<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HEI, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE>
[LOGO]
July 1, 1998
Dear Fellow Shareholder:
You should have recently received our most recent earnings report. Please
review it carefully, particularly in light of the important issues on the agenda
at the August 4 Special Shareholders Meeting. We believe the very positive
results for the quarter demonstrate HEI's growth potential in its current
markets and we are confident that you will support the efforts of your Board to
increase shareholder value by signing, dating and returning the enclosed WHITE
proxy card in the postage paid envelope provided with a vote AGAINST PROPOSALS 1
AND 3 AND FOR PROPOSAL 2.
The third quarter earnings report demonstrates that our strategy of
diversifying into the hearing and medical instrumentation and telecommunications
markets is showing results. As you will recall, we decided to exit the
high-density disk drive market after our largest customer moved its
manufacturing operations to its own offshore facilities. While the current
competitive environment is not favorable to continuation of that line of
business, keep in mind that our disk drive programs provided HEI with valuable
experience and enhanced capabilities and helped build our current strong
platform for growth through its significant contributions to our profits and
cash.
WE BELIEVE OUR NEW MARKETS HAVE THE POTENTIAL FOR SUBSTANTIAL EXPANSION AND
WE HAVE BEEN VERY SUCCESSFUL SO FAR IN PURSUING THAT STRATEGY. CONSIDER THE
FOLLOWING CHART THAT SHOWS OUR REVENUES, NONE OF WHICH COME FROM THE DISK DRIVE
MARKET, STEADILY INCREASING THROUGH THE FIRST THREE QUARTERS OF OUR 1998 FISCAL
YEAR:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEI REVENUE BY QUARTER
<S> <C>
FY1998 YTD
$ Millions
REVENUE
Qtr 1 4.1
Qtr 2 4.6
Qtr 3 6.0
</TABLE>
Of course, our strategy is not yet complete. Your Board and management are
continuing their efforts to improve operating results and to otherwise increase
shareholder value. As we previously wrote you, our financial adviser, Piper
Jaffray Inc., is currently exploring alternatives to maximize the value of all
shareholders' shares.
<PAGE>
JUST SAY NO TO FANT'S COSTLY, OPPORTUNISTIC EFFORTS TO SEIZE CONTROL OF YOUR
COMPANY AND, TO ADD INSULT TO INJURY, HAVE YOU, THE SHAREHOLDERS, PAY HIS
EXPENSES
We are committed to increasing shareholder value and continue to pursue that
goal aggressively, despite the disruption and expense caused by Anthony Fant's
opportunistic efforts and abusive tactics to seize control of your company. HEI
incurred $274,000, or 4 CENTS per share, in expenses in the third quarter to
respond to Fant's tender offer and proxy contest. We would not have incurred
those expenses if Mr. Fant had not made his coercive partial tender offer, and
then sought to remove your current independent directors and replace them with
his hand-picked nominees.
Among those expenses were the costs of defending the Company in what we
believe is a meritless lawsuit that Mr. Fant brought against us in Alabama, a
forum that we believe was deliberately picked by Fant to inconvenience your
management.
TO ADD INSULT TO INJURY, FANT HAS ALSO DECLARED THAT IF HE DOES SEIZE
CONTROL AT THE SPECIAL MEETING, HE INTENDS TO HAVE HEI PAY HIS PROXY
SOLICITATION EXPENSES, WHICH HE ESTIMATES WILL BE OVER $500,000. HE HAS STATED
THAT, IF ELECTED, THOSE EXPENSES WOULD BE PAID BY HEI TO THE EXTENT PERMITTED BY
LAW, WITHOUT THE APPROVAL OF HEI SHAREHOLDERS.
WITHOUT THE FANT-RELATED EXPENSES, OUR EARNINGS FOR THE THIRD QUARTER WOULD
HAVE BEEN 12 CENTS PER SHARE, RATHER THAN 8 CENTS. That amount, if retained in a
small company like HEI, could have made a substantial contribution to building
long-term shareholder value. The $274,000 spent last quarter in defense of the
Fant takeover could have paid the salaries of five experienced design engineers
for a full year, or could have paid for our new, state-of-the-art Laser Trimmer,
or for all the utilities for our 49,000 square foot factory for nearly two
years.
JUST SAY NO TO FANT'S MISLEADING, OUT-OF-CONTEXT AND OUT-OF-CONTROL STATISTICS
AND ASSERTIONS
Mr. Fant's efforts to seize control of HEI have included misleading
representations of the Company's results over the last several years. Do not be
misled by his efforts to win control of your company through these distortions.
Consider, instead, the facts:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEI ANNUAL REVENUE
<S> <C>
FISCAL YEAR 1990-1997
$ Millions
REVENUE
1990 8.5
1991 9.0
1992 14.1
1993 18.9
1994 17.3
1995 23.4
1996 20.7
1997 31.0
</TABLE>
- - 20% ANNUAL COMPOUND REVENUE GROWTH FY 1990 TO FY1997
- - FOR THE NINE MONTHS ENDED MAY 30, 1998, REVENUES WERE $14.7 MILLION.
- - AGGRESSIVE GROWTH STRATEGIES IN THE MEDICAL AND COMMUNICATIONS MARKETS
RESULTED IN A 53% REVENUE GROWTH IN THESE MARKETS FOR THE FIRST NINE MONTHS
OF FY 1998 COMPARED TO FY1997.
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEI ANNUAL PROFIT BEFORE TAX
<S> <C> <C>
FISCAL YEAR 1990-1997
$ Millions
NPBT % Return on Revenue
1990 -0.8 -9.7
1991 0.1 0.6
1992 2.0 14.2
1993 4.0 21.2
1994 2.1 12.2
1995 3.3 13.9
1996 2.8 13.7
1997 4.0 12.9
</TABLE>
- - ANNUAL PRETAX PROFITS HAVE EXCEEDED 12% TO 13% OF REVENUE, FY 1992 THROUGH
FY1997.
- - FOR THE NINE MONTHS ENDED MAY 30, 1998, PROFIT BEFORE TAX WAS $647,000 AND
RETURN ON REVENUE WAS 4.3%.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEI YEAR END CASH AND INVESTMENTS
<S> <C>
FISCAL YEAR 1990-1997
$ Millions
CASH/INV.
1990 0.0
1991 0.2
1992 0.9
1993 2.0
1994 2.3
1995 5.3
1996 6.7
1997 12.6
</TABLE>
- - ZERO TO $13 MILLION IN SEVEN YEARS.
- - STRONG FINANCIAL PLATFORM FOR GROWTH AND DIVERSIFICATION.
- - AS OF MAY 30, 1998, CASH AND INVESTMENTS WERE $13.4 MILLION.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEI YEAR END SHAREHOLDER EQUITY
<S> <C> <C>
FISCAL YEAR 1990-1997
$ Millions
EQUITY Book Value Per Share
1990 1.1 0.77
1991 1.6 0.56
1992 3.6 1.14
1993 6.8 1.86
1994 8.7 2.35
1995 11.0 2.90
1996 13.8 3.43
1997 17.0 4.14
</TABLE>
- - SHAREHOLDER EQUITY: $1.1 MILLION (FY 1990) TO $17 MILLION (FY1997)
- - RETAINED EARNINGS: NEGATIVE $3.1 MILLION (FY1990) TO POSITIVE $9.3 MILLION
(FY1997)
- - BOOK VALUE PER SHARE INCREASED FROM $0.77 (FY1990) TO $4.14 (FY1997)
- - AS OF MAY 30, 1998, SHAREHOLDER EQUITY WAS $17.5 MILLION AND BOOK VALUE PER
SHARE WAS $4.29.
<PAGE>
Do not be misled by Fant's outrageous assertions, misleading graphs and
out-of-context statistics. The facts are that annual pre-tax earnings ranged
from $100,000 in fiscal 1991 to $4,000,000 in fiscal 1993 and fiscal 1997, and
subsequent to 1991, were never less than $2,000,000.
Fant continues to use and abuse the one loss quarter that HEI has had during
the last 29 quarters in his desperate efforts to establish a lack of growth. In
his recent newspaper ads, it appears that he simply took our $4,000,000 pre-tax
earnings in fiscal 1993, subtracted the earnings from the first six months of
1998, and divided by five to suggest a continuing and substantial decline in
average annual earnings over the past five years. IS SOMEONE WHO PLAYS THESE
KINDS OF STATISTICAL GAMES SOMEONE YOU WANT TO CONTROL YOUR COMPANY?
The future of HEI is bright. Your current management team is committed to
increasing shareholder value and is pursuing a diversification strategy that is
producing results and is expected to accelerate in the future. Current
management and the Board have many decades of pertinent experience in the high
technology industry that HEI serves. Do not jeopardize the future value of your
investment in HEI by turning over control to Fant and his hand-picked nominees
who have no experience in HEI's business or markets. Fant's platitudes and
buzzwords are no substitute for hard-earned knowledge and experience in the
microelectronics business.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED WITH A VOTE AGAINST FANT'S PROPOSALS 1 AND 3.
PLEASE SHOW YOUR SUPPORT FOR YOUR BOARD'S EFFORTS TO MAXIMIZE VALUE FOR ALL THE
SHAREHOLDERS' SHARES BY VOTING FOR THE ELECTION OF THE CURRENT DIRECTORS
(PROPOSAL 2).
EVEN IF YOU HAVE ALREADY VOTED FOR FANT, YOU HAVE EVERY RIGHT TO CHANGE YOUR
MIND. REMEMBER, ONLY YOUR LATEST DATED, SIGNED PROXY CARD COUNTS.
Thank you for your support.
HEI, Inc. Board of Directors
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER, ONLY THAT ORGANIZATION
CAN VOTE YOUR SHARES. PLEASE DIRECT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT TO
EXECUTE ON YOUR BEHALF A WHITE PROXY CARD WITH A VOTE
AGAINST PROPOSALS 1 AND 3 AND FOR PROPOSAL 2.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE, PLEASE CONTACT OUR
PROXY SOLICITOR:
INNISFREE M&A INCORPORATED
TOLL FREE--1-888-750-5834
501 MADISON AVENUE
20TH FLOOR
NEW YORK, NY 10022
