8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 29, 2004

HEI, Inc.

(Exact Name of Registrant as Specified in Charter)

Minnesota	0-10078	41-0944876
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

PO Box 5000, 1495 Steiger Lake Lane, Victoria, Minnesota 55386

(Address of Principal Executive Offices, Including Zip Code)

Registrant’s telephone number, including area code: (952) 443-2500

N/A

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2.):

     ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01   Entry Into a Material Definitiave Agreement.
	Item 9.01   Financial Statements and Exhibits.
SIGNATURES
Waiver and Amendment with Commerce Bank
Waiver and Amendment with Commerce Financial Group, Inc.
Notice, Waiver and Amendment with Beacon Bank

Item 1.01   Entry Into a Material Definitiave Agreement.

     On December 29, 2004, HEI, Inc. (the “Company”) entered into a Waiver and Amendment (the "Commerce Bank Amendment”) to waive and amend certain provisions of its Term Loan Agreement, dated October 14, 2003, as amended effective as of November 30, 2004, with Commerce Bank, a Minnesota banking corporation (the “Commerce Bank Loan Agreement”). The Commerce Bank Amendment, among other things: (i) waived a covenant relating to the conduct of the Company’s business; (ii) agreed that the failure of the Company to timely file with the Securities and Exchange Commission (the “SEC”) its Annual Report on Form 10-K for the fiscal year ended August 31, 2004 (the “2004 Annual Report”) or its Quarterly Report on Form 10-Q for the quarter ended November 30, 2004 (the “2005 First Quarterly Report”) does not constitute a default under the Commerce Bank Loan Agreement so long as the 2004 Annual Report is filed with the SEC on or prior to January 14, 2005, and the 2005 First Quarterly Report is filed with the SEC on or prior to February 15, 2005; (iii) amended the Commerce Bank Loan Agreement to provide that the Company must deliver a copy of its annual financial statements for the fiscal year ended August 31, 2004 (“Fiscal 2004”) on or prior to January 14, 2005; and (iv) amended the Commerce Bank Loan Agreement to provide that the Company must deliver a copy of its quarterly financial statements for the fiscal quarter ended November 30, 2004 on or prior to February 15, 2005. A copy of the Commerce Bank Amendment is filed herewith as Exhibit 10.1 and is incorporated herein by reference.

     Also on December 29, 2004, the Company entered into a Waiver and Amendment (the “Commercial Financial Group Amendment”) to waive and amend certain provisions of its Term Loan Agreement, dated October 28, 2003, as amended effective as of November 30, 2004, with Commerce Financial Group, Inc., a Minnesota corporation (the “Commerce Financial Group Loan Agreement”). The Commerce Financial Group Amendment, among other things: (i) waived a covenant relating to the conduct of the Company’s business; (ii) agreed that the failure of the Company to timely file with the SEC its 2004 Annual Report or its 2005 First Quarterly Report does not constitute a default under the Commerce Financial Group Loan Agreement so long as the 2004 Annual Report is filed with the SEC on or prior to January 14, 2005, and the 2005 First Quarterly Report is filed with the SEC on or prior to February 15, 2005; (iii) amended the Commerce Financial Group Loan Agreement to provide that the Company must deliver a copy of its annual financial statements for Fiscal 2004 on or prior to January 14, 2005; and (iv) amended the Commerce Financial Group Loan Agreement to provide that the Company must deliver a copy of its quarterly financial statements for the fiscal quarter ended November 30, 2004, on or prior to February 15, 2005. A copy of the Commerce Financial Group Amendment is filed herewith as Exhibit 10.2 and is incorporated herein by reference.

     Also on December 29, 2004, the Company entered into a Notice, Waiver and Amendment (the "Beacon Bank Amendment”) to waive and amend certain provisions of its Accounts Receivable Agreement dated May 29, 2003, as amended on December 13, 2003, July 1, 2004 and December 7, 2004, with Beacon Bank (the “Accounts Receivable Agreement”). The Beacon Bank Amendment, among other things: (i) waived a covenant relating to the Company’s compliance with laws; (ii) agreed that the failure of the Company to timely file with the SEC its 2004 Annual Report or its 2005 First Quarterly Report does not constitute a default under the Accounts Receivable Agreement so long as the 2004 Annual Report is filed with the SEC on or prior to January 14, 2005 and the First Quarterly Report is filed with the SEC on or prior to February 15, 2005; and (iii) amended the Accounts Receivable Agreement to provide that the Company must deliver a copy of its annual financial statements for Fiscal 2004 on or prior to January 14, 2005. A copy of the Beacon Bank Amendment is filed herewith as Exhibit 10.3 and is incorporated herein by reference.

Item 9.01   Financial Statements and Exhibits.

(c)    Exhibits.

     The following exhibits are filed as a part of this Current Report on Form 8-K.

Item No.	Description
10.1	Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Commerce Bank, a Minnesota banking corporation.
10.2	Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Commerce Financial Group, Inc., a Minnesota corporation.
10.3	Notice, Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Beacon Bank (without schedules).

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HEI, INC.
Date: January 5, 2005	By /s/ Douglas J. Nesbit
	Douglas J. Nesbit
	Chief Financial Officer, Treasurer, Secretary (Duly Authorized Officer)

Exhibit Index

Item No.	Description
10.1	Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Commerce Bank, a Minnesota banking corporation.
10.2	Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Commerce Financial Group, Inc., a Minnesota corporation.
10.3	Notice, Waiver and Amendment, dated as of December 29, 2004, by and between HEI, Inc., a Minnesota corporation, and Beacon Bank (without schedules).

EX-10.1

Exhibit 10.1

WAIVER AND AMENDMENT

Dated as of December 29, 2004

Commerce Bank
7650 Edinborough Way
Suite 150
Edina, MN 55435

Dear Sir or Madam:

     Reference is made to that certain Term Loan Agreement (the “Loan Agreement”), dated October 14, 2003, and amended effective as of November 30, 2004, by and between HEI Inc., a Minnesota corporation (the “Borrower”) and Commerce Bank, a Minnesota banking corporation (the “Lender”).

     The Borrower has advised the Lender that due to its failure to file its Annual Report on Form 10-K for its fiscal year ended August 31, 2004 (“Fiscal 2004”), with the United States Securities and Exchange Commission (the “SEC”) by the extension deadline of December 14, 2004, the Borrower is at present in default under Section 6.6 of the Loan Agreement. The Borrower has further advised the Lender that it will continue to be in default under Section 6.6 of the Loan Agreement until such time that it files its Annual Report on Form 10-K for Fiscal 2004 with the SEC, and that a default may occur under Section 6.6 of the Loan Agreement if the Borrower fails to timely file with the SEC its Quarterly Report on Form 10-Q for the Borrower’s fiscal quarter that ended in November 2004. The Borrower has further advised the Lender (i) that the Borrower is likely to be in default under Section 6.5(a) of the Loan Agreement if it is unable to finalize and, accordingly, deliver to the Lender, its audited financial statements for Fiscal 2004 by December 29, 2004, and (ii) that a default may occur under Section 6.5(b) of the Loan Agreement if the Borrower is unable to timely finalize its quarterly financial statements for its fiscal quarter that ended in November 2004. The Borrower has requested certain waivers and amendments to Sections 6.6, 6.5(a) and 6.5(b) of the Loan Agreement.

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

     1.     The Lender hereby waives any default existing as of the date hereof under Section 6.6 of the Loan Agreement, and any Event of Default (as such term is defined in the Loan Agreement) arising directly therefrom.

     2.     The Lender hereby agrees that, notwithstanding anything in the Loan Agreement to the contrary, no Event of Default thereunder shall be deemed to occur either (a) as a result of the Borrower’s failure to file its Annual Report on Form 10-K for Fiscal 2004, so long as such filing occurs on or prior to January 14, 2005, or (b) as a result of the Borrower’s failure to file its Quarterly Report on Form 10-Q for the Borrower’s fiscal quarter that ended in November 2004, so long as such filing occurs on or prior to February 15, 2005.

     3.     Section 6.5(a) of the Loan Agreement is hereby amended by adding to the end thereof the following sentence.

     Notwithstanding anything in this Section 6.5(a) to the contrary, the Borrower shall deliver a copy of its annual financial statements for its fiscal year ended August 31, 2004, on or prior to the date that such annual financial statements are filed with the United States Securities and Exchange Commission, but in any event on or prior to January 14, 2005.

     4.     Section 6.5(b) of the Loan Agreement is hereby amended by adding to the end thereof the following sentence.

     Notwithstanding anything in this Section 6.5(b) to the contrary, the Borrower shall deliver a copy of its quarterly financial statements for its fiscal quarter ended in November 2004, on or prior to the date that such quarterly financial statements are filed with the United States Securities and Exchange Commission, but in any event on or prior to February 15, 2005.

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

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

[THE REMAINDER OF THIS PAGE IS BLANK. SIGNATURE PAGES FOLLOW.]

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

Very truly yours,


HEI, INC.
 

/s/ Mack V. Traynor, III  

By: Mack V. Traynor, III 

Its: CEO and President 

     Acknowledged as of the date first written above.

COMMERCE BANK
 

/s/ James E. Senske  

By: James E. Senske 

Its: President 

EX-10.2

Exhibit 10.2

WAIVER AND AMENDMENT

Dated as of December 29, 2004

Commerce Financial Group, Inc.
7650 Edinborough Way
Suite 150
Edina, MN 55435

Dear Sir or Madam:

     Reference is made to that certain Term Loan Agreement (the “Loan Agreement”), dated October 28, 2003, and amended effective as of November 30, 2004, by and between HEI Inc., a Minnesota corporation (the “Borrower”) and Commerce Financial Group, Inc., a Minnesota corporation (the “Lender”).

     The Borrower has advised the Lender that due to its failure to file its Annual Report on Form 10-K for its fiscal year ended August 31, 2004 (“Fiscal 2004”), with the United States Securities and Exchange Commission (the “SEC”) by the extension deadline of December 14, 2004, the Borrower is at present in default under Section 6.6 of the Loan Agreement. The Borrower has further advised the Lender that it will continue to be in default under Section 6.6 of the Loan Agreement until such time that it files its Annual Report on Form 10-K for Fiscal 2004 with the SEC, and that a default may occur under Section 6.6 of the Loan Agreement if the Borrower fails to timely file with the SEC its Quarterly Report on Form 10-Q for the Borrower’s fiscal quarter that ended in November 2004. The Borrower has further advised the Lender (i) that the Borrower is likely to be in default under Section 6.5(a) of the Loan Agreement if it is unable to finalize and, accordingly, deliver to the Lender, its audited financial statements for Fiscal 2004 by December 29, 2004, and (ii) that a default may occur under Section 6.5(b) of the Loan Agreement if the Borrower is unable to timely finalize its quarterly financial statements for its fiscal quarter that ended in November 2004. The Borrower has requested certain waivers and amendments to Sections 6.6, 6.5(a) and 6.5(b) of the Loan Agreement.

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

     1.     The Lender hereby waives any default existing as of the date hereof under Section 6.6 of the Loan Agreement, and any Event of Default (as such term is defined in the Loan Agreement) arising directly therefrom.

     2.     The Lender hereby agrees that, notwithstanding anything in the Loan Agreement to the contrary, no Event of Default thereunder shall be deemed to occur either (a) as a result of the Borrower’s failure to file its Annual Report on Form 10-K for Fiscal 2004, so long as such filing occurs on or prior to January 14, 2005, or (b) as a result of the Borrower’s failure to file its Quarterly Report on Form 10-Q for the Borrower’s fiscal quarter that ended in November 2004, so long as such filing occurs on or prior to February 15, 2005.

     3.     Section 6.5(a) of the Loan Agreement is hereby amended by adding to the end thereof the following sentence.

     Notwithstanding anything in this Section 6.5(a) to the contrary, the Borrower shall deliver a copy of its annual financial statements for its fiscal year ended August 31, 2004, on or prior to the date that such annual financial statements are filed with the United States Securities and Exchange Commission, but in any event on or prior to January 14, 2005.

     4.     Section 6.5(b) of the Loan Agreement is hereby amended by adding to the end thereof the following sentence.

     Notwithstanding anything in this Section 6.5(b) to the contrary, the Borrower shall deliver a copy of its quarterly financial statements for its fiscal quarter ended in November 2004, on or prior to the date that such quarterly financial statements are filed with the United States Securities and Exchange Commission, but in any event on or prior to February 15, 2005.

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

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

[THE REMAINDER OF THIS PAGE IS BLANK. SIGNATURE PAGES FOLLOW.]

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

Very truly yours,


HEI, INC.
 

/s/ Mack V. Traynor, III  

By: Mack V. Traynor, III 

Its: CEO and President 

     Acknowledged as of the date first written above.

COMMERCE FINANCIAL GROUP, INC.
 

/s/ James E. Senske  

By: James E. Senske 

Its: President 

EX-10.3

Exhibit 10.3

NOTICE, WAIVER AND AMENDMENT

Dated as of December 29, 2004

Beacon Bank
Attn: David Peterka - Executive Vice President
19765 Highway 7
Shorewood, MN 55331

Dear Mr. Peterka:

     Reference is made to that certain Accounts Receivable Agreement (as from time to time amended or renewed, the “Agreement”) dated May 29, 2003 by and between HEI Inc. (the “Client”) and Beacon Bank (the “Purchaser”).

     On December 16, 2004, the Client received a notification (attached hereto as Schedule 1) from the NASDAQ Listing Qualifications Department that states that the Client is not in compliance with NASDAQ Marketplace Rule 4310(c)(14) due to its failure to file its Annual Report on Form 10-K for its fiscal year ended August 31, 2004 (“Fiscal 2004”), with the United States Securities and Exchange Commission (the “SEC”) by the extension deadline of December 14, 2004, and, as a result, the Client’s common stock is subject to delisting from the NASDAQ National Market unless the Client requests a hearing with a NASDAQ Listing Qualifications Panel to appeal such delisting. The Client intends to request a hearing and make an appeal but can not provide assurances that the NASDAQ Listing Qualifications Panel will grant the Client’s request for continued listing of its common stock.

     Pursuant to Section 5.02(a) of the Agreement, the Client is required to promptly notify the Purchaser of “any developments which would materially adversely affect the business of the Client, its properties or affairs or the ability of Client to perform its obligations under this Agreement.” The delisting of the Client’s common stock from the NASDAQ National Market may materially adversely affect the business of the Client. The Purchaser hereby agrees that the disclosures of such events in this Notice, Waiver and Amendment constitutes notice required under Section 5.02(a) of the Agreement.

     As a result of the Client’s failure to file its Annual Report on Form 10-K for Fiscal 2004, the Client has advised the Purchaser that it is at present in default under Section 3.12 of the Agreement. The Client has further advised the Purchaser that (i) it will continue to be in default under Section 3.12 of the Agreement until such time that its files its Annual Report on Form 10-K for Fiscal 2004 with the SEC, and (ii) a default

may occur under Section 3.12 of the Agreement if the Client fails to timely file with the SEC its Quarterly Report on Form 10-Q for the Client’s fiscal quarter that ended in November 2004. The Client has further advised the Purchaser that the Client is likely to be in default under Section 5.08(a) of the Agreement if it is unable to finalize and, accordingly, deliver to the Purchaser, its audited financial statements for Fiscal 2004 by December 29, 2004. The Client has requested certain waivers and amendments to Sections 3.12 and 5.08(a) of the Agreement.

     In consideration of the promises herein set forth, the Client and the Purchaser hereby agree as follows:

     1.     The Purchaser hereby waives any default existing as of the date hereof under Section 3.12 of the Agreement, and any Event of Default (as such term is defined in the Agreement) arising directly therefrom.

     2.     The Lender hereby agrees that, notwithstanding anything in the Loan Agreement to the contrary, no Event of Default thereunder shall be deemed to occur either (a) as a result of the Client’s failure to file its Annual Report on Form 10-K for Fiscal 2004, so long as such filing occurs on or prior to January 14, 2005, or (b) as a result of the Client’s failure to file its Quarterly Report on Form 10-Q for the Client’s fiscal quarter that ended in November 2004, so long as such filing occurs on or prior to February 15, 2005.

     3.     Section 5.08(a) of the Agreement is hereby amended by adding to the end thereof the following sentence.

     Notwithstanding anything in this Section 5.08(a) to the contrary, the Client shall deliver a copy of its annual financial statements for its fiscal year ended August 31, 2004, on or prior to the date that such annual financial statements are filed with the United States Securities and Exchange Commission, but in any event on or prior to January 14, 2005.

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

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

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

Very truly yours,


HEI, INC.
 

/s/ Mack V. Traynor, III  

By: Mack V. Traynor, III 

Its: CEO and President 

     Acknowledged as of the date first written above.

BEACON BANK
 

/s/ David L. Peterka

By: David L. Peterka

Its: Executive Vice President