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) January 13, 2006

HEI, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	0-10078	41-0944876
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

PO Box 5000, 1495 Steiger Lake Lane, Victoria, Minnesota	55386
(Address of principal executive offices)	(Zip Code)

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

Not Applicable

(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 obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

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

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

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

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

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TABLE OF CONTENTS

2006 Non-employee Director Stock Purchase Plan

Non-employee Director Stock Purchase Agreement

Form of Restricted Stock Agreement

Item 1.01 Entry into a Material Definitive Agreement.

     Effective January 13, 2006 (the “Effective Date”), the Board of Directors of HEI, Inc. (the “Company”) adopted the HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan (the “Plan”). Under the terms of the Plan, each Nonemployee Director, as that term is defined under Rule 16b-3 of the Securities Exchange Act of 1934 (a “Participant”), was given the right on the Effective Date to acquire $16,000 of the Company’s common stock (the “Stock”) in lieu of a cash payment of the same amount otherwise due in partial payment for their services as directors. Each Nonemployee director elected to purchase $16,000 of Company common stock under the Plan. The purchase price of each share of Stock is 100% of the closing price as posted on the NASDAQ Stock Market on the Effective Date. The Stock acquired by any Participant under the Plan is restricted and, except in certain circumstances, does not fully vest until September 1, 2006. Any and all offerings under the Plan terminate immediately following the Effective Date, and no additional Stock will be sold under the Plan without further action by the Board of Directors of the Company.

     Also effective January 13, 2006, the Company granted restricted stock to certain participants under the Company’s 1998 Stock Option Plan, as amended. The grants were made to 17 participants and the aggregate number of shares of Company common stock covered by the grants is 79,800 shares. The restricted stock awards vest pro rata over a four year period, subject to continued employment or service with the Company or its affiliates. The form of restricted stock agreement utilized for this grant is attached as exhibit 10.3 hereto and incorporated herein by reference. The directors and executive officers receiving restricted stock awards as a part of this grant and the aggregate amount of such grants for persons is listed below. The director grants were made in lieu of their annual grant of a total of options to purchase 50,000 shares of Company common stock.

Name	Amount
Dennis Leisz, director	3,000
Timothy Floeder, director	3,000
Michael Evers, director	3,000
George Heenan, director	3,000
Robert Heller, director	3,000
Mack Traynor, officer	15,000
James Vetricek, officer	9,000
Simon Hawksworth, officer	9,000
Timothy Clayton, officer	9,000
Scott Stole, officer	3,000

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

[The following Exhibits are filed as a part of this Report / The following Exhibits shall be deemed furnished and not filed as a part of this Report:]

Exhibit No.	Description of Exhibit
10.1	HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan, effective January 13, 2006
10.2	Nonemployee Director Stock Purchase Agreement, effective January 13, 2006
10.3	HEI, Inc. Form of Restricted Stock Agreement

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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 16, 2006
	By	/s/ Timothy Clayton
		Timothy Clayton
		Its: Chief Financial Officer

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EXHIBIT INDEX

10.1	HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan, effective January 13, 2006
10.2	Nonemployee Director Stock Purchase Agreement, effective January 13, 2006
10.3	HEI, Inc. Form of Restricted Stock Agreement

EX-10.1

EXHIBIT 10.1

HEI, INC.

2006 NONEMPLOYEE DIRECTOR STOCK PURCHASE PLAN

SECTION 1. PURPOSES OF THE PLAN

     The purposes of this HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan (the “Plan”) are (a) to promote the long-term interests of HEI, Inc. (the “Company”) and its shareholders by strengthening the Company’s ability to attract, motivate and retain key directors and (b) conserve cash assets of the Company by allowing the nonemployee directors to receive shares of common stock of the Company in exchange for cash compensation.

SECTION 2. DEFINITIONS

“Change of Control”means a change of control of the Company, as such term is defined in the Company’s 1998 Stock Option Plan for Nonemployee Directors, after the effective date of this Plan.

“Common Stock” means the common stock, $0.05 par value, of the Company.

“Company” means HEI, Inc., a Minnesota corporation.

“Effective Date” means the date that is one (1) business day after the Plan is approved by the Board of Directors of the Company – January 13, 2006.

“Fair Market Value” means the closing price for the Common Stock on the NASDAQ Stock Market during regular session trading for a single trading day as reported for such day in The Wall Street Journal. If no reported price for the Common Stock exists for the applicable trading day, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value.

“Nonemployee Director” has the meaning set forth in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, or any successor definition adopted by the Securities and Exchange Commission.

“Participant” means any eligible person set forth in Section 3.1.

“Plan” means this HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan.

“Restricted Stock” means any shares of Common Stock initially received under the Plan.

SECTION 3. PROVISIONS

3.1. Participation. Any Nonemployee Director may be a participant in the Plan (a “Participant”)

3.2. Issuance of Stock. At any time on the Effective Date, any Participant may elect to receive up to Sixteen Thousand Dollars ($16,000.00) in Common Stock of the Company in lieu of such amount being received as cash compensation for service as a Nonemployee Director. The Participant will receive a number of shares of such stock equal to Sixteen Thousand Dollars ($16,000.00) divided by the Fair Market Value of the Common Stock on the Effective Date. In

the event such number results in a fraction, the number shall be rounded down to the nearest whole share.

3.3. Restricted Stock. Any stock received under the Plan shall be Restricted Stock, subject to such terms, conditions and repurchase or forfeiture restrictions provided in the non employee director stock purchase Agreement, attached hereto as Exhibit A (which may be based principally on continuous service with the Company for the balance of the term of a Participant’s directorship).

3.4. Consent of Participant. The amendment, suspension or termination of the Plan or a portion thereof shall not, without the Participant’s consent, materially adversely affect any rights under any issuance of Restricted Stock theretofore granted to the Participant under the Plan.

3.5. Waiver of Restrictions. Notwithstanding any other provisions of the Plan, the Board of Directors, in its sole discretion, may waive any terms, conditions or restrictions or repurchase or forfeiture periods on any Restricted Stock under such circumstances and subject to such terms and conditions as the Board of Directors may deem appropriate.

3.6. Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

3.7. Choice of Law. The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Minnesota without giving effect to principles of conflicts of law.

Adopted by the Board of Directors of the Company on January 12, 2006.

EX-10.2

EXHIBIT 10.2

HEI, INC.

NONEMPLOYEE DIRECTOR STOCK PURCHASE AGREEMENT

Participant:
Effective Date:		, 20
Purchase Price Per Share:	$
Number of Shares of Restricted Stock		Shares
Restricted Stock Reference No.:

     THIS RESTRICTED STOCK AGREEMENT is made as of the Effective Date (set forth above) by and between HEI, Inc., a Minnesota corporation (the “Company”), and the individual named above (the “Participant”) pursuant to the terms of the HEI, Inc. 2006 Nonemployee Director Stock Purchase Plan, as such Plan may be amended from time to time (the “Plan”).

     The Company desires, by issuing to the Participant shares of the Company’s common stock, par value $0.05 per share (the “Common Stock”), as hereinafter provided, to provide the Participant with incentive to fulfill the balance of his or her term as a director of the Company.

     NOW, THEREFORE, in consideration of the provision of services by the Participant to the Company, the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Issuance of Shares of Restricted Stock. The Company hereby issues to the Participant the number of shares of Common Stock set forth above (the “Restricted Stock”) on the terms and conditions set forth in this Agreement.

2. Vesting; Term. All of the shares of Restricted Stock issued to the Participant pursuant to Section 1 shall vest, and any restrictions on said shares shall terminate, as to the Restricted Stock on the earlier of: a) September 1, 2006, or b) on a Change of Control, as such term is defined in the Plan, or (c) on the date of Participant’s death or disability (the “Vesting Date”) provided the Participant is and has been continuously serving as a member of the Board of Directors of the Company from the Effective Date up to and including the Vesting Date. In the event that Participant ceases to continuously serve as a member of the Board of Directors of the Company prior to the Vesting Date for any reason other than death or disability, the shares of Restricted Stock shall vest, and any restrictions on said shares shall terminate on a pro rata basis (based on the percentage of actual service to the amount of service that would have occurred through September 1, 2006).

3. Restrictions on Transfer; Forfeiture.

a. The shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant until such shares of Restricted Stock are vested as hereinafter provided. Any attempt to dispose of shares of Restricted Stock in a manner contrary to these restrictions shall be void and of no force or effect.

b. If the Participant’s service as a member of the Board of Directors of the Company ceases for any reason other than death or disability before the shares of Restricted Stock are vested, all shares of Restricted Stock that are unvested shall immediately and automatically terminate and be forfeited to the Company and the Participant shall have no rights with respect to such Restricted Stock.

4. Stock Certificates.

a. The Company will issue a stock certificate in the name of the Participant representing the shares of Restricted Stock issued under this Plan. The Participant agrees that the Company will hold such stock certificate in custody until the shares of Restricted Stock vest or terminate and are forfeited, and that the certificate may bear an appropriate legend referring to the terms, conditions and restrictions applicable to the issuance of shares of Restricted Stock substantially in the following form:

THE TRANSFERABILITY OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE HEI, INC. 2005 NONEMPLOYEE DIRECTOR STOCK PURCHASE PLAN AND A RESTRICTED STOCK AGREEMENT ENTERED INTO UNDER SUCH PLAN BETWEEN THE REGISTERED OWNER OF THIS STOCK CERTIFICATE AND HEI, INC. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE OFFICES OF HEI, INC.

b. As a condition of this issuance, the Participant agrees that, simultaneously with the execution of this Agreement, the Participant will execute and deliver to the Company a stock power in the form attached hereto as Exhibit A, endorsed in blank, relating to each certificate evidencing the shares of Restricted Stock.

5. Consideration for Restricted Shares. The Participant is not required to pay any additional consideration to the Company or its Affiliates upon the vesting of the shares of Restricted Stock other than the rendering of services as a director to the Company.

6. Dividends. The Participant shall have the right to receive dividends and other distributions with respect to the shares of Restricted Stock; provided, however, that all dividends in stock, all stock rights and all stock issued upon split-ups or reclassifications shall be subject to the same restrictions as the shares Restricted Stock upon which such stock dividends, rights or additional shares are issued, and shall be held in custody by the Company until the restrictions thereon shall have lapsed.

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7. Income Tax Withholding; Tax and Financial Advice. The Company shall have the right to require the payment (through withholding from the Participant’s salary or otherwise) of any federal, state or local taxes required by law to be withheld with respect to the issuance of the shares of Restricted Stock or the vesting of such shares of Restricted Stock. The Participant acknowledges and represents to the Company that the Participant has obtained advice with respect to the tax and other financial consequences of the issuance of the shares of Restricted Stock.

8. Plan Governs. The provisions of this Restricted Stock Agreement are subject to the Plan, and if any provision of this Restricted Stock Agreement conflicts with the Plan, the provisions of the Plan shall govern. All capitalized terms used but not defined in this Restricted Stock Agreement shall have the same meanings ascribed to them in the Plan. The Participant acknowledges and represents to the Company that the Participant has received a copy of the Plan, the Participant has reviewed the Plan and this Agreement and/or had them reviewed by the Participant’s advisors to the Participant’s satisfaction, and that the Participant understands the Plan and this Agreement.

9. Interpretation; Choice of Law. The interpretation and construction of any provision of this Restricted Stock Agreement shall be made by the Board of Directors of the Company and shall be final, conclusive and binding on the Participant and all other persons. This Restricted Stock Agreement and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Minnesota without giving effect to principles of conflicts of law.

[signature page to follow]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its corporate name by its duly authorized officers and the Participant has executed this Agreement, as of the Effective Date set forth above.

HEI, INC.
By:
	Signature
	Name Typed or Printed
	Its:
	Title Typed or Printed
PARTICIPANT:
	Signature
	Name Typed or Printed
	the Participant’s Address:
	the Participant’s Social Security or Tax Identification Number:

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EXHIBIT A

STOCK POWER
(Assignment Separate from Certificate)

For Value Received,                                                             hereby sells, assigns and transfers unto                                                                                                      (                    ) shares of the common stock of HEI, Inc. (the “Company”) standing in his/her/its name on the books of the Company represented by Stock Certificate No.                                          herewith and does hereby irrevocably constitute and appoint                                                              attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

Dated:                                        

	Signature
	Name Typed or Printed
IN PRESENCE OF

EX-10.3

EXHIBIT 10.3

HEI, INC.

RESTRICTED STOCK AGREEMENT

Participant:
Grant Date:	January 13, 2006
Purchase Price Per Share:	$
Number of Shares of Restricted Stock		Shares
Restricted Stock Reference No.:	RS-

     THIS RESTRICTED STOCK AGREEMENT is made as of the Grant Date (set forth above) by and between HEI, Inc., a Minnesota corporation (the “Company”), and the individual named above (the “Participant”) pursuant to the terms of the HEI, Inc. 1998 Stock Option Plan, as such Plan may be amended from time to time (the “Plan”).

     The Company desires, by issuing to the Participant shares of the Company’s common stock, par value $0.05 per share (the “Common Stock”), as hereinafter provided, to provide the Participant with incentive to achieve corporate objectives of the Company.

     NOW, THEREFORE, in consideration of the provision of services by the Participant to the Company, the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.  Issuance of Shares of Restricted Stock. The Company hereby grants to the Participant the number of shares of Common Stock set forth above (the “Restricted Stock”) on the terms and conditions set forth in this Agreement.

2.  Vesting; Term. Except as otherwise provided in this Agreement, the Restricted Stock shall vest in accordance with the following schedule:

On or after each of the following dates	Number of Shares Vested
January 13, 2007	___(25%)
January 13, 2008	___(50%)
January 13, 2009	___(75%)
January 13, 2010	___(100%)

3. Restrictions on Transfer; Forfeiture.

a. The shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant until such shares of Restricted Stock are vested as hereinafter provided. Any attempt to dispose of shares of Restricted Stock in a manner contrary to these restrictions shall be void and of no force or effect.

b. If the Participant’s active employment or other service with the Company or with an Affiliate is terminated for any reason before the shares of Restricted Stock are vested, including because of the disability of the Participant but not upon the death of the Participant, all shares of Restricted Stock shall immediately and automatically terminate and be forfeited to the Company, and neither the Participant nor any of the Participant’s heirs, personal representatives, successors or assigns shall have any rights with respect to such Restricted Stock.

c. The Participant’s death shall not affect this grant of shares of Restricted Stock, which shall continue under the same terms and conditions for the benefit of the Participant’s heirs, personal representatives and/or legatees according to the Participant’s will or the laws of descent and distribution.

4. Stock Certificates.

a. The Company will issue a stock certificate in the name of the Participant representing the shares of Restricted Stock issued under this Plan. The Participant agrees that the Company will hold such stock certificate in custody until the shares of Restricted Stock vest or terminate and are forfeited, and that the certificate may bear an appropriate legend referring to the terms, conditions and restrictions applicable to the issuance of shares of Restricted Stock substantially in the following form:

THE TRANSFERABILITY OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE HEI, INC. 2005 NONEMPLOYEE DIRECTOR STOCK PURCHASE PLAN AND A RESTRICTED STOCK AGREEMENT ENTERED INTO UNDER SUCH PLAN BETWEEN THE REGISTERED OWNER OF THIS STOCK CERTIFICATE AND HEI, INC. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE OFFICES OF HEI, INC.

b. As a condition of this issuance, the Participant agrees that, simultaneously with the execution of this Agreement, the Participant will execute and deliver to the Company a stock power in the form attached hereto as Exhibit A, endorsed in blank, relating to each certificate evidencing the shares of Restricted Stock.

5.      Consideration for Restricted Shares. The Participant is not required to pay any additional consideration to the Company or its Affiliates upon the vesting of the shares of Restricted Stock other than the rendering of services as a employee or director to the Company.

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6.      No Right to Employment. The issuance of the Shares or this Agreement shall not be construed as giving Participant the right to be retained in the employ, or as giving a director of the Company or an Affiliate the right to continue as a director, of the Company or an Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, or terminate the term of a director of the Company or an Affiliate, free from any liability or any claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. The Award granted hereunder shall not form any part of the wages or salary of Participant for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Participant shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the Committee (as defined in the Plan) and shall be fully bound thereby.

7.      Dividends. The Participant shall have the right to receive dividends and other distributions with respect to the shares of Restricted Stock; provided, however, that all dividends in stock, all stock rights and all stock issued upon split-ups or reclassifications shall be subject to the same restrictions as the shares Restricted Stock upon which such stock dividends, rights or additional shares are issued, and shall be held in custody by the Company until the restrictions thereon shall have lapsed.

8.      Income Tax Withholding; Tax and Financial Advice. The Company shall have the right to require the payment (through withholding from the Participant’s salary or otherwise) of any federal, state or local taxes required by law to be withheld with respect to the issuance of the shares of Restricted Stock or the vesting of such shares of Restricted Stock. The Participant acknowledges and represents to the Company that the Participant has obtained advice with respect to the tax and other financial consequences of the issuance of the shares of Restricted Stock.

9.      Plan Governs. The provisions of this Restricted Stock Agreement are subject to the Plan, and if any provision of this Restricted Stock Agreement conflicts with the Plan, the provisions of the Plan shall govern. All capitalized terms used but not defined in this Restricted Stock Agreement shall have the same meanings ascribed to them in the Plan. The Participant acknowledges and represents to the Company that the Participant has received a copy of the Plan, the Participant has reviewed the Plan and this Agreement and/or had them reviewed by the Participant’s advisors to the Participant’s satisfaction, and that the Participant understands the Plan and this Agreement.

10.    Interpretation; Choice of Law. The interpretation and construction of any provision of this Restricted Stock Agreement shall be made by the Board of Directors of the Company and

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shall be final, conclusive and binding on the Participant and all other persons. This Restricted Stock Agreement and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Minnesota without giving effect to principles of conflicts of law.

11.      Severability. If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.

12.      No Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Participant or any other person.

13.      Headings. Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.

[signature page to follow]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its corporate name by its duly authorized officers and the Participant has executed this Agreement, as of the Effective Date set forth above.

HEI, INC.
By:
	Signature
	Name Typed or Printed
	Its:
	Title Typed or Printed
PARTICIPANT:
Signature
Name Typed or Printed
the Participant’s Address:
the Participant’s Social Security or Tax Identification Number:

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EXHIBIT A

STOCK POWER
(Assignment Separate from Certificate)

For Value Received,                                                              hereby sells, assigns and transfers unto                                                                                                      (                    ) shares of the common stock of HEI, Inc. (the “Company”) standing in his/her/its name on the books of the Company represented by Stock Certificate No.                      or as reflected in any book entry records of the Company herewith and does hereby irrevocably constitute and appoint                                                              attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

Dated:                                                            

	Signature
	Name Typed or Printed
IN PRESENCE OF