE IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

      The following table sets forth our various expenses in connection with the sale and distribution of the Shares being registered pursuant to this Form S-3 Registration Statement. All of the amounts shown are estimates, except for the Securities and Exchange Commission registration fee and the Nasdaq listing fee.

Securities and Exchange Commission fee		$	185
Accounting fees and expenses			9,000
Legal fees and expenses			10,000
Printing and mailing expenses			1,000
Transfer Agent fees			100
	TOTAL	$	20,285

Item 15. Indemnification of Officers and Directors

      We are subject to the Minnesota Business Corporation Act (the “MBCA”). Section 302A.521 of the MBCA provides that we shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to any employee benefit plan, settlements and reasonable expenses, including attorneys’ fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person:

•  has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys’ fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions;

•  acted in good faith;

•  received no improper personal benefit and Section 302A.255 of the MBCA, if applicable, has been satisfied;

•  in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and

•  reasonably believed that the conduct was in our best interests in the case of acts or omissions in such person’s official capacity for us or reasonably believed that the conduct was not opposed to our best interests in the case of acts or omissions in such person’s official capacity for other affiliated organizations.

      Article VIII of our articles of incorporation further provide that our directors shall not be personally liable to us or our shareholders for breach of fiduciary duty, except for:

•  any breach of the director’s duty of loyalty;

•  acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

•  liability resulting from the authorization of an improper distribution;

•  any transaction from which the director received an improper personal benefit; or

•  any act or omission occurring prior to December 31, 1987.

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Article VIII of our articles of incorporation further provides that we shall indemnify our directors to the fullest extent permitted under the MBCA, and that any repeal or modification of Article VIII by our shareholders will be prospective only and will not adversely affect any limitation on the personal liability of a director existing at the time of such repeal or modification.

      Article IX of our bylaws provides that each person who was or is made a party or is threatened to be made a party to or is involved, as a non-party witness or otherwise, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a proceeding by or in the right of us, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was our director or officer or, while our director or officer, is or was serving at our request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, where the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, will be indemnified and held harmless by us to the fullest extent authorized by the MBCA, as may be amended, by common law or by administrative or judicial interpretation, against all expense, liability and loss reasonably incurred or suffered by such person in connection with such proceeding.

      We also maintain a director and officer insurance policy to cover ourselves, our directors and our officers against certain liabilities.

Item 16. Exhibits

3	.1	Amended and Restated Articles of Incorporation of HEI, Inc.(1)
3	.2	Certificate of Designation of Common Stock of HEI, Inc.*
3	.3	Amended and Restated Bylaws of HEI, Inc.(1)
3	.4	Amendment, dated March 19, 2003, to the Amended and Restated Bylaws of HEI, Inc.(2)
5	.1	Opinion of Counsel*
10	.1	Form of Registration Rights Agreement, dated as of May 7, 2004, among HEI, Inc. and the Purchasers of an aggregate of 631,524 shares of HEI, Inc.*
23	.1	Consent of KPMG LLP*
23	.2	Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A. (included in Exhibit 5.1)*
24	.1	Powers of Attorney*

* Filed herewith.

(1)	Filed as an exhibit to the Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on January 23, 2003, and incorporated into this Registration Statement by reference.
(2)	Filed as an exhibit to the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 16, 2003, and incorporated into this Registration Statement by reference.

Item 17. Undertakings

      A. The undersigned registrant hereby undertakes:

      (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

      (a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933,

      (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change to such information in the registration statement, and

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      (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

      (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

      B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(a) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      C. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Victoria, State of Minnesota, on May 28, 2004.

HEI, INC.

/s/ MACK V. TRAYNOR, III

By: Mack V. Traynor, III

Its: Chief Executive Officer and President

      Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-3 has been signed below on the 28th day of May, 2004, by the following persons in the capacities indicated:

By	/s/ MACK V. TRAYNOR, III Mack V. Traynor, III	Chief Executive Officer, President and Director (Principal Executive Officer)
By	/s/ DOUGLAS J. NESBIT Douglas J. Nesbit	Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)
By	/s/ DENNIS J. LEISZ Dennis J. Leisz	Chairman of the Board and Director
By	Anthony J. Fant	Director
By	/s/ TIMOTHY F. FLOEDER Timothy F. Floeder	Director
By	/s/ MICHAEL J. EVERS Michael J. Evers	Director
By	/s/ GEORGE M. HEENAN George M. Heenan	Director

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HEI, INC.

FORM S-3

INDEX TO EXHIBITS

3	.1	Amended and Restated Articles of Incorporation of HEI, Inc.(1)
3	.2	Certificate of Designation of Common Stock of HEI, Inc.*
3	.3	Amended and Restated Bylaws of HEI, Inc.(1)
3	.4	Amendment, dated March 19, 2003, to the Amended and Restated Bylaws of HEI, Inc.(2)
5	.1	Opinion of Counsel*
10	.1	Form of Registration Rights Agreement, dated as of May 7, 2004, among HEI, Inc. and the Purchasers of an aggregate of 631,524 shares of HEI, Inc.*
23	.1	Consent of KPMG LLP*
23	.2	Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A. (included in Exhibit 5.1)*
24	.1	Powers of Attorney*

* Filed herewith.

(1)	Filed as an exhibit to the Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on January 23, 2003, and incorporated into this Registration Statement by reference.
(2)	Filed as an exhibit to the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 16, 2003, and incorporated into this Registration Statement by reference.

EX-3.2 2 c85837exv3w2.htm CERTIFICATE OF DESIGNATION OF COMMON STOCK

Exhibit 3.2

CERTIFICATE OF DESIGNATION OF
COMMON STOCK

HEI, INC.
STATEMENT OF DESIGNATION OF RIGHTS AND PREFERENCES

     The undersigned, Douglas J. Nesbit, Chief Financial Officer of HEI, Inc., a Minnesota corporation (the “Company”), does hereby file with the office of the Minnesota Secretary of State a Certificate of Designation of Common Stock of HEI, Inc. pursuant to Minnesota Statutes, Section 302A.401, Subd. 3. In connection therewith, the following statement is made:

1. The name of the corporation is HEI, Inc.

2. Pursuant to the provisions of Minnesota Statutes, Section 302A.401, Subd. 3 and Article III of the Amended and Restated Articles of Incorporation of HEI, Inc., the resolution authorizing the establishment of additional shares of Common Stock and fixing the relative rights and preferences thereof was approved by the unanimous voice vote of the members of the Board of Directors of HEI, Inc. present at a duly called meeting thereof held on March 16, 2004.

3. The resolution attached as Annex A hereto was adopted by the Board of Directors of HEI, Inc. in connection with establishing the additional shares of Common Stock, par value $.05 per share, of HEI, Inc.

      I swear that the foregoing is true and accurate and that I have authority to sign this document on behalf of HEI, Inc.

Dated: March 16, 2004	By:	/S/ Douglas J. Nesbit
		Douglas J. Nesbit, Chief Financial
		Officer of HEI, Inc.

ANNEX A TO
CERTIFICATE OF DESIGNATION OF
COMMON STOCK

HEI, INC.

RESOLVED, that the following designation with respect to 1,000,000 of the Company’s previously undesignated shares are hereby made:

Section 1. Designation of Additional Common Stock.

One Million (1,000,000) shares of the Company’s undesignated shares that are authorized by Article III of this Company’s Amended and Restated Articles of Incorporation are hereby designated Common Stock, par value $.05 per share, which shares shall have the identical rights and preferences as all other shares of the Company’s Common Stock.

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EX-3.2

exv3w2

EX-5.1

EXHIBIT 5.1

[LETTERHEAD OF GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.]

May 28, 2004

HEI, Inc.
1495 Steiger Lake Lane
Victoria, Minnesota 55386
RE: Form S-3 Registration Statement

Gentlemen:

     This opinion is furnished in connection with the registration, pursuant to the Securities Act of 1933, as amended, of 631,524 issued and outstanding shares of common stock of HEI, Inc. (the “Company”) to be sold by various selling shareholders (the “Shares”) identified in the Registration Statement (as defined below).

     We have acted as counsel to the Company in connection with the preparation of the Registration Statement on Form S-3 (the “Registration Statement”). We have examined the Amended and Restated Articles of Incorporation, the Amended and Restated Bylaws of the Company, such records of the proceedings of the Company as we deemed material and such other certificates, records and documents as we considered necessary for the purpose of this opinion.

     Based on the foregoing, we are of the opinion that the Shares are legally issued, fully paid and non-assessable securities of the Company. We understand that this opinion is to be issued in connection with the Registration Statement. We consent to be named under the caption “Legal Matters” in the Prospectus, which constitutes a part of the Registration Statement. We further consent to the filing of a copy of this opinion with the Registration Statement.

Very truly yours,

/s/ Gray, Plant, Mooty, Mooty & Bennett, P.A.

EX-10.1

EXHIBIT 10.1

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of May 7, 2004, between HEI, Inc., a Minnesota corporation (the “Company”), and the investor identified on the signature page to this Agreement (“Purchaser”).

RECITALS

     WHEREAS, pursuant to a privately negotiated sale, Purchaser is acquiring the number of shares of the Company’s Common Stock (as defined below) listed on the signature page to this Agreement (the “Shares”); and

     WHEREAS, in connection with the privately negotiated sale, the Company desires to provide certain registration rights and benefits with respect to the Shares.

AGREEMENT

     NOW, THEREFORE, in consideration of the respective covenants and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows.

ARTICLE I
DEFINITIONS

     1.1 Specific Definitions. As used in this Agreement, the following terms shall have the meanings set forth or as referenced below:

     “Common Stock” means the Company’s common stock, par value $.05 per share.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Form S-3” means such form under the Securities Act in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

     “Holder” means a Purchaser, any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Article 2.

     “Register,” “Registered,” and “Registration” mean a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act, and the declaration or ordering by the SEC of effectiveness of such Registration Statement.

     “Registrable Securities” means the Shares. Notwithstanding the foregoing, Registrable Securities shall not include any securities sold by a person to the public either pursuant to a Registration Statement or Rule 144 under the Securities Act or sold in a private transaction in which the transferor’s rights under Article 2 of this Agreement are not assigned.

     “Registration Expenses” means all expenses incurred by the Company in complying with Article 2 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and disbursements of counsel for the underwriter or underwriters of such securities (if the Company and/or the Holder is required to bear such fees and disbursements), all internal Company expenses, and the premiums and other costs of policies of insurance against liability (if any) arising out

of such public offering and underwriting discounts and commissions and transfer taxes relating to the shares included in the offering by the Holder.

     “Registration Statement” means any Registration Statement filed by the Company with the SEC for a public offering and sale of Common Stock (other than a Registration Statement on Form S-8 or Form S-4, or their successors, or any other form for a similar purpose).

     “Rule 144” means Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar successor rule.

    “SEC” means the Securities and Exchange Commission.

    “Securities Act” means the Securities Act of 1933, as amended.

    “Selling Expenses” means all underwriting discounts and commissions, transfer taxes, filing fees, any and all fees, commission, discounts or similar payments made to any brokers or dealers, any fees and disbursements of counsel, accountant or any other advisor to the Purchaser applicable to a sale of Registrable Securities, and any costs and expenses with respect to Holder’s compliance with the securities laws of any state in the sale of all or any part of the Registrable Securities.

ARTICLE 2
REGISTRATION RIGHTS

     2.1 Registrations.

     (a) The Company shall, on or before May 31, 2004, use its best efforts to file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities. The Company shall use its best efforts to cause such Registration Statement to be declared effective under the Securities Act within 120 days of such filing.

     (b) The Company shall have the right to terminate or withdraw any Registration initiated by it under this Section 2 prior to the effectiveness of the Registration Statement. Such termination or withdrawal shall not give the Purchaser a right to include Registrable Securities in a future Registration where the Purchaser’s rights under this Agreement have been terminated prior to the Company’s withdrawal or termination of the Registration Statement.

     (c) In connection with any offering involving an underwriting of shares of Common Stock, the Company shall not be required under this Section 2 to include any of the Holder’s securities in such underwriting unless the Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by the Company. If the total amount of securities, including the Registrable Securities, requested by the Holder to be included in such offering exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Holder shall not be entitled to include the Registrable Securities in the offering.

     (d) The Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resales by the Holder thereof. The Company shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is 9 months from the date of filing (the “Effectiveness Period”) or such shorter period ending when all Registrable Securities covered by the Registration Statement have been sold in the manner set forth and as contemplated in the Registration Statement.

     2.2 Expenses of Registration. All Registration Expenses incurred in connection with any registration under Section 2.1 shall be borne by the Company. All Selling Expenses incurred in connection with any such registration shall be borne by the Holder(s) of the securities so registered.

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     2.3 Obligations of the Company. The Company shall use its best efforts to:

     (a) Prepare and file with the SEC a Registration Statement, on such form as is then available to the Company in connection with such registration, with respect to such Registrable Securities.

     (b) Furnish to the Holder such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by the Holder.

     (c) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering, provided that the Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

     (d) Notify the Holder of Registrable Securities covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in the light of the circumstances then existing.

     2.4 Termination of Registration Rights. All registration rights granted under this Article 2 shall terminate and be of no further force and effect after the expiration of the Effectiveness Period or such shorter period ending when all Registrable Securities covered by the Registration Statement have been sold in the manner set forth and as contemplated in the Registration Statement.

     2.5 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article 2.

     2.6 Indemnification. If any Registrable Securities are included in a Registration Statement under Section 2.1:

     (a) The Company will indemnify and hold harmless each Holder, the partners, officers, and directors of each Holder, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, and each underwriter, if any, and each person, if any, who controls any underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions, or violations (collectively a “Company Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law in connection with the offering covered by such Registration Statement; and the Company will reimburse each such Holder, partner, officer, director, underwriter, and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action if it is judicially determined that there was such a Company Violation; provided, however, that the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Company Violation that occurs in reliance upon and in conformity with information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, or controlling person of such Holder.

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     (b) Each selling Holder will indemnify and hold harmless the Company, each of its officers and directors, each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, and each underwriter, if any, and each person, if any, who controls any underwriter within the meaning of the Securities Act or the Exchange Act, and any other Holder selling securities under such Registration Statement or any of such other Holder’s partners, directors, or officers or any person who controls such Holder, against any losses, claims, damages, or liabilities (joint or several) to which the Company or any such director, officer, underwriter, controlling person, or other such Holder, or partner, director, officer, or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements, omissions, or violations (collectively a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with information furnished by such Holder; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, underwriter, controlling person, or other Holder, or partner, officer, director, or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability, or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, further, that in no event shall any indemnity under this Section 2.6(b) exceed the proceeds from the offering received by such Holder unless the Holder Violation is the result of fraud on the part of such Holder.

     (c) Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party (or, if there is more than one indemnified party, the indemnifying party shall pay the fees and expenses of one counsel for any and all indemnified parties, to be mutually agreed upon by such indemnified parties), if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.6, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6.

     (d) If the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages, or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage, or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Company Violation(s) or the Holder Violation(s), as the case may be, that resulted in such loss, claim, damage, or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to

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information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

     (e) The foregoing indemnity agreements of the Company and Holder are subject to the condition that, insofar as they relate to any Company Violation(s) or Holder Violation(s), as the case may be, made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement in question becomes effective or the final prospectus is filed with the SEC pursuant to SEC Rule 424(b), such indemnity agreement shall not inure to the benefit of any person if a copy of such final prospectus was furnished to the indemnified party and was not furnished to the person asserting the loss, liability, claim, or damage at or prior to the time such action is required by the Securities Act.

     (f) The obligations of the Company and Holder under this Section 2.6 shall terminate and be of no further force and effect after the Effectiveness Period or such shorter period ending when all Registrable Securities covered by the shelf registration (i) have been sold in the manner set forth and as contemplated in the Registration Statement or (ii) may be sold without limitation under Rule 144(k).

ARTICLE 3
PURCHASER REPRESENTATIONS AND WARRANTIES

     The Purchaser hereby represents and warrants to the Company as follows:

     3.1 Experience. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser acknowledges that investment in the Shares is a speculative risk. The Purchaser is able to fend for itself in the transactions contemplated by this Agreement, can bear the economic risk of its investment in the Shares (including possible complete loss of such investment) for an indefinite period of time, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Shares. The Purchaser understands that nothing in this Agreement or any other materials presented to the Purchaser in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. The Purchaser has consulted such legal, tax and investment advisors as the Purchaser, in its sole discretion, has deemed necessary or appropriate.

     3.2 Investment Purpose. The Purchaser is acquiring the Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Shares have not been registered under the 1933 Act, by reason of a specific exemption from the registration provisions of the 1933 Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Shares are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving any public offering and that under such laws and applicable regulations the Shares, may be resold without registration under the 1933 Act only in certain limited circumstances. The Purchaser shall not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the 1933 Act, applicable state securities laws and the respective rules and regulations thereunder.

     3.3 Access to Data. The Purchaser and its representatives have been afforded the opportunity to request access to or copies of corporate books, financial statements, records, contracts, documents and other information concerning the Company (to the extent such exists), and to its offices and facilities, have been afforded an opportunity to ask such questions of the Company’s officers, employees, agents, accountants and representatives concerning the Company’s existing and proposed business, operations, financial condition, assets, liabilities and other relevant matters as they have deemed necessary or desirable, and have been given all such information as has been requested, in order to evaluate the merits and risks of the prospective investments contemplated herein. The Purchaser further represents and acknowledges that it has been solely responsible for its own “due diligence” investigation of the Company and its management and business, for its own analysis of the merits and risks of this investment, and for its own analysis of the fairness and desirability of the terms of the investment.

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     3.4 Residency. For purposes of the application of state securities laws, the Purchaser represents and warrants to the Company that it is a bona fide resident of, or a duly formed entity domiciled in, the state or country indicated on the signature page.

     3.5 Evaluation of Risks. The Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that the Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.

     3.6 Not an Affiliate or Group. The Purchaser represents that it is not under the control of, controlled by or under common control with any other Purchaser, and the Purchaser represents that it, along with any other purchasers, is not a “Person or a Group as defined in Section 13(d)(3) of the 1934 Act and the rules and regulations promulgated thereunder.

     3.7 Restrictive Legends. The Purchaser agrees that, so long as the Shares remain restricted securities, the Company shall place a restrictive legend on the certificate(s) representing the Shares in substantially the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred without registration under such Act or an opinion of counsel reasonably acceptable to the Company that such registration is not required.”

At any time after (a) the effective date of a registration statement covering the Shares or (b) the date the Shares may be sold without limitation under Rule 144(k) promulgated under the 1933 Act, the Company will use its best efforts to instruct its transfer agent and registrar for Common Stock to remove the restrictive legend from certificate(s) representing the Shares within five (5) business days of receipt of the Purchaser’s written request to remove such legend from such Shares.

     3.8 Transactions in Common Stock. The Purchaser has not, during the thirty (30) trading days immediately preceding the closing of the purchase of the Shares, sold or established a short position in any shares of the Common Stock or other capital stock of the Company.

     3.9 No General Solicitation. The Purchaser did not learn of the investment in the Securities as a result of any public advertising or general solicitation.

     3.10 Accredited Investor. The Purchaser is an accredited investor within the meaning of Rule 501(a) of Regulation D of the Securities and Exchange Commission.

ARTICLE 4
OTHER PROVISIONS

     4.1 Complete Agreement. This Agreement and the agreements referenced herein constitute the entire agreement between the parties hereto with respect to the subject matter hereof.

     4.2 Waiver, Discharge, Amendment, Etc. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not, absent an express written waiver signed by the party making such waiver specifying the provision being waived, be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of the party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

     4.3 Notices. All notices or other communications to a party required or permitted hereunder shall be in writing and shall be delivered personally or by telecopy (receipt confirmed) to such party (or, in the case of an entity, to an executive officer of such party) or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with return receipt requested, addressed as follows:

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     if to a Purchaser:

c/o Feltl and Company
Suite 4200
225 South Sixth Street
Minneapolis, MN 55402
Attn: John C. Feltl
Fax: 612-492-8848

     if to the Company to:

HEI, Inc.
P.O. Box 5000
1495 Steiger Lake Lane
Victoria, MN 55386
Attention: President
Fax: 952-443-2668

     with copy to:

Gray, Plant, Mooty, Mooty & Bennett, P.A.
500 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attn: Mark D. Williamson, Esq.
Fax: (612) 632-4444

Any party may change the above-specified recipient and/or mailing address by notice to all other parties given in the manner herein prescribed. All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally or by telecopy) or on the day shown on the return receipt (if delivered by mail or delivery service).

     4.4 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Minnesota, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws.

     4.5 Titles and Headings; Construction. The titles and headings to the Articles and Sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. This Agreement shall be construed without regard to any presumption or other rule requiring construction hereof against the party causing this Agreement to be drafted.

     4.6 Benefit. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors or assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

     4.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed as original and all of which together shall constitute one instrument, and may be delivered in person or by facsimile transmission.

[REMAINDER OF PAGE IS BLANK. SIGNATURE PAGE FOLLOWS.]

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     IN WITNESS WHEREOF, each of the parties has caused this Agreement and the attached Acceptance to be executed as of the date first written above.

HEI, INC.
 

Mack V. Traynor, III 

Chief Executive Officer 

PURCHASER

By:

Title:

Number of Shares:

Address:

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EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of HEI, Inc.:

     We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the heading “Experts” in this Form S-3.

/s/ KPMG LLP

Minneapolis, Minnesota
May 28, 2004

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

     KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Mack V. Traynor, III, and Timothy F. Floeder, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full powers and authority to do and perform each and every act and things requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

By	/s/ Mack V. Traynor, III	Date:	May 28, 2004
	Mack V. Traynor, III
	Chief Executive Officer, President and Director
	(Principal Executive Officer)
By	/s/ Douglas J. Nesbit	Date:	May 28, 2004
	Douglas J. Nesbit
	Chief Financial Officer
	Treasurer and Secretary
	(Principal Financial and Accounting Officer)
By	/s/ Dennis J. Leisz	Date:	May 28, 2004
	Dennis J. Leisz
	Chairman of the Board and Director
By
	Anthony J. Fant
	Director
By	/s/ Timothy F. Floeder	Date:	May 28, 2004
	Timothy F. Floeder
	Director

By	/s/ Michael J. Evers	Date:	May 28, 2004
	Michael J. Evers
	Director
By	/s/ George M. Heenan	Date:	May 28, 2004
	George M. Heenan
	Director