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)      June 22, 2006

HEI, Inc.

(Exact name of registrant as specified in its 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)	(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))

TABLE OF CONTENTS

Waiver and Amendment with Commerce Bank

Waiver and Amendment with Commerce Financial Group, Inc.

Waiver with Commerce Leasing Corp

Section 1 – Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

     On June 21, 2006, HEI, Inc. (the “Company”) entered into a Waiver and Amendment dated effective May 27, 2006 (the “Commerce Bank Amendment”) to waive and amend certain provisions of its Term Loan Agreement dated October 14, 2003, as amended by the Waiver and Amendment dated as of November 30, 2004, the Waiver and Amendment dated as of December 29, 2004 and the Promissory Note dated October 14, 2003, with Commerce Bank, a Minnesota banking corporation (the “Commerce Bank Loan Agreement”). The Commerce Bank Amendment, among other things: (i) waived the Company’s compliance with the Debt Service Coverage Ratio covenant in the Commerce Bank Loan Agreement for the period up to the Company’s reporting period ending August 31, 2006 and (ii) amended the Commerce Bank Loan Agreement to re-establish the $100,000 Payment Reserve Account. A copy of the Commerce Bank Amendment is filed herewith as Exhibit 10.1 and is incorporated herein by reference.

     Also on June 21, 2006, 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 by the Waiver and Amendment dated as of November 30, 2004, the Waiver and Amendment dated as of December 29, 2004 and the Promissory Note dated October 28, 2003, with Commerce Financial Group, Inc., a Minnesota corporation (the “Commerce Financial Group Loan Agreement”). The Commerce Financial Group Amendment, among other things: (i) waived the Company’s compliance with the Debt Service Coverage Ratio covenant in the Commerce Financial Group Loan Agreement for the period up to the Company’s reporting period ending August 31, 2006 and (ii) amended the Commerce Financial Group Loan Agreement to re-establish the $25,000 payment reserve account. A copy of the Commerce Financial Group Amendment is filed herewith as Exhibit 10.2 and is incorporated herein by reference.

     Also on June 21, 2006, the Company entered into a Waiver (the “Waiver”) to waive and amend certain provisions of its Master Equipment Lease No. 0512231 (the “Master Lease”) dated as of December 23, 2005 with Commerce Leasing Corporation (the “Lessor”), a division of Commerce Financial Group, Inc.; those lease commitments by the Lessor for the benefit of the Company dated as of December 5, 2005, December 8, 2005, February 23, 2006 and February 24, 2006 (collectively, the “Commitments”); and those supplements (the “Supplements”) to the Master Lease in favor of the Lessor (the Master Lease, Commitments and Supplements are collectively the “Lease”). The Waiver, among other things: (i) waived the Company’s compliance with the Debt Service Coverage Ratio covenant in the Lease for the period up to the Company’s reporting period ending August 31, 2006 and (ii) amended the Lease to increase by 2% the implied economic interest rate for each Supplement under the Master Lease and to adjust the monthly rental payments for the Supplements accordingly until the Company is in compliance with the covenants in the Lease. A copy of the Waiver is filed herewith as Exhibit 10.3 and is incorporated herein by reference.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are being furnished with this Current Report on Form 8-K and are hereby incorporated herein by reference:

Exhibit No.	Description of Exhibit
10.1	Waiver and Amendment dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Bank, a Minnesota banking corporation.
10.2	Waiver and Amendment dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Financial Group, Inc., a Minnesota corporation.
10.3	Waiver dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Leasing Corporation, a division of Commerce Financial Group, Inc., a Minnesota corporation.

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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: June 22, 2006.
	By	/s/ Mack V. Traynor, III
		Mack V. Traynor, III
		Its: President and Chief Executive Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Waiver and Amendment dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Bank, a Minnesota banking corporation.
10.2	Waiver and Amendment dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Financial Group, Inc., a Minnesota corporation.
10.3	Waiver dated as of May 27, 2006 by and between HEI, Inc., a Minnesota corporation, and Commerce Leasing Corporation, a division of Commerce Financial Group, Inc., a Minnesota corporation.

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EX-10.1

Exhibit 10.1

WAIVER AND AMENDMENT

Dated as of May 27, 2006

HEI, Inc.
1495 Steiger Lake Lane
Victoria, MN 55386

Attn: Mack V. Traynor, CEO

Dear Mr. Traynor:

          Reference is made to that certain Term Loan Agreement (the “Loan Agreement”), dated October 28, 2003, by and between HEI Inc., a Minnesota corporation (the “Borrower”) and Commerce Bank, a Minnesota banking corporation (the “Lender”), as amended by the certain Waiver and Amendment dated as of November 30, 2003, between Borrower and Lender; and that certain Promissory Note (the “Promissory Note”), dated October 28, 2003, made by the Borrower in favor of the Lender.

          The Borrower has advised the Lender that preliminary financial results for the Borrower’s quarterly reporting period ended May 27, 2006, indicate that as of such date the Borrower failed to comply with the Debt Service Coverage Ratio covenant set forth in Section 6.10 of the Loan Agreement, and, consequently Borrower would be deemed to have been in default under Section 6.10 of the Loan Agreement as of May 27, 2006. The Borrower has further advised the Lender that the Borrower is likely to be in default under Section 6.10 of the Loan Agreement until completion of the Borrower’s quarterly reporting period ending November 25, 2006. The Borrower has accordingly requested certain waivers relating to Sections 6.10 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 and, the Borrower and the Lender hereby agree as follows:

          1.      The Lender hereby waives the Borrower’s default existing as of the date hereof under Section 6.10 of the Loan Agreement.

          2.      The Lender hereby waives the Borrower’s compliance with the Debt Service Coverage Ratio covenant under Section 6.10 of the Loan Agreement, to and including Borrower’s reporting period ending August 31, 2006. Borrower will be required to comply with the Debt Service Coverage Ratio under Section 6.10 of the Loan Agreement as of the reporting period ending November 25, 2006.

HEI, Inc.
Waiver and Amendment
May 27, 2006
Page 2 of 2

          3.      As a condition to the effectiveness of the waivers by the Lender contained herein, the Borrower shall, on or before June 30, 2006, re-establish the $100,000 Payment Reserve Account with Lender pursuant to the provisions of Section 6.9 of the Loan Agreement, except that the release provisions set forth in the second paragraph of Section 6.9 of the Loan Agreement are hereby amended and restated as follows:

“Notwithstanding the foregoing, provided that there is not then an Event of Default (as defined in the Mortgage) which has occurred and is continuing under the Loan, the amount held by Lender in the Payment Reserve Account will be released by the Lender to the Borrower upon the earlier of (i) Borrower’s successful compliance with the Debt Service Coverage Ratio covenant under Section 6.10 of the Loan Agreement for two consecutive quarterly reporting periods beginning with the quarterly reporting period ending November 25, 2006, or (ii) the payoff date of the Loan.”

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

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

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

Sincerely,
COMMERCE BANK
/s/ James E. Senske
By:	James E. Senske
Its:	President

Acknowledged as of the date first written above.

HEI, INC.
/s/ Mack V. Traynor, III
By:	Mack V. Traynor, III, June 21, 2006
Its:	President & CEO

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EX-10.2

Exhibit 10.2

Commerce Leasing Corporation
Commerce Mortgage Company

WAIVER AND AMENDMENT

Dated as of May 27, 2006

HEI, Inc.
1495 Steiger Lake Lane
Victoria, MN 55386

Attn: Mack V. Traynor, CEO

Dear Mr. Traynor:

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

          The Borrower has advised the Lender that preliminary financial results for the Borrower’s quarterly reporting period ended May 27, 2006, indicate that as of such date the Borrower failed to comply with the Debt Service Coverage Ratio covenant set forth in Section 6.10 of the Loan Agreement, and, consequently Borrower would be deemed to have been in default under Section 6.10 of the Loan Agreement as of May 27, 2006. The Borrower has further advised the Lender that the Borrower is likely to be in default under Section 6.10 of the Loan Agreement until completion of the Borrower’s quarterly reporting period ending November 25, 2006. The Borrower has accordingly requested certain waivers relating to Sections 6.10 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 and, the Borrower and the Lender hereby agree as follows:

          1.      The Lender hereby waives the Borrower’s default existing as of the date hereof under Section 6.10 of the Loan Agreement.

          2.      The Lender hereby waives the Borrower’s compliance with the Debt Service Coverage Ratio covenant under Section 6.10 of the Loan Agreement, to and including Borrower’s reporting period ending August 31, 2006. Borrower will be required to comply with the Debt Service Coverage Ratio under Section 6.10 of the Loan Agreement as of the reporting period ending November 25, 2006.

HEI, Inc.
Waiver and Amendment
May 27, 2006
Page 2 of 2

     3. As a condition to the effectiveness of the waivers by the Lender contained herein, the Borrower shall, on or before June 30, 2006, establish a payment reserve account in the amount of $25,000 with Lender pursuant to the provisions of Section 6.9 of the Loan Agreement, except that the release provisions set forth in the second paragraph of Section 6.9 of the Loan Agreement are hereby amended and restated as follows:

“Notwithstanding the foregoing, provided that there is not then an Event of Default (as defined in the Mortgage) which has occurred and is continuing under the Loan, the amount held by Lender in the Payment Reserve Account will be released by the Lender to the Borrower upon the earlier of (i) Borrower’s successful compliance with the Debt Service Coverage Ratio covenant under Section 6.10 of the Loan Agreement for two consecutive quarterly reporting periods beginning with the quarterly reporting period ending November 25, 2006, or (ii) the payoff date of the Loan.”

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

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

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

Sincerely,

COMMERCE FINANCIAL GROUP, INC.

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

Its:    President

Acknowledged as of the date first written above.

HEI, INC.

/s/ Mack V. Traynor, III, June 21, 2006 By:    Mack V. Traynor, III

Its:    President & CEO

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EX-10.3

Exhibit 10.3

Commerce Leasing Corporation
Commerce Mortgage Company

WAIVER

Dated as of May 27, 2006

HEI, Inc.
1495 Steiger Lake Lane
Victoria, MN 55386

Attn: Mack V. Traynor, CEO

Dear Mr. Traynor:

     Reference is made to that certain Master Equipment Lease No. 0512231 (the “Master Lease”), dated as of December 23, 2005, by and between HEI Inc., a Minnesota corporation (the “Lessee”) and Commerce Leasing Corporation, a division of Commerce Financial Group, Inc., a Minnesota corporation (the “Lessor”); those certain lease commitments (the “Lease Commitments”) by the Lessor for the benefit of the Lessee dated as of December 5, 2005, December 8, 2005, February 23, 2006 and February 24, 2006; and those certain supplements (the “Supplements”) to the Master Lease made by the Lessee in favor of the Lessor (the Master Lease, together with the Lease Commitments and the Supplements, is collectively, the “Lease”).

     The Lessee has advised the Lessor that preliminary financial results for the Lessee’s quarterly reporting period ended May 27, 2006, indicate that as of such date the Lessee failed to comply with the Minimum Total Tangible Stockholders’ Equity covenant set forth in the Lease, and, consequently the Lessee would be deemed to have been in default under the Lease as of May 27, 2006. The Lessee has further advised the Lessor that the Lessee is likely to be in default under the Debt Service Coverage Ratio covenant set forth in the Lease until completion of the Lessee’s quarterly reporting period ending November 25, 2006. The Lessee has accordingly requested certain waivers relating to the covenants set forth in the Lease.

     In consideration of the promises herein set forth, and subject to the provisions of Section 13 and 27 of the Master Lease, the Lessee and the Lessor hereby agree as follows:

     1. The Lessor hereby waives the Lessee’s default existing as of the date hereof under the Minimum Total Tangible Stockholders’ Equity covenant of the Lease.

     2. The Lessor hereby waives the Lessee’s compliance with the Debt Service Coverage Ratio covenant under the Lease, to and including the Lessee’s reporting period ending August 31, 2006. Lessee will be required to comply with the Debt Service Coverage Ratio covenant under the Lease as of the reporting period ending November 25, 2006.

HEI, Inc.
Waiver
May 27, 2006
Page 2 of 2

     3. As a condition to the effectiveness of the waivers by the Lessor contained herein, the implied economic interest rate for each Supplement under the Master Lease shall be increased by 2.0% and the monthly rental payments for such Supplements shall be adjusted accordingly until such time that the Lessee is in full compliance with the covenants set forth in the Lease.

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

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

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

Sincerely,

COMMERCE FINANCIAL GROUP, INC.

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

Its:    President

Acknowledged as of the date first written above.

HEI, INC.

/s/ Mack V. Traynor, III By:    Mack V. Traynor, III

Its:    President & CEO

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