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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
(Amendment No.11)
-----------------------------------
HEI, Inc.
(Name of Subject Company)
-----------------------------------
FANT INDUSTRIES INC.
(Bidder)
COMMON STOCK, PAR VALUE $0.05 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
-----------------------------------
404160103
(CUSIP Number of Class of Securities)
-----------------------------------
ANTHONY J. FANT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FANT INDUSTRIES INC.
2154 HIGHLAND AVENUE
BIRMINGHAM, AL 35205
TELEPHONE: (205) 933-1030
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on Behalf of Bidder)
Copies To:
MICHAEL A. KING, ESQ.
BROWN & WOOD llp
ONE WORLD TRADE CENTER
NEW YORK, NY 10048-0557
TELEPHONE: (212) 839-5546
-----------------------------------
================================================================================
<PAGE>
Fant Industries Inc. hereby amends and supplements its Tender Offer
Statement on Schedule 14D-1 (the "Statement") filed with the Securities and
Exchange Commission on March 10, 1998 relating to its offer to purchase 11.5% of
the outstanding shares of common stock, par value $0.05 per share, of HEI, Inc.,
a Minnesota corporation (together with the associated common stock purchase
rights), as set forth in this Amendment No.11.
On April 24, 1998, Fant Industries Inc. filed a definitive proxy statement
(the "Definitive Proxy Statement") with the Securities and Exchange Commission
in connection with the solicitation of proxies from the shareholders of HEI,
Inc. with respect to a special meeting of shareholders. A copy of the
Definitive Proxy Statement is filed herewith as Exhibit (a) 18 and is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
The Definitive Proxy Statement is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The Definitive Proxy Statement is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Definitive Proxy Statement is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
On April 20, 1998, HEI, Inc. (the "Company") filed a complaint against
Mr. Fant and Fant Industries Inc. (the "Fant Group") in the federal
district court of the District of Minnesota. The complaint alleges
violations of the Exchange Act.
The Company alleges that the Fant Group has violated Sections 14(a),
14(d), and 14(e) and 13(d) of the Exchange Act in the Statement and
the amendments thereto, their Schedule 13D filed on February 17, 1998
and the amendments thereto, and certain communications with
shareholders of the Company. The Company alleges that the Fant Group
has omitted and misrepresented material information to the Company's
shareholders relating to the Company, the Fant Group, its tender
offer, and its plans for the Company. The Company further alleges
that the Fant Group has solicited proxies from shareholders of the
Company without complying with the federal proxy rules. The Company
seeks an injunctive order for the Fant Group to amend its Schedules
13D and 14D-1 and file corrective Schedule 14A proxy materials. The
Company further seeks to enjoin the Fant Group from communicating with
shareholders, purchasing tendered shares or soliciting any proxies for
45 days after filing corrective disclosures, or making any false or
misleading statements or proxy solicitations. The Fant Group believes
that all allegations in the complaint are without merit.
2
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a) 18 Definitive Proxy Statement.
(a) 19 Press Release, dated April 24, 1998.
3
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: April 24, 1998
FANT INDUSTRIES INC.
By:/s/ Anthony J. Fant
-------------------------------
Anthony J. Fant
President and Chief Executive Officer
Fant Industries Inc.
/s/ Anthony J. Fant
-------------------------------
Anthony J. Fant
4
<PAGE>
EXHIBIT (a)(18)
FANT INDUSTRIES INC.
2154 HIGHLAND AVENUE
BIRMINGHAM, ALABAMA 35205
April 23, 1998
Fellow Shareholders of HEI, Inc.:
We would like to thank you first for your overwhelming support for our
tender offer. We are extremely encouraged by the decision of so many of you to
tender your shares to get the cash premium that our offer of $8 per share
represents and to participate in our revitalization of HEI. You have sent a
clear message to HEI's incumbent Board of Directors that this is YOUR COMPANY
and that you want the Board to remove the obstacles to completing the tender
offer.
We have tried, through much effort, to negotiate with HEI's Board to
effectuate a change of control and to enlist the Board's cooperation in our
efforts to complete the tender offer. To date, the Board has failed to
cooperate, and we are left with little choice but to require a special meeting
of shareholders and to commence a proxy solicitation. We will demand the
special meeting in the near future according to applicable procedures. As an
18% shareholder, we have the right under Minnesota law and the Company's
Bylaws to demand the special meeting.
We are pleased to enclose for your consideration our proxy statement
providing you with detailed information about director nominees and our vision
for HEI's future. WE URGE YOU TO VOTE FOR OUR BOARD NOMINEES AND THE RELATED
PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD. Your
continued support is necessary as we work towards completing the tender offer
and maximizing shareholder value.
We are excited about the growth potential of HEI under new leadership, and
we are committed to delivering to you:
. immediate value by consummating the tender offer
. long term value by setting HEI on the correct strategic path for
growth
ONCE AGAIN, TO RECEIVE THE BENEFITS OF OUR OFFER AND NEW LEADERSHIP, IT IS
IMPORTANT THAT YOU VOTE THE GREEN PROXY CARD IN FAVOR OF OUR NOMINEES AND THE
RELATED PROPOSALS.
If you have any questions concerning this proxy statement or the tender
offer or need assistance in voting your shares, please contact Beacon Hill
Partners, Inc.: Call toll-free (800) 253-3814 or call collect (212) 843-8500.
YOUR VOTE IS ESSENTIAL!
Thank you again for your overwhelming and continued support of our efforts
to revitalize HEI and maximize value for all shareholders.
Anthony J. Fant
Fant Industries Inc.
<PAGE>
PROXY STATEMENT
OF
FANT INDUSTRIES INC.
----------------
SPECIAL MEETING OF SHAREHOLDERS
OF
HEI, INC.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY CARD
This proxy statement (the "Proxy Statement") and the enclosed GREEN proxy
card are being furnished to holders of the common stock, par value $0.05 per
share (the "Shares"), of HEI, Inc., a Minnesota corporation (the "Company" or
"HEI"), by Fant Industries Inc., a Delaware corporation ("Fant Industries")
formed by Mr. Anthony J. Fant (together with Fant Industries, the "Fant
Group"), in connection with the solicitation of proxies from the Company's
shareholders to be used at a special meeting of shareholders of the Company
including any adjournments or postponements, continuations or rescheduling
thereof (the "Special Meeting"), to take the following actions: (i) remove all
members of the Board of Directors of the Company (the "Board") (and any person
or persons elected or designated prior to the Special Meeting to fill any
vacancy or newly created directorship) other than Eugene W. Courtney, and
elect the directors nominated by the Fant Group (the "Fant Nominees") who are
committed to completing the Offer (as defined below) and leading changes
designed to create new value for all shareholders (the "Director Replacement
Proposals"); and (ii) adopt an amendment to the bylaws of the Company (the
"Bylaws") to opt out of Section 302A.671 of the Minnesota Business Corporation
Act (the "Control Share Act") so that Shares acquired by Fant Industries in
the Offer will have voting rights equal to those of all other outstanding
Shares (the "Equal Voting Rights Proposal" and, together with the Director
Replacement Proposals, the "Proposals"). The principal executive offices of
the Company are located at 1495 Steiger Lake Lane, Victoria, Minnesota 55386.
This Proxy Statement and the GREEN proxy card are first being furnished to the
Company's shareholders on or about April 23, 1998.
YOUR VOTE IS IMPORTANT! A VOTE FOR OUR NOMINEES AND THE RELATED PROPOSALS IS
A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY
DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND
(2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR
GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE RELATED
PROPOSALS.
Although the Company has not yet called the Special Meeting or determined
the date it will be held, the Fant Group is entitled under the Company's
Bylaws and under the Minnesota Business Corporation Act to demand the Special
Meeting and is soliciting proxies for use at the Special Meeting whenever it
may be held. Alternatively, the Board can call the Special Meeting, which
could be held after only 14 days. If the Board fails to call the Special
Meeting promptly, the Fant Group will exercise its right to demand the Special
Meeting. The record date for determining shareholders entitled to notice of
and to vote at the Special Meeting (the "Record Date") has not yet been set by
the Company. Shareholders of record at the close of business on the Record
Date will be entitled to one vote at the Special Meeting for each Share held
by them on the Record Date. The Fant Group beneficially owns 734,900 Shares,
which represent approximately 18.0% of the Shares outstanding (based on
information publicly disclosed by the Company), and intends to vote such
Shares FOR the Proposals.
THIS SOLICITATION IS BEING MADE BY THE FANT GROUP AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
On March 10, 1998, Fant Industries commenced a cash tender offer at a price
of $8.00 per Share (including the associated Right), net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated the same date (the "Offer to
Purchase") and the related letter
<PAGE>
of transmittal (the "Letter of Transmittal") (which, as amended from time to
time, together constitute the "Offer") for (i) 467,886 Shares or such greater
number of Shares which constitute 11.5% of the total number of Shares
outstanding as of the date Shares are accepted for payment in the Offer (such
number of Shares being the "Maximum Number"), and (ii) unless and until
validly redeemed by the Board, the common stock purchase rights (the "Rights")
associated therewith and issued pursuant to the Rights Agreement, dated as of
May 27, 1988, between the Company and Norwest Bank Minnesota, N.A., as Rights
Agent (the "Rights Agreement"). Upon the terms and subject to the conditions
of the Offer, if more than the Maximum Number of Shares shall be validly
tendered and not withdrawn prior to the Expiration Date, Fant Industries will,
upon the terms and subject to the conditions of the Offer, purchase the
Maximum Number of Shares on a pro rata basis.
The purpose of the Offer is to increase the equity interest of the Fant
Group in the Company and support its efforts to gain control over the
management, operations and assets of the Company. The Fant Group wants to
provide the strategic leadership needed to make HEI a dynamic, growing
company. The Fant Group has invested approximately $4.3 million to acquire 18%
of the Company's outstanding common stock and is by far the largest
shareholder. As such, its interest in maximizing shareholder value is directly
aligned with yours. The Fant Group has absolutely no intention of liquidating
the Company's assets, laying off employees, moving operations out of Victoria,
Minnesota, or otherwise disrupting operations. Rather, the Fant Group wants to
work with, and not against, management to enhance the Company's long-term
growth prospects and increase shareholder value through carefully selected
acquisitions, long-term investments for expansion, and diversification of its
customer base.
The Offer is currently scheduled to expire at 12:00 Midnight, New York City
time, on Thursday, April 30, 1998, unless further extended to a later date and
time (the "Expiration Date"). Shares which are tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date.
THIS PROXY STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN
OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE OFFER
TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, WHICH YOU SHOULD HAVE
ALREADY RECEIVED. IF YOU HAVE NOT ALREADY RECEIVED THE OFFER TO PURCHASE AND
THE RELATED LETTER OF TRANSMITTAL, PLEASE CALL BEACON HILL PARTNERS, INC. AT
(800) 253-3814.
2
<PAGE>
PROPOSALS
The Fant Group is soliciting proxies in support of the following two sets of
proposals to be considered and voted upon at the Special Meeting:
DIRECTOR REPLACEMENT PROPOSALS
1. To remove all of the current members of the Company's Board of Directors
and any person or persons elected or designated by the Board to fill any
vacancy or newly created directorship, other than Eugene W. Courtney; and
2. To elect to the Board such number of the following Fant Nominees that
when added to Mr. Courtney equals the size of the Board: Anthony J. Fant,
Edwin W. Finch, III, David W. Ortlieb and Steve E. Tondera, Jr. The first
three of such individuals will be nominated for election to succeed the
current Directors (or any Director named to fill any vacancy created by the
death, retirement, resignation or removal of any of such four Directors) of
the Company, other than Mr. Courtney. The fourth of such individuals will be
nominated for election to fill the currently vacant directorship (or to
succeed any Director named to fill such vacancy). One or more additional
individuals will be nominated for election (a) in the event that the Company
purports to increase the number of Directorships pursuant to Section 3.09 of
the Bylaws, to each additional Directorship created, and/or (b) in the event
any of the four individuals named above or Mr. Courtney is unable for any
reason to serve as a Director.
Additional nominations made pursuant to the preceding clause are without
prejudice to the position of the Fant Group that any attempt to increase the
size of the Board constitutes an unlawful manipulation of the Company's
corporate machinery to disenfranchise the Company's shareholders. The Fant
Group plans to distribute to the shareholders of the Company supplemental
materials if the Board amends the Bylaws after the date of this Proxy
Statement to increase the number of Directors of the Company.
EQUAL VOTING RIGHTS PROPOSAL
1. To adopt the following resolution:
RESOLVED, that the Bylaws of the Company are hereby amended, by adding a
new section reading as follows:
"Control Share Act. The provisions of Section 302A.671 of the Minnesota
Business Corporation Act shall not apply to control share acquisitions
of shares of this corporation."
The adoption of BOTH sets of Proposals is necessary to ensure that
shareholders who wish to tender their Shares to Fant Industries pursuant to
the Offer will have the opportunity to do so. Abstentions and broker non-votes
will have the same effect as votes against the Proposals.
The Fant Group is not aware of any other proposals to be brought before the
Special Meeting. However, should other proposals be brought before the Special
Meeting, the persons named as proxies on the enclosed GREEN proxy card will
vote on such matters in their discretion.
A VOTE FOR THE FANT NOMINEES AND THE RELATED PROPOSALS IS A VOTE FOR CHANGE.
THE FANT NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO
DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG
TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE
URGE YOU TO JOIN US IN VOTING FOR THE FANT NOMINEES AND THE RELATED PROPOSALS.
3
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN, WE URGE YOU TO PROMPTLY
SIGN, DATE AND MAIL (OR FAX BOTH SIDES OF) THE ENCLOSED GREEN PROXY CARD TO
VOTE FOR THE PROPOSALS.
ELECTION OF THE FANT NOMINEES AND THE ADOPTION OF THE EQUAL VOTING RIGHTS
PROPOSAL WILL BE AN IMPORTANT STEP IN REACHING THE GOAL OF CONSUMMATING THE
OFFER AND MAXIMIZING SHAREHOLDER VALUE. HOWEVER, YOU MUST TENDER YOUR SHARES
PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE OFFER. YOUR VOTE FOR
THE PROPOSALS DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT TO THE
OFFER, AND YOUR FAILURE TO VOTE FOR THE PROPOSALS DOES NOT PREVENT YOU FROM
TENDERING YOUR SHARES PURSUANT TO THE OFFER.
IMPORTANT NOTE: If you hold your Shares in the name of one or more
brokerage firms, banks or nominees, only they can exercise voting rights
with respect to your Shares and only upon receipt of your specific
instructions. Accordingly, it is critical that you promptly sign, date and
mail the enclosed GREEN proxy card in the envelope provided or contact the
person responsible for your account and give instructions to sign, date and
mail the GREEN proxy card representing your Shares. Fant Industries urges
you to confirm in writing your instructions to the person responsible for
your account and to provide a copy of those instructions to Fant Industries
in care of Beacon Hill Partners, Inc., who is assisting in this
solicitation, at the address and telephone numbers set forth below and on
the back cover of this Proxy Statement, so that Fant Industries will be
aware of all instructions and can attempt to ensure that such instructions
are followed.
If you have any questions regarding your proxy, or need assistance in
voting your Shares, please call:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
20TH FLOOR
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 253-3814
FAX (212) 843-4384
4
<PAGE>
WHY YOU SHOULD VOTE FOR THE PROPOSALS
YOUR VOTE IS IMPORTANT! A VOTE FOR OUR DIRECTOR NOMINEES AND THE RELATED
PROPOSALS IS A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR
FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE
OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC
PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE
RELATED PROPOSALS.
The adoption of BOTH sets of Proposals is necessary to ensure that
shareholders who wish to tender their Shares to Fant Industries pursuant to
the Offer will have the opportunity to do so.
. Immediate Cash Premium
The value of the Offer at $8.00 per Share is a 25% PREMIUM over the
closing market price of $6 3/8 on the Nasdaq National Market on March
3, 1998, the last full trading day prior to Fant Industries' public
announcement of the Offer and a 78% PREMIUM over the closing price of
$4 1/2 per share on December 1, 1997, which was the day before Mr.
Fant began accumulating the Shares. The Offer is for 11.5% of the
Shares, is subject to certain conditions and will not be consummated
until those conditions are satisfied or waived. There are procedures
available to the Company's Board of Directors enabling it to
facilitate prompt consummation of the Offer. Further information
concerning the Offer is contained in the Offer to Purchase and related
Letter of Transmittal.
. Participation in the Company's Revitalization and Future Growth
The Fant Group has many years of experience in identifying,
screening and implementing strategic opportunities and enhancing
values. They are committed to revitalizing HEI and making it a
dynamic, growing company. Upon gaining control of the Board, they will
seek to position the Company as an industry leader, increase its
visibility, and enhance market liquidity, through initiatives that may
include strategic acquisitions and corporate financing activities,
although, to date, no specific transactions have been identified or
defined.
The Fant Group believes that the election of the Fant Nominees to the Board
is in the best interests of the Company's shareholders and is necessary for
enhancing the Company's long-term growth prospects and maximizing shareholder
value.
5
<PAGE>
DIRECTOR REPLACEMENT PROPOSALS
REMOVAL OF CURRENT DIRECTORS
The essential first step toward revitalizing HEI is to change control of the
Board.
LACK OF STRATEGIC DIRECTION. The Fant Group believes that the most serious,
far-reaching failure of the current Board is that it has not set a strategic
direction for employing the Company's assets productively. The Company's 1997
Annual Report indicates that as of November 29, 1997, $13.3 million, or about
70% of its total market capitalization at that time, was held in the form of
cash and short-term investments. While the Company's senior managers may be
satisfied maintaining substantial assets in what they have referred to as a
"rainy day fund," the Fant Group believes that this practice reflects a lack
of vision and an inability or unwillingness to identify opportunities for
participating in the industry's growth.
DANGEROUSLY NARROW CUSTOMER BASE. For each of the past five fiscal years, a
minimum of 64% of the Company's net sales have come from two or three
customers. For fiscal 1997, 82% of the Company's net sales were derived solely
from two customers. In the face of such a highly concentrated customer base,
the Company has failed to generate repeat business from its largest customers.
In fiscal 1996, the Company lost significant business from two of its largest
customers accounting for 30% and 27%, respectively, of fiscal 1995 net sales.
In fiscal 1997, the Company lost all business from its single largest
customer, which had accounted for 55% of fiscal 1997 net sales. In view of the
instability of the Company's customer base, the Fant Group questions the
wisdom of management's decision to invest in plant expansion in fiscal 1996.
VOLATILE OPERATING RESULTS. The Fant Group believes that the Company's
recent operating results have been volatile and disappointing. The Company's
net sales for the first six months of fiscal 1998 decreased 44% from the same
period in fiscal 1997. Yet the Company failed to reduce expenses
commensurately, even while acknowledging in the 1997 Annual Report that an
"unexpected decline in revenues, without corresponding and timely reductions
in expenses, could have a material adverse effect on the Company's business,
results of operations, or financial conditions." The result was a decline in
the Company's gross profit margin to 18% for the first six months of fiscal
1998 from 26% for the same period in fiscal 1997 and a decline in net income
to $100,000 from $1,601,000 over the same periods--a 94% drop in net income.
EXCESSIVE MANAGEMENT BONUSES. The Board sets and approves management salary
and bonuses, including stock compensation, through the Board's Compensation
Committee. DURING CALENDAR YEAR 1997, THE COMPANY'S STOCK PRICE FELL FROM A
HIGH OF $12 3/8 ON JANUARY 20, 1997 TO $4 3/4 ON DECEMBER 31, 1997, A DECREASE
IN SHAREHOLDER VALUE OF OVER $30 MILLION, OR 62%. Despite this disappointing
1997 year for the shareholders, the Board found it appropriate to reward the
top three managers with options to purchase 67,500 Shares (all other employees
as a group received 65,000). During the past three fiscal years, in the face
of volatile operating results, the Board has approved steadily increasing cash
bonuses to these top three managers, including cash bonuses of over $90,000 in
fiscal 1997. Over the past nine years, these top three managers have been
granted 442,500 options, while all other employees as a group have received
options to purchase 420,500 Shares over the same period.
IRRATIONAL SYSTEM OF DIRECTOR STOCK COMPENSATION. In the face of what the
Fant Group believes to be poor operating performance and a resulting decline
in the market value of the Shares, the current directors have continued to
reward themselves through the Company's Stock Option Plan for Non-Employee
Directors (the "Plan"). Under the Plan, 10,000 Shares are granted annually to
each non-employee director, regardless of the Company's operating results and
stock price performance. Options to purchase 160,000 Shares, representing
approximately 4% of all currently outstanding Shares, have been awarded to
Directors in the last four years. In total, options to purchase 400,000 Shares
(including the options previously granted for 160,000 Shares), representing
approximately 10% of all currently outstanding Shares, have been reserved
under the Plan for compensating directors. The Board amended the Plan on
November 19, 1997 to extend the term of options received under the Plan from 5
years to 10 years. This amendment was enacted after the Board received options
with an exercise price of $11.325 per Share and reflects the Board's lack of
faith that the stock price will exceed
6
<PAGE>
$11.325 within the next 5 years. The Fant Group believes that, to create
appropriate incentives, stock compensation should bear a close relationship to
actual operating results and shareholder value.
INADEQUATE PERSONAL FINANCIAL COMMITMENT. As set forth in the table below,
the current directors and executive officers as a group hold currently issued
Shares representing only about 4% of the Company's total Shares outstanding.
The Fant Group believes that to have their interests aligned with those of
shareholders, the Company's directors and executive officers must have a much
greater personal financial stake in its stock performance, through cash equity
investments that put their own money at risk.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING
DIRECTORS AND EXECUTIVE OFFICERS DIRECTLY OWNED SHARES
-------------------------------- -------------- -----------
<S> <C> <C>
Eugene W. Courtney............................ 82,740(1) 2.0%
William R. Franta............................. 5,211 *
Robert L. Brueck.............................. 2,000 *
Frederick M. Zimmerman........................ 900 *
Jerald H. Mortenson........................... 67,197 1.6%
Dale A. Nordquist............................. 14,564 *
All directors and executive officers as a
group........................................ 172,612 4.2%
</TABLE>
--------
* Less than one percent.
(1)Includes 46,974 shares held jointly with Mr. Courtney's spouse.
Additionally, when directors and executive officers have exercised their stock
options, they have consistently sold the Shares within a matter of days. The
Fant Group regards this practice as a further reflection of their
unwillingness to make a personal financial commitment through Share ownership
and their low expectations for the Company's future.
YOU ARE URGED TO VOTE FOR THE REMOVAL OF THE CURRENT BOARD ON THE ENCLOSED
GREEN PROXY CARD.
ELECTION OF FANT NOMINEES
The Fant Group wants to provide the strategic leadership needed to make HEI
a dynamic, growing company. The Fant Group has invested approximately $4.3
million to acquire 18% of the Company's outstanding common stock, and is by
far the largest shareholder. As such, its interest in maximizing shareholder
value is directly aligned with yours. The Fant Group has absolutely no
intention of liquidating the Company's assets, laying off employees, moving
operations out of Victoria, Minnesota, or otherwise disrupting the Company's
operations. Rather, the Fant Group wants to work with, and not against,
management to enhance the Company's long-term growth prospects and increase
shareholder value through carefully selected acquisitions, long-term
investments for expansion, and diversification of the Company's customer base.
In addition, Mr. Fant personally has asked Mr. Courtney to remain as
President of the Company following the election of the Fant Nominees. The Fant
Group recognizes Mr. Courtney's value to the Company and would like to see him
continue to oversee the day-to-day operations.
7
<PAGE>
The Fant Nominees obviously do not plan to, nor could they, micro-manage
design and manufacture of microelectronic devices or any other high technology
products. The Company has plenty of talented, highly skilled people for this
purpose as well as for other day-to-day operations. Yet the Company is missing
one element that is essential for real growth, and that element is strategic
leadership. This is what the Fant Nominees intend to bring to the Company.
The Fant Nominees are committed, subject to their fiduciary duties, to
delivering to you (1) immediate value by consummating the Offer and (2) long
term value by setting the Company on the correct strategic path for growth. We
urge you to join us in voting FOR our nominees.
DELIVERY OF IMMEDIATE CASH
The value of the Fant Industries Offer at $8.00 per Share is a 25% PREMIUM
over the recent stock price and a 78% PREMIUM over the price on the day before
Mr. Fant began accumulating Shares. Upon their election, the Fant Nominees are
expected, subject to their fiduciary duties to the Company's shareholders, to
remove any obstacles to the consummation of the Offer that the current members
of the Board have failed to remove. In particular, the Fant Nominees are
expected to redeem the Rights (or amend the Rights Agreement to make the
Rights inapplicable to the Offer), which would have the effect of satisfying
the Board Action Condition (as defined herein) to the Offer. The all cash
offer is for 11.5% of the Shares and is not conditioned upon Fant Industries
obtaining financing.
REFORM OF DIRECTOR STOCK COMPENSATION
The Fant Nominees are committed to reforming the current stock compensation
arrangements immediately. It is vital that the interests of the Company's
directors and management correlate with the interests of shareholders. The
Fant Group plans to link stock compensation directly to the Company's
operating performance and shareholder value.
CREATION OF LONG-TERM VALUE
First Steps. Upon gaining control of the Board, the Fant Nominees will
aggressively screen numerous strategic opportunities with a view toward
revitalizing the Company.
. The Fant Nominees will explore ways to employ the Company's assets more
productively. The accumulation of cash by the Company without a strategic
plan for its use provides little opportunity for growth. The Fant Group
will seek to employ this cash through strategic acquisitions and
investments that contribute to the long-term growth of the Company.
. The Fant Nominees will seek to increase the utilization and operating
efficiency of the Company's recently expanded facility in Victoria,
Minnesota. The Fant Nominees will challenge management to rethink its
sales strategy and, if appropriate, will invest in a substantial and
directed sales and marketing program to expand and diversify the Company's
customer base.
. The Fant Group will seek to stabilize the Company's cash flows. In
addition to expanding and diversifying the Company's customer base towards
this objective, the Fant Group will seek out opportunities that allow the
Company to grow in related areas that complement current operations. The
Fant Group will also explore opportunities to develop, manufacture and
market proprietary products and may seek strategic partners for such
endeavors.
Strategic Vision. The Fant Group believes that the contract electronics
manufacturing industry and specifically the microelectronics segment of that
industry represents one of the most attractive opportunities for high compound
annual growth of any industry. Our goal is to see the Company become a major
competitor in this industry--on a global scale--during the next ten to fifteen
years.
8
<PAGE>
Intense competition from around the world dictates that the Company think
globally. We must be flexible enough to evolve as markets and technology
continue to change. The Fant Group will bring to the Company the vision and
determination needed for the future. We believe the true potential of the
Company has barely been tapped and that a paradigm shift in leadership is
needed to reinvigorate the Company and enable it to reach its true potential.
Such a change can occur only with leaders who believe there are unlimited
opportunities for those who seek them and who are committed to capitalizing on
them as they are identified. The current Board views the Company as being
dependant on its existing customers' needs in order to achieve growth and
lacks the vision to seek out and create its own opportunities for growth. The
Fant Group is the catalyst needed to lead the Company into the twenty-first
century.
The Fant Group views the Company's Victoria, Minnesota facility as the
anchor of its plan for expansion and aggressive growth. We believe the
intensely competitive nature of the Company's business dictates that it become
one of the most efficient producers of contract microelectronic components in
the world. To that end we will seek to lead the industry in achieving high
levels of plant loading at the Victoria facility.
With the Victoria facility as the anchor and technology hub of the Company,
the Fant Group plans to seek opportunities to expand the Company's
manufacturing capabilities, through the acquisition or construction of
additional facilities that will allow the Company to compete for the long-term
business it has consistently missed out on. We have noted a distinct pattern
in which the Company is able to attract a new and relatively large customer,
complete the design and start-up process for manufacturing a particular
product for that customer, and soon thereafter have the customer move long-
term production of that product to another manufacturer. The Company is
missing out on long-term business from its customers by developing the product
manufacturing design process but failing to retain the customer throughout the
on-going production of the customer's product. The additional facilities will
provide the increased manufacturing capabilities the Company's customers
demand. The Company is not merely a research and development source--it is a
microelectronics manufacturer. The Company must have the facilities to allow
it to not only provide design and prototyping functions, but to enjoy the
benefits of long-term high volume production runs for the products it
develops.
The Fant Nominees believe the Company may be missing out on new business for
long-term production as a result of concerns many potential customers may have
with risking their entire manufacturing capacity in one plant. They may be
willing to have their initial prototyping completed in a single facility but
the risk of committing their long-term, high volume production to a single
facility entails an unacceptable risk for many potential customers.
More and more, electronics companies are outsourcing the engineering and
manufacturing needs of their business. The Company must be positioned to
compete for the business created by this trend. Additionally, major
electronics manufacturers are expanding at an extraordinary rate as new
markets are emerging in Latin America, Asia, Eastern Europe and elsewhere. The
Fant Group will seek opportunities, including the acquisition of existing
facilities or construction of new facilities in these emerging markets that
will allow the Company to compete in the global marketplace. The Fant Group
believes that to succeed in such a marketplace, the Company must become the
lowest cost manufacturing source to win new customers and retain existing
customers while maintaining its standards for quality.
The Fant Group will seek opportunities to engage in partnerships, joint
ventures and similar strategic alliances for the development of new products
and processes. Such arrangements may offer important strategic value and
represent a path to long-term growth and more consistent performance. We will
also seek acquisition opportunities that could result in increased utilization
of the Company's existing manufacturing facilities and yield synergistic
benefits. We will seek to develop proprietary products to increase the
Company's financial stability. These goals require a marketing effort hitherto
undreamed of by the existing Board of Directors.
No assurance can be given that the Fant Nominees will be able to implement
any of the foregoing plans or produce favorable financial results. Any actions
undertaken, however, will be with a view towards enhancing value of the
Company for the benefit of all shareholders.
9
<PAGE>
BUSINESS EXPERIENCE OF ANTHONY FANT
Mr. Fant began his successful business career in 1985 when he built a single
television station. Over the next 12 years he acquired, built or managed a
number of additional underperforming or undeveloped television and radio
stations in diverse areas of the country. From 1993 through 1996, a total of
eight television and radio properties were purchased in seven states,
including Minnesota. In the process of acquiring these stations, Mr. Fant
instituted a highly intensive and aggressive screening of a multitude of
stations to achieve the objective of identifying underperforming or
undervalued assets. All eight of the acquired stations were either not on the
air, in bankruptcy, or otherwise underperforming and undervalued.
Following the acquisition of these properties, innovative steps were
formulated and taken to enhance and realize their true value. The strategies
employed by Mr. Fant to revitalize each station included, among other things,
repositioning the transmitting towers to better reach a greater population,
affiliating with different or new networks to create brand recognition for the
station, forming joint ventures with local broadcasters to increase
profitability while reducing risk, increasing cash flow by reducing wasteful
spending, and expanding sales and marketing efforts.
In 1996, Mr. Fant began to focus on divesting his television and radio
assets to capitalize on the sharply escalating station values, new media
market conditions and changes in federal ownership rules, among other things.
Currently, the Fant Group has sold or has contracts to sell all of the eight
broadcasting properties for in excess of $53,000,000, which represents a 400%
increase in the value of the stations over the total cost of acquisition and
improvements. None of these sales resulted in the liquidation of any station.
Each station was sold as a profitable on-going business.
Mr. Fant continues to invest in a variety of other businesses using the same
approach of identifying and understanding the underlying assets of a business
and formulating innovative steps to realize its full potential, and he now
owns a number of businesses in diverse industries.
In each of his endeavors, Mr. Fant's success was not attributable to his
prior knowledge and experience in the specific industry. Rather, it was his
strategic insight and desire to identify undervalued businesses and to
revitalize each one according to its own specific needs. The Fant Group
believes that this strategic leadership is the essential element missing in
the Company's formula for success. In HEI, Mr. Fant sees an opportunity to
create a dynamic engine of growth and believes that Mr. Fant can provide the
necessary leadership toward that end.
THE SHAREHOLDERS HAVE THE RIGHT TO DECIDE
The Fant Group believes anti-takeover defenses such as the Rights Agreement
and the Control Share Act reduce shareholder value over the long run by
entrenching management and by reducing the probability that someone, like Fant
Industries, will make a bid for Shares at a price above market value. The Fant
Group further believes that when an offer is made to acquire Shares, the
shareholders, not the Board, should have the final word on whether the offer
is accepted. Absent the Rights Agreement, a bidder such as Fant Industries
could make an offer to all shareholders to buy their Shares at a fixed price
above the market value without prior approval of the Board. Shareholders would
have the option to accept the Offer and tender their Shares or reject the
Offer if they believe the premium offered is insufficient. With the Rights
Agreement in place, a bidder is effectively required to seek Board approval
prior to making an offer to shareholders. Absent that approval, the Board can
declare the bidder unfriendly and trigger the Rights Agreement. Consequently,
the Fant Group believes that the Rights Agreement provides the current members
of the Board an entrenchment mechanism to protect and enhance their own
welfare prior to approving any bidder's offer, by placing them in a position
to persuade the bidder to spend funds that could otherwise go directly to the
shareholders.
A commonly stated benefit behind measures such as the Rights Agreement is to
provide incumbent boards of directors with negotiating leverage to obtain
better terms for their shareholders.
10
<PAGE>
The Fant Group believes that the shareholders (who are the true owners of
the Company) should have the right to decide what is or is not a fair price
for their Shares and whether to accept or reject an offer for their Shares,
and not the Directors (who merely act as agents for the owners). The Rights
Agreement currently in place takes these decisions away from the shareholders.
Election of the Fant Nominees will expedite the redemption of the Rights,
properly returning shareholders' right to control the Company's future, and as
a consequence, will satisfy the Board Action Condition (as defined
hereinafter) to the Offer.
THE FANT GROUP URGES ALL SHAREHOLDERS TO AFFIRM THEIR RIGHT TO DECIDE THE
COMPANY'S FUTURE BY VOTING FOR THE ELECTION OF THE FANT NOMINEES.
THE FANT NOMINEES
The following table sets forth the name, present principal occupation,
business address and business experience for the past five years, and certain
other information, with respect to each of the Fant Nominees. This information
has been furnished to Fant Industries by the respective Fant Nominees. Each of
the Fant Nominees has consented to serve as a Director and, if elected, would
hold office until the 1999 Annual Meeting of Shareholders of the Company and
until his or her successor has been elected and qualified or until earlier
death, retirement, resignation or removal.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE
BUSINESS ADDRESS LAST FIVE YEARS
---------------- -------------------------------------------------------
<S> <C>
Anthony J. Fant (37)........... Director, President and Chief Executive Officer of Fant
2154 Highland Avenue Industries. Mr. Fant has been Director, President and
Birmingham, AL 35205 Chief Executive Officer of Fant Broadcasting Company
(including, for these purposes, various affiliated
companies engaged primarily in television and radio
broadcasting) since 1986.
Edwin W. Finch, III (52)....... Director and President of FHL Capital Corporation since
600 North 20th Street 1984. FHL Capital is an investment banking and business
Birmingham, AL 35203 valuation firm specializing in mergers and
acquisitions. Mr. Finch served as President of Pinson
Valley Millworks, Inc., a distributor of millworks
products, from 1988 through 1996.
David W. Ortlieb (67).......... Independent management consultant since 1994. Director,
61 Eleven O'Clock Road President and Chief Executive Officer of Immunomedics,
Weston, CT 06883 Inc., a biopharmaceutical company, from 1992 to 1994.
Director, President and Chief Executive Officer of
Texas Biotechnology Corporation, a pharmaceutical
products company, from 1990 to 1992. Director,
President and Chief Operating Officer of American
Optical Corporation, a diversified business principally
involved with optics and opthalmics, from 1987 to 1989.
Director, President and Chief Executive Officer of
Erbamont N.V., a diversified health care company, from
1983 to 1985. Director of Abbott Laboratories, a
diversified health care and consumer products company,
from 1975 to 1983, serving as Corporate Executive Vice
President and President of Abbott International.
Assistant to the Chairman and Chief Executive Officer
of American Home Products Company, a diversified
package goods company, in 1971. Director, Executive
Vice President and Chief Operating Officer of Tyco
International, Ltd., a diversified high technology
company, from 1969 to 1970.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE
BUSINESS ADDRESS LAST FIVE YEARS
---------------- -------------------------------------------------------
<S> <C>
Steve E. Tondera, Jr. (35) .... Director, Vice President, Treasurer, Secretary and
2154 Highland Avenue Chief Financial Officer of Fant Industries. Mr. Tondera
Birmingham, AL 35205 has been Senior Vice President and Chief Financial
Officer of Fant Broadcasting Company (including, for
these purposes, various affiliated companies engaged
primarily in television and radio broadcasting) since
1994 and Director since 1995. Prior to such time, Mr.
Tondera was a principal of Humphryes & Associates,
P.C., a public accounting firm.
</TABLE>
- --------
The Fant Nominees will not receive any compensation from Fant Industries for
their services as Directors of the Company. Fant Industries has agreed to
indemnify all of the Fant Nominees against any costs, expenses and other
liabilities associated with their nomination and the election contest.
According to the Company's public filings, if elected as Directors of the
Company, the Fant Nominees who are not employees of the Company would receive
$750 per quarter, plus $700 for each regular meeting of the Board and $300 for
each committee or special Board meeting attended. Each committee chairperson
would receive an annual retainer of $300. All Directors of the Company would
be reimbursed by the Company for expenses incurred in connection with their
services as Directors of the Company. The Fant Nominees, if elected, will be
indemnified by the Company for service as a Director of the Company to the
extent indemnification is provided to Directors of the Company under the
Bylaws. In addition, Fant Industries believes that upon election, the Fant
Nominees will be covered by the Company's officer and director liability
insurance. Fant Industries disclaims any responsibility for the accuracy of
the foregoing information, which has been extracted from the Company's public
filings.
Except as described hereinafter, none of the Fant Nominees is adverse to the
Company or any of its subsidiaries in any material pending legal proceedings.
See "Background of the Solicitation-Certain Litigation."
Fant Industries does not expect that any of the Fant Nominees will be unable
to stand for election, but, in the event that any vacancy in the Fant Nominees
should occur, the Shares represented by the enclosed GREEN proxy card will be
voted in each such case for a substitute nominee selected by Fant Industries
from among the Fant Nominees listed above. In addition, Fant Industries
reserves the right to nominate substitute or additional persons if the Company
makes or announces any changes to its Bylaws or takes or announces any other
action that has, or if consummated would have, the effect of disqualifying any
or all of the Fant Nominees. In any such case, Shares represented by the
enclosed GREEN proxy card will be voted for all such substitute or additional
nominees selected by Fant Industries.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "Commission"), the GREEN proxy card affords each shareholder
the opportunity to designate the names of any of the Fant Nominees whom he or
she does not desire to elect to the Board. Notwithstanding the foregoing, the
Fant Group urges shareholders to vote FOR all of the Fant Nominees on the
enclosed GREEN proxy card. The persons named as proxies in the enclosed GREEN
proxy card will vote, in their discretion, for each of the Fant Nominees who
is nominated for election and for whom authority has not been withheld.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE FANT NOMINEES ON THE ENCLOSED
GREEN PROXY CARD.
12
<PAGE>
EQUAL VOTING RIGHTS PROPOSAL
Pursuant to the Control Share Act, substantially all of the Shares acquired
by Fant Industries pursuant to the Offer will be denied voting rights, unless
voting rights for such Shares are approved by (i) the affirmative vote of the
holders of a majority of all outstanding Shares entitled to vote, and (ii) the
affirmative vote of a majority of all outstanding Shares entitled to vote,
excluding holders of "interested shares" (generally, Shares held by Fant
Industries, by officers of the Company and by any employee-directors of the
Company). A commonly stated benefit of control share acquisition statutes is
to provide shareholders with an opportunity to vote as a group on a proposed
acquisition of control.
The Control Share Act does not apply if either (i) the Bylaws are amended by
the Company's shareholders prior to consummation of the Offer to provide that
the Control Share Act shall be inapplicable to control share acquisitions of
the Company's Shares, or (ii) the shareholders vote in accordance with the
Control Share Act to confer full voting rights to Shares acquired by Fant
Industries pursuant to the Offer.
The Equal Voting Rights Proposal contemplates the adoption of a bylaw to
"opt out" of the Control Share Act, so that all shareholders have the right to
vote their Shares, regardless of the number of Shares they own or how such
Shares were acquired. Investors, such as Fant Industries, who are otherwise
interested in purchasing a significant number of Shares at a premium over the
current price may be unwilling to do so if such Shares are subject to the loss
of voting rights pursuant to the Control Share Act. Upon shareholder approval
of the Equal Voting Rights Proposal, the Company's shareholders will have
access to persons interested in acquiring their Shares without the obstruction
created by the Control Share Act. The adoption of the Equal Voting Rights
Proposal will have the affect of satisfying the Control Share Condition (as
defined herein) to consummating the Offer.
YOUR VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL IS A VOTE FOR CHANGE. WE URGE
YOU TO VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL. The Fant Group believes that
all public company shareholders, including the Company's shareholders, should
have equal voting rights, regardless of the number of shares owned. The Fant
Group further believes that the Control Share Act decreases the attractiveness
of the Shares in the public market and may limit the ability of a shareholder
to receive a premium for his/her shares, because it is unlikely that any
investor will purchase a significant number of Shares unless it is certain to
be able to exercise full voting rights for such Shares. The Control Share Act
therefore, makes it likely that the shareholders will never have the
opportunity to sell their Shares to an investor, such as Fant Industries, who
is willing to purchase a significant number of shares at a premium over the
recent historical market prices for the Shares. The Fant Group believes that
even though the Company's shareholders can grant voting rights for Shares
otherwise subject to voting restrictions under the Control Share Act, no
significant investor is likely to offer to purchase Shares or offer a premium
for the Shares unless it is certain to be able to exercise full voting rights,
and that the best way to provide that certainty is for the Company to "opt
out" of the Control Share Act.
THE FANT GROUP URGES ALL SHAREHOLDERS TO AFFIRM THEIR RIGHTS TO DECIDE FOR
THEMSELVES WHETHER TO TAKE ADVANTAGE OF THE OFFER BY VOTING FOR THE EQUAL
VOTING RIGHTS PROPOSAL.
By voting for the adoption of the Equal Voting Rights Proposal, you will be
sending the Board a strong message that the shareholders of the Company, as
the true owners of the Company, demand that every shareholder be entitled to
equal rights to vote their shares and to decide for themselves whether to
accept the Offer.
YOU ARE URGED TO VOTE FOR THE ADOPTION OF THE EQUAL VOTING RIGHTS PROPOSAL
ON THE ENCLOSED GREEN PROXY CARD.
13
<PAGE>
BACKGROUND OF THE SOLICITATION
FANT INDUSTRIES' TENDER OFFER
The primary purpose of this solicitation of proxies is to replace the
current Board with the Fant Nominees who believe that the Company's
shareholders should have the opportunity to approve the Offer and to amend the
Bylaws to opt out of the Control Share Act. On March 4, 1998, the Fant Group
announced the Offer for 11.5% of the Shares and on March 10, 1998, the Fant
Group commenced the Offer. The Offer is currently scheduled to expire at 12:00
Midnight, New York City time, on Thursday, April 30, 1998, unless further
extended.
The Offer is subject to the fulfillment of a number of conditions,
including, without limitation, the following:
Minimum Tender Condition. The Offer is conditioned upon there being validly
tendered and not withdrawn prior to the expiration date at least that number
of Shares (the "Minimum Number of Shares") which constitute 11.5% of the total
number of Shares outstanding on the date Shares are accepted for payment,
without giving effect to any dilution that might result from exercise of the
rights (the "Minimum Tender Condition"). Fant Industries reserves the right
(subject to the applicable rules and regulations of the Commission), which it
presently has no intention of exercising, to waive or reduce the Minimum
Tender Condition and to elect to purchase, pursuant to the Offer, fewer than
the Minimum Number of Shares.
According to the Company's Quarterly Report on Form 10-Q for the period
ended February 28, 1998, as of April 2, 1998, there were 4,083,576 Shares
issued and outstanding. In addition, the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1997 states that, as of August 31, 1997
there were 447,000 Shares subject to options outstanding under the Company's
stock option plans. The Fant Group currently owns an aggregate of 734,900
Shares which were recently acquired in open market purchases. Based on the
foregoing, the Minimum Number of Shares is 469,612. However, the actual
Minimum Number of Shares will depend on the facts as they exist on the date of
purchase.
Change of Control Condition. The Offer is conditioned upon the election, by
Board resolution or shareholder vote, of a sufficient number of Fant Nominees
to constitute a majority of the Company's Board.
The Change of Control Condition can be satisfied either by an election by
the existing Board or by a vote of the Company's shareholders. As set forth in
the Bylaws, the Board has the ability, without a shareholder vote, to increase
the number of members that constitute the Board and to fill the newly-created
directorships with Fant Nominees. Likewise, the Board can fill any vacancies
caused by resignations of current members by a resolution of the remaining
directors.
WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE FOR
YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
Board Action Condition. The Offer is conditioned upon Fant Industries being
satisfied in its reasonable discretion that the Board has irrevocably taken
all actions necessary to redeem the Rights or Fant Industries having
determined in its reasonable discretion that the Rights have been invalidated
or are otherwise inapplicable to the Offer.
Set forth below is a summary description of the Rights Agreement derived
from the Company's Form 8 filed on June 27, 1988.
On May 27, 1988, the Company's Board declared a dividend distribution of one
Right for each outstanding Share. The dividend is payable to the shareholders
of record on June 10, 1988. Each Right entitles the registered holder to
purchase from the Company one-fourth ( 1/4) of one Share at a price of $6.00
(the "Purchase Price"), subject to adjustment.
The Rights will not be exercisable until the earlier of ten business days
(subject to deferral by the Board) following a public announcement that (i) an
"Acquiring Person" (as defined in the Rights Agreement), which term does not
include the Company or an employee benefit plan of the Company, has acquired
beneficial
14
<PAGE>
ownership (as defined in the Rights Agreement) of 20% or more of the
outstanding Shares of the Company or (ii) a tender offer or exchange offer for
30% or more of the outstanding Shares has been commenced or announced (the
earlier of such dates being called the "Distribution Date"). The Rights are
not exercisable until the Distribution Date. The Rights will expire on June
10, 1998 unless earlier redeemed by the Company as described below.
Until the Distribution Date the Rights will be evidenced, with respect to
any Share certificates outstanding as of June 10, 1987 by such Share
certificates with a copy of the Company's Form 8 Summary of Rights attached
thereto. The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Share certificates. New
Share certificates issued after June 10, 1988 (or as soon as practicable
thereafter) upon transfer or new issuance of Shares will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
the surrender for transfer of any Share certificates outstanding as of June
10, 1988, even without a copy of the Company's Form 8 Summary of Rights
attached thereto, will also constitute the transfer of the Rights associated
with the Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of Shares as of
the close of business on the Distribution Date and such separate certificates
alone will evidence the Rights.
The Purchase Price payable, and the number of Shares or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Shares, (ii) upon the
grant to holders of the Shares of certain rights or warrants to subscribe for
Shares or convertible securities at less than the current market price of the
Shares or (iii) upon the distribution to holders of the Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends out of
earnings or retained earnings at a rate not in excess of 125% of the rate of
the last cash dividend theretofore paid or dividends payable in Shares) or of
subscription rights or warrants (other than those referred to above).
In the event that the Company is acquired in a merger or other business
combination by an Acquiring Person or after an Acquiring Person has acquired
more than 40% of the Company's Shares or 50% or more of the Company's assets
or earning power is sold in one transaction or a series of transactions to an
Acquiring Person, proper provision shall be made so that each holder of a
Right shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price, that number of one-fourths ( 1/4) of full
shares of common stock of the Acquiring Person or other acquiring entity which
at the time of such transaction would have a market value of two times the
Purchase Price. In the event that the Company is the surviving corporation in
a merger and the Shares are not changed or exchanged, or in the event that an
Acquiring Person engages in one of a number of self-dealing transactions
specified in the Rights Agreement, or in the event any person acquires 30% or
more of the outstanding Shares without prior approval of the Board of
Directors, proper provision shall be made so that each holder of a Right will
thereafter have the right to receive upon exercise thereof at the then current
Purchase Price that number of one-fourths ( 1/4) of full shares of Shares
having a market value of two times the Purchase Price. Upon the occurrence of
any of the transactions referred to in this paragraph, any rights that are or
were at any time beneficially owned by an Acquiring Person engaging in any of
such transactions or receiving the benefits thereof on or after the time the
Acquiring Person became such shall become void.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. Fractional shares may not be issued in the discretion of
the Company and, in lieu thereof, an adjustment in cash may be made based on
the market price of the Shares on the last trading date prior to the date of
exercise.
At any time prior to ten business days after an announcement that an
Acquiring Person (as defined in the Rights Agreement) has acquired, or
obtained the right to acquire, 20% or more of the outstanding shares of Common
Stock of the Company, subject to extension by the Board of Directors, the
Company may redeem all but not some of the Rights at a price of $.05 per Right
(the "Redemption Price"). Immediately upon the action
15
<PAGE>
of the Board of Directors of the Company ordering the redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company, including, without limitation, the right to
vote or to receive dividends.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the description
included in the Company's Form 8 filed on June 27, 1988, and the text of the
Rights Agreement as set forth as an exhibit to the Company's Registration
Statement on Form 8-A filed May 31, 1988, as amended by Form 8 filed on June
27, 1988 and by Form 8-A filed on March 19, 1998.
Fant Industries presently intends, if necessary, to extend the Offer from
time to time until the Board Action Condition is satisfied or it determines,
in its reasonable discretion, that such condition is not reasonably likely to
be satisfied.
WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE FOR
YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
The Control Share Condition. The Offer is conditioned upon Fant Industries'
acquisition of Shares in the Offer having been approved in accordance with the
requirements of the Control Share Act and accorded full voting rights, or Fant
Industries determination in its reasonable discretion that such Act is
inapplicable to the Offer or that it otherwise will not have the effect of
denying voting rights to the Shares acquired by Fant Industries in the Offer.
WE URGE YOU TO VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL FOR THE OPPORTUNITY
TO DECIDE FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
Although Fant Industries will seek to consummate the Offer as soon as
practicable after the Expiration Date, satisfaction of the foregoing
conditions depends upon a variety of factors and legal requirements that may
affect the timing of such consummation. Fant Industries reserves the right
(but shall not be obligated) to waive any or all such conditions.
CERTAIN LITIGATION
On March 27, 1998, the Fant Group filed a complaint against the Company and
its directors in the federal district court for the Northern District of
Alabama. The complaint alleges violations of the Securities Exchange Act of
1934 (the "Exchange Act"), tortious interference, breach of fiduciary duty,
and wantonness by the Company and its directors.
The Fant Group alleges that the Company and its directors have violated
Sections 14(d)(4) and 14(e) of the Exchange Act in their Schedule 14D-9 filed
on March 20, 1998 (including a related letter to shareholders on such date) by
making untrue statements of material fact and omitting to state material facts
necessary to make the statements, in the light of the circumstances under
which they were made, not misleading. Specifically, it is alleged that the
Directors omitted to state, among other things, material information relating
to HEI's performance, director stock compensation, and insider sales of stock
prior to a dramatic decline in its price. The Fant Group asserts that these
fraudulent omissions and misstatements by the Company and its directors, if
uncorrected, will cause irreparable harm to the Fant Group because a
reasonable stockholder may reject an otherwise valid tender offer in reliance
on these material omissions and misstatements. The Fant Group seeks an
injunctive order for the Company and its directors to issue full curative
disclosure including a retraction of the misleading statements.
The Fant Group also seeks damages for tortious interference with their
business relationships and for breaches of fiduciary duty and for declaratory
relief with respect to the Offer.
16
<PAGE>
On April 20, 1998, the Company filed a complaint against Mr. Fant and Fant
Industries in the federal district court of the District of Minnesota. The
complaint alleges violations of the Exchange Act.
The Company alleges that the Fant Group has violated Sections 14(a), 14(d),
14(e) and 13(d) of the Exchange Act in their Schedule 14D-1 filed on March 10,
1998 and the amendments thereto, their Schedule 13D filed on February 17, 1998
and the amendments thereto, and certain communications with shareholders of
the Company. The Company alleges that the Fant Group has omitted and
misrepresented material information to the Company's shareholders relating to
the Company, the Fant Group, its tender offer, and its plans for the Company.
The Company further alleges that the Fant Group has solicited proxies from
shareholders of the Company without complying with the federal proxy rules.
The Company seeks an injunctive order for the Fant Group to amend its
Schedules 13D and 14D-1 and file corrective Schedule 14A proxy materials. The
Company further seeks to enjoin the Fant Group from communicating with
shareholders, purchasing tendered shares or soliciting any proxies for 45 days
after filing corrective disclosures, or making any false or misleading
statements or proxy solicitations. The Fant Group believes that all
allegations in the complaint are without merit.
EVENTS RELATED TO THIS SOLICITATION
If the Company's Board fails to cooperate and call the Special Meeting
promptly, the Fant Group intends to exercise its rights, as a holder in the
aggregate of over 18% of the Company's outstanding Shares, to demand that the
Company hold a Special Meeting of its shareholders pursuant to Section
302A.433 of the Minnesota Business Corporation Act and Section 2.03 of the
Bylaws.
Under Section 302A.433 of the Minnesota Business Corporation Act and Section
2.03 of the Company Bylaws, a special meeting of the Company's shareholders is
required to be held upon the written demand of the holders of record of Shares
representing at least 10% of all the votes entitled to be cast on any issue
proposed to be considered at the Special Meeting, except that a Special
Meeting for the purpose of considering any action to directly or indirectly
effect a business combination, including any action to change or otherwise
affect the composition of the Board for that purpose, must be called by
shareholders holding not less than 25% of all Shares entitled to vote. Fant
Industries does not intend to effect, directly or indirectly, a business
combination with the Company.
Under Section 302A.433 of the Minnesota Business Corporation Act and Section
2.07 of the Bylaws, the Special Meeting may be held within 14 days of the date
notice is given to shareholders, but it must be held not later than 90 days
after the date the Special Meeting is demanded.
The solicitation of proxies for the Special Meeting is an effort to ensure
that shareholders have the choice of electing the Fant Nominees to the
Company's Board who, once elected, will expedite the consummation of the Offer
and through new leadership and policies will be committed to maximizing
shareholder value. The replacement of the Board with the Fant Nominees and the
adoption of the Equal Voting Rights Proposal are essential steps to ensure
that the best interests of the shareholders are accorded their appropriate
highest priority.
A VOTE FOR OUR DIRECTOR NOMINEES AND THE RELATED PROPOSALS IS A VOTE FOR
CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO
DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG
TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE
URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE RELATED PROPOSALS.
17
<PAGE>
VOTING AND PROXY PROCEDURES
Only shareholders of record on the Record Date will be entitled to notice of
and to vote at the Special Meeting. Each Share is entitled to one vote upon
each matter presented at the Special Meeting. Shareholders who sell Shares
before the Record Date (or acquire them without voting rights after the Record
Date) may not vote such Shares. Shareholders of record on the Record Date,
will retain their voting rights in connection with the Special Meeting even if
they sell such Shares after the Record Date. Pursuant to Section 2.04 of the
Bylaws, the holders of a majority of the Shares entitled to vote constitutes a
quorum for the transaction of any business at the Special Meeting. Based on
publicly available information, Fant Industries believes that the only
outstanding class of securities of the Company entitled to vote at the Special
Meeting are the Shares. According to publicly available information, as of
April 2, 1998, there were 4,083,576 Shares issued and outstanding.
Shares represented by properly executed GREEN proxy cards will be voted at
the Special Meeting as marked and, in the absence of specific instructions,
will be voted FOR the removal of current members of the Board, FOR the
election of Fant Nominees to the Board, FOR the adoption of the Equal Voting
Rights Proposal and in the discretion of the persons named as proxies on all
other matters as may properly come before the Special Meeting. Pursuant to
Section 3.10 of the Bylaws, any or all of the directors may be removed from
the Board at any time, with or without cause, by the affirmative vote of the
shareholders holding a majority of the Shares entitled to vote at the Special
Meeting. Election of the Fant Nominees requires the affirmative vote of a
majority of the Shares represented and entitled to vote at the Special
Meeting. For the purpose of adopting the Equal Voting Rights Proposal, Section
10.01 of the Bylaws requires a majority vote of the shareholders present or
represented at any special meeting. Abstentions and broker non-votes will have
the same effect as votes against all Proposals and will each be included in
determining the number of Shares present for purposes of determining the
presence of a quorum.
Shareholders of the Company may revoke their proxies at any time prior to
its exercise by attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy) or by delivering a written notice or revocation. The
delivery of a subsequently dated proxy which is properly completed will
constitute a revocation of any earlier proxy. The revocation may be delivered
either to Fant Industries in care of Beacon Hill Partners, Inc. at the address
set forth on the back cover of this Proxy Statement or to the Company at P.O.
Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386 or any other address
provided by the Company. Although a revocation is effective if delivered to
the Company, Fant Industries requests that either the original or photostatic
copies of all revocations be mailed to Fant Industries in care of Beacon Hill
Partners, Inc. at the address set forth on the back cover of this Proxy
Statement so that Fant Industries will be aware of all revocations and can
more accurately determine if and when proxies have been received from the
holders of record on the Record Date of a majority of the outstanding Shares.
IF YOU WISH TO VOTE FOR THE REMOVAL OF THE CURRENT MEMBERS OF THE BOARD, FOR
THE ELECTION OF THE FANT NOMINEES TO THE BOARD AND FOR THE ADOPTION OF THE
EQUAL VOTING RIGHTS PROPOSAL, PLEASE SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED GREEN PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. REGISTERED
HOLDERS MAY FAX BOTH SIDES OF THE ENCLOSED GREEN PROXY CARD TO BEACON HILL
PARTNERS, INC. AT THE NUMBER SET FORTH ON THE BACK COVER OF THIS PROXY
STATEMENT.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being made
by Fant Industries. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Solicitations may be made by
certain directors, officers and employees of Fant Industries, none whom will
receive additional compensation for such solicitation.
Fant Industries has retained Beacon Hill Partners, Inc. for solicitation and
advisory services in connection with this solicitation, for which Beacon Hill
Partners, Inc. will receive a fee of up to $30,000 together with
18
<PAGE>
reimbursement for its reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. Beacon Hill Partners, Inc. will
solicit proxies from individuals, brokers, banks, bank nominees and other
institutional holders. Fant Industries has required banks, brokerage houses
and other custodians, nominees and fiduciaries to forward all solicitation
materials to the beneficial owners of the Shares they hold of record. Fant
Industries will reimburse these record holders for their reasonable out-of-
pocket expenses in so doing. It is anticipated that Beacon Hill Partners, Inc.
will employ approximately 25 persons to solicit the Company's shareholders for
the Special Meeting. Beacon Hill Partners, Inc. is also acting as Information
Agent in connection with the Offer, for which it will be paid customary
compensation in addition to reimbursement of reasonable out-of-pocket
expenses.
R.J. Steichen & Co. is acting as Dealer Manager for the Offer and as the
Fant Group's financial advisor in connection with the Fant Group gaining
control of the Company, including the Offer. Pursuant to the terms of R.J.
Steichen & Co.'s engagement, the Fant Group has agreed to pay R.J. Steichen &
Co., for its services as Dealer Manager and financial advisor, an initial
financial advisory retainer fee or $20,000 and a monthly financial advisory
fee of $10,000. In addition, success fees of up to $50,000 may be earned.
Subject to certain limitations, the Fant Group also has agreed to reimburse
R.J. Steichen & Co. for travel and other out-of pocket expenses, including
legal fees and expenses, and to indemnify R.J. Steichen & Co. against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of its engagement. In the ordinary course of business, R.J.
Steichen & Co. may actively trade or hold the securities of the Company for
its own account or for the account of customers and, accordingly, may at any
time hold a long or short position in such securities. In connection with R.J.
Steichen & Co.'s engagement as financial advisor, the Fant Group anticipates
that employees and representatives of R.J. Steichen & Co. may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers, or other persons who are shareholders of the Company for the purpose
of assisting in the solicitation of proxies for the Special Meeting. R.J.
Steichen will not receive any additional fee for or in connection with such
activities apart from the fees which it is otherwise entitled to receive as
described herein. It is anticipated that approximately 6 employees and
representatives of R.J. Steichen will communicate with the Company's
shareholders in connection with the solicitation for the Special Meeting.
The entire expense of soliciting proxies is being borne by Fant Industries.
Fant Industries intends to seek reimbursement of the costs of this
solicitation from the Company only to the extent permitted by law. Fant
Industries does not intend to seek shareholder approval of such reimbursement
unless such approval is required by law. Costs of this solicitation of proxies
are currently estimated to be approximately $510,000 Fant Industries estimates
that through the date hereof, its expenses in connection with the solicitation
are approximately $210,000.
INFORMATION ABOUT FANT INDUSTRIES
Fant Industries is a Delaware corporation, the principal executive offices
of which are located at 2154 Highland Avenue, Birmingham, Alabama 35205,
telephone number (205) 933-1030. Fant Industries was formed by Mr. Fant for
the sole purpose of acquiring and holding the Company's Shares. Fant
Industries has not conducted any unrelated activities since its organization
on February 23, 1998. Its sole shareholder is Mr. Fant. The directors of Fant
Industries are Mr. Fant, who is also its President and Chief Executive
Officer, and Mr. Steve E. Tondera, Jr., who is also its Vice President,
Treasurer, Secretary and Chief Financial Officer.
As of the date of this Proxy Statement, the Fant Group beneficially owns
734,900 Shares. For more detailed information regarding the directors and
executive officers of Fant Industries and transactions involving Shares by
Fant Industries, see Schedule II of this Proxy Statement.
See "Proposals -- The Fant Nominees."
19
<PAGE>
CERTAIN TRANSACTIONS BETWEEN THE FANT GROUP AND THE COMPANY
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of the Fant Group, or any other participant in this solicitation
or any of their respective associates: (i) directly or indirectly beneficially
owns any Shares or any securities of the Company; (ii) has had any
relationship with the Company in any capacity other than as a shareholder, or
is or has been a party to any transactions, or series of similar transactions,
since September 1, 1996 with respect to any Shares of the Company; or (iii)
knows of any transactions since September 1, 1996, currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any of them or their respective affiliates had, or will
have, a direct or indirect materials interest. In addition, other than as set
forth in Schedule II of this Proxy Statement, there are no contracts,
arrangements or understandings entered into by the Fant Group, or any other
participant in this solicitation or any of their respective associates within
the past year with any person with respect to any of the Company's securities,
including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or grantees of profit, division of
losses or profits, or the giving or withholding of proxies. In addition, other
than as set forth in this Proxy Statement, none of the Fant Group, or any
other participant in this solicitation or any of their respective associates
has been engaged in contracts, negotiations or transactions with the Company
or its affiliates concerning a merger, consolidation, acquisition, tender
offer or other acquisition of securities, election of directors or a sale or
other transfer of a material amount of assets; or has had any other
transaction with the Company or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of
the Commission.
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of the Fant Group, or any other participant in this solicitation
or any of their respective associates, has entered into any agreement or
understanding with any person with respect to (i) any future employment by the
Company or its affiliates or (ii) any future transactions to which the Company
or any of its affiliate will or may be a party. However, in connection with
the Offer, the Fant Group has reviewed, and will continue to review, on the
basis of publicly available information, various possible business strategies
that they might consider in the event that the Fant Group acquires control of
the Company. In addition, if and to the extent that the Fant Group acquires
control of the Company or otherwise obtains access to the books and records of
the Company, the Fant Group intends to conduct a detailed review of the
Company and its assets, financial projections, corporate structure, dividend
policy, capitalization, operations, properties, policies, management and
personnel and consider and determine what, if any, changes would be desirable
in light of the circumstances which then exist.
OTHER MATTERS AND ADDITIONAL INFORMATION
Fant Industries is unaware of any other matters to be considered at the
Special Meeting. However, Fant Industries has notified the Company of its
intention to bring before the Special Meeting such proposals as it believes to
be appropriate. Should other proposals be brought before the Special Meeting,
the persons named as proxies on the enclosed GREEN proxy card will vote on
such matters in their discretion.
Schedule III of this Proxy Statement sets forth certain information, as made
available in public documents, regarding Shares held by the Company's
management. The information concerning the Company contained in this Proxy
Statement and the Schedules attached hereto has been taken from, or is based
upon, publicly available information. Except for the Company's Share Register,
Fant Industries has not had access to the books and records of the Company.
Shareholders will have no appraisal or similar rights of dissenters with
respect to any of the proposals to be considered and voted upon at the Special
Meeting.
20
<PAGE>
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of the Company's shareholders that are intended to be presented by
such shareholders at the Company's 1999 Annual Meeting of shareholders must be
received by the Company no later than August 6, 1998 in order to be considered
for inclusion in the proxy statement and form of proxy relating to that
meeting.
FANT INDUSTRIES INC.
April 23, 1998
21
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF FANT INDUSTRIES AND CERTAIN EMPLOYEES AND
OTHER REPRESENTATIVES OF FANT INDUSTRIES
Set forth in the tables below are the present principal occupation or
employment and the name, principal business and address of any corporation or
organization in which such employment is carried on for (1) each of the
directors and officers of Fant Industries and (2) certain employees and other
representatives of Fant Industries who may also solicit proxies from the
shareholders of the Company. Unless otherwise indicated, each person
identified below is employed by Fant Industries. The principal business
address of Fant Industries and, unless otherwise indicated below, the
principal business address for each individual listed below is 2154 Highland
Avenue, Birmingham, Alabama 35205. Directors of Fant Industries are identified
by an asterisk. Unless otherwise indicated, each such person is a citizen of
the United States and each occupation set forth opposite the individual's name
refers to employment with Fant Industries.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS HELD
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
---------------- -------------------------------------------------------
<S> <C>
Anthony J. Fant* .............. Director, President and Chief Executive Officer of Fant
2154 Highland Avenue Industries. Mr. Fant has been Director, President and
Birmingham, AL 35205 Chief Executive Officer of Fant Broadcasting Company
(including, for these purposes, various affiliated
companies engaged primarily in television and radio
broadcasting) since 1986.
Steve E. Tondera, Jr.*......... Director, Vice President, Treasurer, Secretary and
2154 Highland Avenue Chief Financial Officer of Fant Industries. Mr. Tondera
Birmingham, AL 35205 has been Senior Vice President and Chief Financial
Officer of Fant Broadcasting Company (including, for
these purposes, various affiliated companies engaged
primarily in television and radio broadcasting) since
1994 and Director since 1995. Prior to such time, Mr.
Tondera was a principal of Humphryes & Associates, a
public accounting firm.
</TABLE>
I-1
<PAGE>
SCHEDULE II
SHARES HELD BY FANT INDUSTRIES, ITS DIRECTORS AND OFFICERS
AND THE FANT NOMINEES
I. TRANSACTIONS IN SHARES BY FANT INDUSTRIES
Fant Industries is the beneficial owner of an aggregate of 10,000 Shares.
Such Shares represent a capital contribution by Anthony J. Fant.
<TABLE>
<CAPTION>
TRANSACTION SHARES
DATE ACQUIRED
----------- --------
<S> <C>
02/24/98 10,000
</TABLE>
II. TRANSACTIONS IN SHARES BY ANTHONY J. FANT
Anthony J. Fant is currently the beneficial owner of 734,900 Shares. Such
shares were purchased by Anthony J. Fant for cash in open market transactions
as follows:
<TABLE>
<CAPTION>
TRANSACTION SHARES PRICE PER
DATE ACQUIRED SHARE(1)
----------- -------- ---------
<S> <C> <C>
12/2/97 500 4.5000
12/4/97 1,000 4.5000
12/5/97 1,000 4.3750
12/5/97 5,000 4.2500
12/5/97 5,000 4.2500
12/8/97 5,000 4.2500
12/8/97 6,000 4.5000
12/9/97 (1,000) 4.6250
12/10/97 (100) 4.2500
12/10/97 (100) 4.5000
12/10/97 10,000 4.5000
12/10/97 75,000 5.0000
12/11/97 (1,000) 5.0000
12/11/97 1,000 4.7500
12/12/97 (1,000) 4.6250
12/15/97 2,000 4.6250
12/16/97 5,000 4.6250
12/17/97 5,000 4.7500
12/19/97 10,000 4.7500
12/22/97 2,100 4.6250
12/23/97 1,200 4.6875
12/23/97 3,000 4.6875
12/23/97 7,500 4.6875
12/23/97 10,000 4.6875
12/29/97 2,000 4.6250
12/29/97 3,000 4.6250
01/02/98 18,500 4.7500
01/16/98 10,000 5.0000
01/21/98 4,500 4.8750
01/27/98 10,000 4.8750
01/27/98 3,000 4.8750
02/04/98 6,000 4.8750
02/04/98 5,000 4.8750
02/04/98 5,000 4.8750
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SHARES PRICE PER
DATE ACQUIRED SHARE(1)
----------- -------- ---------
<S> <C> <C>
02/05/98 10,000 5.1875
02/05/98 8,000 5.1875
02/05/98 4,000 5.1250
02/05/98 2,500 5.0000
02/05/98 2,000 5.1875
02/06/98 40,000 5.3750
02/06/98 2,000 5.1875
02/09/98 25,000 5.5625
02/09/98 25,000 5.4375
02/09/98 10,000 5.8750
02/09/98 10,000 5.8125
02/09/98 2,000 5.3750
02/10/98 20,000 5.8750
02/11/98 15,000 5.8125
02/11/98 7,000 5.8125
02/12/98 20,000 6.7500
02/12/98 3,500 6.7500
02/12/98 1,000 6.6875
02/12/98 2,000 6.6875
02/12/98 2,000 6.6250
02/12/98 5,000 6.7500
02/12/98 25,000 6.6875
02/12/98 20,000 6.3125
02/13/98 2,000 6.6250
02/13/98 2,000 6.5000
02/13/98 10,000 6.5625
02/13/98 10,000 6.5625
02/13/98 25,000 7.1250
02/13/98 5,800 7.1250
02/17/98 30,000 7.4375
02/17/98 30,000 7.5625
02/18/98 50,000 7.4375
02/18/98 65,000 7.5000
02/20/98 15,000 6.5000
02/24/98 (10,000)(2)
03/03/98 10,000 6.4375
</TABLE>
- --------
(1) All prices are exclusive of commissions.
(2) Represents a capital contribution of 10,000 Shares by Mr. Fant to Fant
Industries.
III. TRANSACTIONS IN SHARES BY FANT INDUSTRIES DIRECTORS AND EXECUTIVE
OFFICERS AND THE FANT NOMINEES
Anthony J. Fant and Steve E. Tondera, Jr. have agreed to serve as proxies on
the GREEN proxy card for the Special Meeting.
Except as disclosed in this Schedule, none of Fant Industries, any of its
directors or executive officers or the Fant Nominees owns any securities of
the Company or any subsidiary of the Company, beneficially or of record, has
purchased or sold any of such securities within the past two years or was
within the past year a party to any contract, arrangement or understanding
with any person with respect to any such securities. Except as disclosed in
this Schedule, to the knowledge of Fant Industries, no associate of Fant
Industries or any of its directors and executive officers or of the Fant
Nominees beneficially owns, directly or indirectly, any securities of the
Company.
II-2
<PAGE>
To the knowledge of Fant Industries, other than as disclosed in this
Schedule, none of Fant Industries, any of its directors or executive officers,
or the Fant Nominees has any substantial interest, direct or indirect, by
security holdings or otherwise, in any matter to be acted upon at the Special
Meeting.
IV. BENEFICIAL OWNERSHIP TABLE OF THE FANT NOMINEES
The following table shows, as of April 22, 1998, the beneficial ownership
known to Fant Industries, of Shares held by the Fant Nominees:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- ----------
<S> <C> <C>
Anthony J. Fant...................................... 734,900 18.0%
2154 Highland Avenue
Birmingham, Alabama 35205
</TABLE>
II-3
<PAGE>
SCHEDULE III
SHARE OWNERSHIP OF
MANAGEMENT OF THE COMPANY
Set forth below is information as of November 28, 1997 regarding the Shares
beneficially owned by each director and executive officer of the Company, and
by the directors and executive officers as a group. Except as otherwise
indicated, the persons listed in the table have sole voting and investment
powers with respect to the Shares owned.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OF BENEFICIAL OUTSTANDING
OWNER OWNERSHIP(1) SHARES
---------- ----------------- -----------
<S> <C> <C>
Eugene W. Courtney.......................... 82,740(2) 2.0%
Kenneth A. Schoen........................... 57,108(3) 1.4%
William R. Franta........................... 5,211 *
Robert L. Brueck............................ 2,000 *
Frederick M. Zimmerman...................... 900 *
Jerald H. Mortenson......................... 67,197 1.6%
Dale A. Nordquist........................... 14,564 *
All directors and executive officers as a
group...................................... 229,720 5.6%
</TABLE>
- --------
* Less than one percent.
(1) Represents outstanding shares directly owned except as hereinafter
otherwise indicated. Pursuant to regulations of the Commission, shares
receivable by directors and executive officers by options exercisable
within 60 days after November 28, 1997 are deemed to be beneficially owned
by such directors and executive officers at said date. Of the number of
Shares shown above, the following represent shares that may be acquired
upon exercise of options for the accounts of: Mr. Courtney, 75,000 Shares;
Mr. Schoen, 50,000 Shares; Mr. Franta, 40,000 Shares; Mr. Brueck, 30,000
Shares; Mr. Zimmerman, 30,000 Shares; Mr. Mortenson, 30,000 Shares; Mr.
Nordquist, 44,500 Shares; and all directors and executive officers as a
group, 299,500 Shares.
(2) Includes 46,974 shares held jointly with Mr. Courtney's spouse.
(3) Includes 37,108 shares held in the name of Kenneth Schoen Trust and 10,000
shares held in the name of VKS Ltd. Partnership, of which Mr. Schoen is
considered to be an indirect owner.
Except as provided herein, there are no beneficial owners of more than five
percent of the outstanding Shares based on publicly available information as
of the date hereof.
Except as indicated above, the foregoing information and other information
relating to the Company contained in this Proxy Statement has been taken from
the Company's 1997 Annual Report on Form 10-K and other documents on file with
the Commission. Although Fant Industries does not have any information that
would indicate that any information contained in this Proxy Statement that has
been taken from such documents is inaccurate or incomplete, Fant Industries
does not take any responsibility for the accuracy or completeness of such
information.
III-1
<PAGE>
IMPORTANT
Tell your Board that you want to make your own choice. Tell them what you
think! Your vote is important. No matter how many Shares you own, please give
Fant Industries your proxy FOR the removal of the current members of the Board,
FOR the election of the Fant Nominees and FOR the approval of the Equal Voting
Rights Proposal by taking three steps:
1. SIGNING the enclosed GREEN proxy card,
2. DATING the enclosed GREEN proxy card, and
3. MAILING the enclosed GREEN proxy card TODAY in the envelope provided
(no postage is required if mailed in the United States). Registered holders
may FAX BOTH SIDES of the enclosed GREEN proxy card TODAY to Beacon Hill
Partners, Inc. at the number provided below.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such Shares and only upon
receipt of your specific instructions. Accordingly, please return the GREEN
proxy card in the envelope provided or contact the person responsible for your
account and instruct that person to execute the GREEN proxy card representing
your Shares. Fant Industries urges you to confirm in writing your instructions
to Fant Industries in care of Beacon Hill Partners, Inc. at the address
provided below so that Fant Industries will be aware of all instructions given
and can attempt to ensure that such instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact, Beacon Hill Partners, Inc. at the address
set forth below.
BEACON HILL PARTNERS, INC.
90 BROAD STREET
20TH FLOOR
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 253-3814
FAX: (212) 843-4384
<PAGE>
HEI, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF FANT INDUSTRIES INC. AND ANTHONY J. FANT
The undersigned appoints Anthony J. Fant and Steve E. Tondera, Jr., and each of
them, attorneys and agents with full power of substitution to vote all shares of
common stock of HEI, Inc. which the undersigned would be entitled to vote if
personally present at the Special Meeting of Shareholders of HEI, Inc. to be
called for the purposes stated hereinbelow, and including at any adjournments or
postponements, continuations or rescheduling thereof, as follows:
THE FANT GROUP RECOMMENDS A VOTE
FOR THE REMOVAL OF CURRENT MEMBERS OF THE BOARD
OTHER THAN EUGENE W. COURTNEY,
FOR THE ELECTION OF ALL FANT NOMINEES NAMED BELOW, AND
FOR THE APPROVAL OF THE EQUAL VOTING RIGHTS PROPOSAL
A. DIRECTOR REPLACEMENT PROPOSALS
1. REMOVAL OF DIRECTORS: To remove from the Board of Directors of the
Company (the "Board") all of the following current Directors:
Robert L. Brueck, William R. Franta and Frederick M. Zimmerman.
<TABLE>
<CAPTION>
<S> <C>
FOR REMOVAL OF ABOVE-NAMED CURRENT DIRECTORS [ ] AGAINST REMOVAL OF ABOVE-NAMED CURRENT DIRECTORS [ ]
2. ELECTION OF DIRECTORS: To elect to the Board such number of the following Fant Nominees that when added to Eugene W.
Courtney equals the size of the Board: Anthony J. Fant, Edwin W. Finch, III, David W. Ortlieb and Stephen E. Tondera,
Jr. The first three such individuals will be voted for election to succeed the current Directors (or any Director named
to fill any vacancy created by the death, retirement, resignation or removal of any such four Directors) of the
Company, other than Mr. Courtney. The fourth of such individuals will be voted to be elected to fill the currently
vacant directorship (or to succeed any Director named to fill such vacancy). One or more additional individuals will be
voted for election (a) in the event that the Company purports to increase the number of Directorships pursuant to
Section 3.09 of Bylaws, to each additional Directorship created, and/or (b) in the event any of the first four
individuals named above or Mr. Courtney is unable for any reason to serve as a Director.
FOR ALL FANT NOMINEES [ ] WITHHOLD AUTHORITY FOR ALL FANT NOMINEES [ ]
INSTRUCTION: To withhold authority to vote for one or more individual Fant Nominees, mark FOR ALL Fant Nominees above
and write the (names) of the Fant Nominee with respect to which you wish to withhold authority here:
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</TABLE>
<PAGE>
B. EQUAL VOTING RIGHTS PROPOSAL
To adopt the following resolution:
RESOLVED, that the Bylaws of the Company are hereby amended by
adding a new section reading as follows:
"Control Share Act. The provisions of Section 302A.671 of the
Minnesota Business Corporation Act shall not apply to control share
acquisitions of shares of this corporation."
<TABLE>
<CAPTION>
<S> <C>
FOR ADOPTION OF EQUAL VOTING RIGHTS PROPOSAL [ ] AGAINST ADOPTION OF EQUAL VOTING RIGHTS PROPOSAL [ ]
C. In their discretion with respect to any other matters as may properly come before the Special Meeting.
The undersigned hereby revokes any other proxy or proxies heretofore given to vote or act with respect to the Shares of the
Company held by the undersigned, and hereby ratifies and confirms all action the herein named attorneys and proxies, their
substitutes, or any of them lawfully take by virtue hereof. If properly executed, this proxy will be voted as directed above. If no
direction is indicated with respect to the above proposals, this proxy will be voted FOR the removal of current Directors, FOR the
election of all Fant Nominees and FOR the Equal Voting Rights Proposal and in the manner set forth in Item C above.
This proxy will be valid until the sooner of one year from the date indicated below and the completion of the Special Meeting.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE. REGISTERED HOLDERS MAY FAX BOTH SIDES OF
----------
THIS PROXY TO BEACON HILLS PARTNERS, INC. AT: (212) 843-4384!
DATED: ----------------------------------------------------------, 1998
please sign exactly as name appears on this proxy. When shares are held
jointly, joint owners should each sign. Executors, administrators,
trustees, etc. should indicate the capacity in which signing.
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Signature, if held jointly)
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD,
PLEASE CALL BEACON HILL PARTNERS, INC. ----------------------------------------------------------------------
(Title)
TOLL-FREE (800) 253-3814 OR CALL COLLECT (212) 843-8500
</TABLE>
<PAGE>
EXHIBIT (a)(19)
Fant Industries Inc.
2154 Highland Avenue
Birmingham, Alabama 35205
For further information contact:
Anthony J. Fant
(205) 933-1030
Richard Grubaugh
Beacon Hill partners
(212) 843-8500
FOR IMMEDIATE RELEASE
- ---------------------
FANT INDUSTRIES ANNOUNCES COMMENCEMENT OF PROXY SOLICITATION TO REPLACE
- -----------------------------------------------------------------------
HEI BOARD
- ---------
NEW YORK, NEW YORK - April 24, 1998 - Fant Industries Inc. and Anthony J. Fant,
its sole shareholder, have announced the commencement of a proxy solicitation to
replace the current HEI Board of Directors, other than Eugene W. Courtney, with
director nominees selected by Mr. Fant. The Fant nominees include: Mr. Fant,
head of Fant Broadcasting and other businesses in diverse industries; David W.
Ortlieb, a former director and member of senior management at several public
companies, including Abbott Laboratories, Immunomedics, Texas Biotechnology,
Tyco International, Erbamont and American Optical; Edwin W. Finch, III, an
investment banker specializing in mergers and acquisitions; and Steve E.
Tondera, Jr., the Chief Financial Officer of Fant Broadcasting.
"I am excited about working with this experienced and talented slate of
director nominees," said Fant. "We are bullish about HEI's growth potential
under new leadership and are eager to consummate our cash offer and to get to
work on moving HEI forward."
