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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
and
SCHEDULE 13D/*/
Under the Securities Exchange Act of 1934
(Amendment No.3)
-----------------------------------
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
-----------------------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION/1/ AMOUNT OF FILING FEE/2/
- -------------------------- -----------------------
$3,743,088 $749.00
/1/ Estimated for purposes of calculating the filing fee only. This
calculation assumes the purchase of 467,886 shares of Common Stock, par
value $0.05 per share, of HEI, Inc. for $8.00 net per share in cash.
/2/ 1/50 of 1% of Transaction Valuation.
/*/ This Statement is also being filed to satisfy the reporting requirements of
Section 13(d) of the Securities Exchange Act of 1934, as amended, and shall
constitute an amendment to the Statement on Schedule 13D filed with the
Securities and Exchange Commission on February 17, 1998 by Anthony J. Fant,
as amended.
/_/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: Not applicable. FILING PARTY: Not applicable
FORM OR REGISTRATION NO.: Not applicable. DATE FILED: Not applicable
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CUSIP NO. 404160103 14D-1 Page 1 of 2 Pages
--------- -----------------
1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Persons (Entities Only)
Fant Industries Inc.
63-119462
2) Check the Appropriate Box if a Member of a Group*
(a) [X]
(b) [X]
3) SEC Use Only
4) Sources of Funds*
WC, AF, OO
5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(e)or 2(f) [X]
6) Citizenship or Place of Organization
Delaware
7) Aggregate Amount Beneficially Owned by Each Reporting Person
10,000 Shares
8) Check Box if the Aggregate Amount in Row 7 Excludes Certain Shares* [ ]
9) Percent of Class Represented by Amount in Row 7
Less than one percent
10) Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
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CUSIP NO. 404160103 14D-1 Page 2 of 2 Pages
--------- -----------------
1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Persons (Entities Only)
Anthony J. Fant
2) Check the Appropriate Box if a Member of a Group*
(a) [X]
(b) [X]
3) SEC Use Only
4) Sources of Funds*
PF, OO
5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(e)or 2(f) [ ]
6) Citizenship or Place of Organization
United States
7) Aggregate Amount Beneficially Owned by Each Reporting Person
734,900 Shares
8) Check Box if the Aggregate Amount in Row 7 Excludes Certain Shares* [ ]
9 Percent of Class Represented by Amount in Row 7
18.1%
10) Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
3
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This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to the offer by Fant Industries Inc., a Delaware corporation (the
"Bidder"), to purchase up to 467,886 shares of common stock, par value $0.05 per
share (the "Shares"), of HEI, Inc., a Minnesota corporation (the "Company"), or
such greater number of Shares that will equal 11.5% of the Shares outstanding as
of the date Shares are accepted for payment, in each case together with the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of May 27, 1988 (the "Rights Agreement"), as
amended, between Target and Norwest Bank Minnesota, N.A., as a Rights Agent, at
a price of $8.00 per Share (and 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 March 10, 1998 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), which are annexed to
and filed with this Schedule 14D-1 as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1) SECURITY AND SUBJECT COMPANY.
--------------------------------
(a) The name of the subject company is HEI, Inc., a Minnesota corporation
and the address of the Company's principal executive office is P.O. Box 5000,
1495 Steiger Lake Lane, Victoria, MN 55386.
(b) The class of securities to which this Statement relates is the common
stock, par value $0.05 per share, of the Company, including the Rights. The
information set forth in the Introduction and Section 1 ("Terms of the Offer")
of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 5 ("Price Range of the Shares;
Dividends on the Shares") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2) IDENTITY AND BACKGROUND.
---------------------------
(a)-(d), (g) This statement is being filed by Fant Industries Inc., a
Delaware corporation (the "Bidder"). Information regarding the Bidder's
principal business and address of its principal office is set forth in Section 7
("Certain Information Concerning Purchaser") of the Offer to Purchase and is
incorporated herein by reference. The name, business address, present principal
occupation or employment, the material occupations, positions, offices or
employments for the past five years, the citizenship of each director and
executive officer of the Bidder, and the name, principal business and address of
any corporation or other organization in which such occupations, positions,
offices and employments are or were carried on are set forth in Schedule I of
the Offer to Purchase and are incorporated herein by reference.
(e)-(f) Neither the Bidder nor, to the best knowledge of the Bidder, any
of the directors or executive officers of the Bidder, has during the last five
years (i) been convicted in a criminal proceeding or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
4
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ITEM 3) PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the introduction, Section 7 ("Certain
Information Concerning Purchaser") and Section 9 ("Background and Purpose of the
Offer; Plans for the Company") of the offer to Purchase is incorporated herein
by reference.
ITEM 4) SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 8 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference. The Form
of Margin Agreement of Purchaser and the Letter of Guarantee, dated March 9,
1998, executed by Anthony J. Fant attached hereto as Exhibits (b)(1) and (b)(2),
respectively, are incorporated herein by reference.
ITEM 5) PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Section 9
("Background and Purpose of the Offer; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 11 ("Effect of the Offer on
the Market for the Shares; Stock Quotations; Registration Under the Exchange
Act; Margin Regulations") of the Offer to Purchase is incorporated herein by
reference.
ITEM 6) INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
-------------------------------------------------
(a) The information set forth in the Introduction and Section 7 ("Certain
Information Concerning Purchaser") of the Offer to Purchase is incorporated
herein by reference. Such information with respect to the Bidder is current
through the date hereof.
(b) The information set forth in Schedule II of the Offer to Purchase is
incorporated herein by reference.
ITEM 7) CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 7 ("Certain
Information Concerning Purchaser") and Section 9 ("Background and Purpose of the
Offer; Plans for the Company") of the Offer to Purchase is incorporated herein
by reference.
ITEM 8) PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 15 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
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ITEM 9) FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable. The Bidder was formed on February 24, 1998 solely for
the purpose of acquiring and holding Shares of the Company, and its sole
shareholder is a natural person, Anthony J. Fant. The Bidder has conducted no
operations. The Bidder's assets consist solely of $2 million cash, plus interest
thereon, and 10,000 Shares of the Company, all of which was contributed by Mr.
Fant. The Bidder's shareholder's equity consists of 1,000 shares of common
stock, no par value, all of which is held by Mr. Fant. The Bidder has no
liabilities. The Bidder's only source of income is interest earned on the cash
held by it. The information set forth in Section 8 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
ITEM 10) ADDITIONAL INFORMATION.
(a) The information set forth in Section 9 ("Background and Purpose of the
Offer; Plans for the Company") of the Offer to Purchase in incorprated herein by
reference.
(b)-(c) The information set forth in the Introduction, SECTION 9
("Background and Purpose of the Offer; Plans for the Company") and Section 13
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 11 ("Effect of the Offer on the
Market for Shares; Stock Quotations; Registration Under the Exchange Act; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated herein by reference,
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), is
incorporated herein by reference.
ITEM 11) MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) OFFER TO PURCHASE, DATED MARCH 10, 1998.
(2) Letter of Transmittal with respect to the Shares and Rights.
(3) Notice of Guaranteed Delivery.
(4) Letter, dated March 10, 1998, from the Bidder to brokers, dealers,
banks, trust companies and other nominees.
(5) Form of letter to clients for use by brokers, dealers, banks, trust
companies and other nominees.
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(7) Press Release, dated March 4, 1998, issued by the Bidder.
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(8) Summary Advertisement as published on March 10, 1998.
(b)(1) Form of Margin Agreement.
(2) Letter of Guarantee, dated March 9, 1998, executed by Anthony J. Fant.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
7
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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: March 10, 1998
By: /s/ Anthony J. Fant
-------------------------------
Anthony J. Fant
President and Chief Executive Officer
Fant Industries Inc.
8
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ---------------- --------------------------------------------------------
(a) (1) Offer to Purchase, dated March 10, 1998.
(2) Letter of Transmittal with respect to the Shares and Rights.
(3) Notice of Guaranteed Delivery.
(4) Letter, dated March 10, 1998, from the Bidder to
brokers, dealers, banks, trust companies and nominees.
(5) Form of letter to clients for use by brokers,
dealers, banks, trust companies and nominees to
their clients.
(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(7) Press Release, dated March 4, 1998, issued by the Bidder.
(8) Summary Advertisement as published on March 10, 1998.
(b)(1) Form of Margin Agreement.
(2) Letter of Guarantee, dated March 9, 1998, executed by
Anthony J. Fant.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
9
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EXHIBIT (a)(1)
OFFER TO PURCHASE
FOR CASH UP TO 467,886 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
AT
$8.00 NET PER SHARE IN CASH
BY
FANT INDUSTRIES INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, APRIL 7, 1998, UNLESS THE
OFFER IS EXTENDED TO A LATER DATE AND TIME (THE "EXPIRATION DATE").
SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, INCLUDING THE RIGHTS (AS DEFINED HEREIN) ASSOCIATED THEREWITH,
WHICH CONSTITUTES 11.5% OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON
STOCK (AND RIGHTS) OF HEI, INC. (THE "COMPANY") (THE "MINIMUM TENDER
CONDITION"), (2) THE ELECTION, BY BOARD RESOLUTION OR SHAREHOLDER VOTE, OF A
SUFFICIENT NUMBER OF PURCHASER'S DIRECTOR NOMINEES TO CONSTITUTE A MAJORITY OF
THE COMPANY'S BOARD OF DIRECTORS (THE "CHANGE OF CONTROL CONDITION"), (3)
REDEMPTION OF THE RIGHTS BY THE BOARD OF DIRECTORS OF THE COMPANY, OR
PURCHASER HAVING DETERMINED IN ITS SOLE DISCRETION THAT THE RIGHTS HAVE BEEN
INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER (THE "BOARD ACTION
CONDITION"), AND (4) THE ACQUISITION OF SHARES IN THE OFFER HAVING BEEN
APPROVED IN ACCORDANCE WITH THE REQUIREMENTS OF THE MINNESOTA CONTROL SHARE
ACT (AS DEFINED HEREIN) AND ACCORDED FULL VOTING RIGHTS, OR PURCHASER HAVING
DETERMINED IN ITS SOLE DISCRETION THAT SUCH STATUTE IS INAPPLICABLE TO THE
OFFER OR THAT IT OTHERWISE WILL NOT HAVE THE EFFECT OF DENYING VOTING RIGHTS
TO THE SHARES ACQUIRED BY PURCHASER IN THE OFFER (THE "CONTROL SHARE
CONDITION").
THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
THERE ARE PROCEDURES AVAILABLE TO THE COMPANY'S BOARD OF DIRECTORS IN THE
COMPANY'S BYLAWS AND THE MINNESOTA BUSINESS CORPORATION ACT PURSUANT TO WHICH
IT CAN ACT PROMPTLY TO SATISFY THE CHANGE OF CONTROL CONDITION AND THE BOARD
ACTION CONDITION. IN ADDITION, THE BOARD CAN CALL A SPECIAL MEETING OF
SHAREHOLDERS, WHICH COULD BE HELD AFTER ONLY 14 DAYS, FOR THE PURPOSE OF
ACTING TO SATISFY THE CONTROL SHARE CONDITION.
WE URGE THE BOARD TO COOPERATE WITH OUR EFFORTS TO CONSUMMATE THE OFFER
PROMPTLY.
(continued on next page)
----------------
THE DEALER MANAGER FOR THE OFFER IS:
RJ STEICHEN & CO
March 10, 1998
<PAGE>
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares (as defined herein) and the associated common stock purchase rights
should either (i) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal,
have such shareholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile), or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 2, an Agent's Message
(as defined herein), and any other required documents to the Depositary (as
defined herein) and either deliver the certificates for such Shares and, if
separate, the certificate(s) representing the associated Rights to the
Depositary along with the Letter of Transmittal (or facsimile) or deliver such
Shares (and Rights, if applicable) pursuant to the procedure for book-entry
transfer set forth in Section 2 or (ii) request such shareholder's broker,
dealer, bank, trust company or other nominee to effect the transaction for
such shareholder. A shareholder having Shares (and, if applicable, Rights)
registered in the name of a broker, dealer, bank, trust company or other
nominee must contact such broker, dealer, bank, trust company or other nominee
if such shareholder desires to tender such Shares (and, if applicable,
Rights). Unless the Board Action Condition with respect to the Rights is
satisfied, shareholders will be required to tender one Right for each Share
tendered in order to effect a valid tender of Shares.
If a shareholder desires to tender Shares and Rights and such shareholder's
certificates for Shares (or Rights, if applicable) are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis, or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected by following the procedure for guaranteed delivery set forth in
Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or to the Dealer Manager at its
address and telephone number set forth on the back cover of this Offer to
Purchase. A shareholder may also contact brokers, dealers, commercial banks,
trust companies or other nominees for assistance concerning the offer.
2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 4
THE TENDER OFFER.......................................................... 7
1. Terms of the Offer.................................................... 7
2. Procedure for Tendering Shares and Rights............................. 9
3. Withdrawal Rights..................................................... 13
4. Acceptance for Payment and Payment for the Shares..................... 13
5. Price Range of the Shares; Dividends on the Shares.................... 15
6. Certain Information Concerning the Company............................ 15
7. Certain Information Concerning Purchaser.............................. 18
8. Source and Amount of Funds............................................ 19
9. Background and Purpose of the Offer; Plans for the Company............ 20
10. Dividends and Distributions........................................... 27
11. Effect of the Offer on the Market for the Shares; Stock Quotations;
Registration under the Exchange Act; Margin Regulations.............. 28
12. Certain Conditions of the Offer....................................... 29
13. Certain Legal Matters................................................. 32
14. Certain Federal Income Tax Consequences............................... 33
15. Fees and Expenses..................................................... 34
16. Miscellaneous......................................................... 34
Schedule I................................................................ 36
Schedule II............................................................... 37
</TABLE>
3
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To the Holders of Common Stock (including the associated Common Stock Purchase
Rights) of HEI, Inc.:
INTRODUCTION
Fant Industries Inc., a Delaware corporation ("Purchaser") formed by Mr.
Anthony J. Fant solely for purposes of the Offer (as defined below), hereby
offers to purchase up to 467,886 shares of common stock, par value $0.05 per
share (the "Shares"), of HEI, Inc., a Minnesota corporation (the "Company"),
or such greater number of Shares that will equal 11.5% of the Shares
outstanding as of the date Shares are accepted for payment (such number of
Shares being the "Maximum Number"), in each case together with (unless and
until Purchaser declares that the Board Action Condition (as defined below) is
satisfied) the associated common stock purchase rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of May 27, 1988, as it may from
time to time be supplemented or amended (the "Rights Agreement"), between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights
Agent"), at a price of $8.00 per Share (and associated Right), net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). ALL
REFERENCES HEREIN TO RIGHTS SHALL INCLUDE ALL BENEFITS THAT MAY INURE TO
HOLDERS OF THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT AND, UNLESS THE CONTEXT
OTHERWISE REQUIRES, ALL REFERENCES HEREIN TO SHARES SHALL INCLUDE THE RIGHTS.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes in connection with the tender of Shares pursuant
to the Offer. Purchaser will pay all fees and expenses of Firstar Bank of
Minnesota, N.A., which is acting as the Depositary (the "Depositary"), Beacon
Hill Partners, Inc., which is acting as the Information Agent (the
"Information Agent"), and R.J. Steichen & Co., which is acting as the Dealer
Manager (the "Dealer Manager"), incurred in connection with the Offer. See
Section 15.
The purpose of the Offer is to increase the equity interest of Purchaser and
Mr. Fant in the Company and support their efforts to gain control over the
management, operations and assets of the Company. Upon gaining control of the
Company, Purchaser intends to (1) explore ways to deploy the Company's assets
more productively, which may include the initiation of a program to acquire
other companies in the industry, (2) seek to increase the utilization and
operating efficiency of the Company's recently expanded facility in Victoria,
Minnesota, and (3) seek to stabilize the Company's cash flows. Purchaser also
plans to reform the manner in which stock compensation is paid to the
Company's Board of Directors and senior management. Specifically, Purchaser
plans to link stock compensation more closely to the Company's operating
results and stock price performance, avoid the dilutive effects that the
current practices can have on non-management shareholder value, and eliminate
certain compensation arrangements that promote entrenchment of management.
Purchaser has no intention of liquidating the Company's assets, moving
operations out of Victoria, Minnesota, or otherwise disrupting operations.
Rather, Purchaser will seek to enhance the Company's long-term growth
prospects. Purchaser does not plan to effect, directly or indirectly, a
business combination with the Company.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH
PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO PROXY SOLICITATION MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Purchaser reserves the right to assign its right to purchase Shares tendered
pursuant to the Offer and its other rights under the Offer to one or more of
its affiliates, including Mr. Fant. Any such assignment shall not relieve
Purchaser of its obligations under the Offer and shall in no way prejudice the
rights of tendering shareholders to receive payment for Shares duly tendered.
4
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The Offer is subject to the fulfillment of a number of conditions,
including, without limitation, the conditions set forth below. THERE ARE
PROCEDURES AVAILABLE TO THE COMPANY'S BOARD OF DIRECTORS IN THE COMPANY'S
BYLAWS AND THE MINNESOTA BUSINESS CORPORATION ACT PURSUANT TO WHICH IT CAN ACT
PROMPTLY TO SATISFY THE CHANGE OF CONTROL CONDITION AND THE BOARD ACTION
CONDITION. IN ADDITION, THE BOARD CAN CALL A SPECIAL MEETING OF SHAREHOLDERS,
WHICH COULD BE HELD AFTER ONLY 14 DAYS, FOR THE PURPOSE OF ACTING TO SATISFY
THE CONTROL SHARE CONDITION.
WE URGE THE BOARD TO COOPERATE WITH OUR EFFORTS TO CONSUMMATE THE OFFER
PROMPTLY.
Minimum Tender Condition. THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) AT LEAST THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH
CONSTITUTES 11.5% OF THE TOTAL NUMBER OF ALL OUTSTANDING SHARES 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").
Purchaser reserves the right (subject to the applicable rules and regulations
of the Securities and Exchange Commission (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. See Section 1.
According to the Company's Quarterly Report on Form 10-Q for the period
ended November 29, 1997 (the "November 1997 Form 10-Q"), as of December 16,
1997, there were 4,068,576 Shares issued and outstanding. In addition, the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997
(the "August 1997 Form 10-K") states that, as of August 31, 1997 there were
447,000 Shares subject to options outstanding under the Company's stock option
plans. Purchaser and Mr. Fant currently own an aggregate of 734,900 Shares
which were recently acquired in open market purchases. Based on the foregoing,
the Minimum Number of Shares is 467,886. 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 PURCHASER'S
DIRECTOR NOMINEES TO CONSTITUTE A MAJORITY OF THE COMPANY'S BOARD OF
DIRECTORS.
The Change of Control Condition can be satisfied by the election of
Purchaser's director nominees either by the existing Board of Directors or by
the Company's shareholders. As set forth in the Company's Bylaws, the Board of
Directors 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 Purchaser's director nominees. Likewise, the Board can fill
any vacancies caused by resignations of current members by a resolution of the
remaining directors.
PURCHASER URGES THE BOARD TO TAKE ALL ACTIONS NECESSARY TO SATISFY THE
CHANGE OF CONTROL CONDITION, THEREBY PROVIDING TO THE COMPANY'S SHAREHOLDERS
THE OPPORTUNITY TO DECIDE FOR THEMSELVES WHETHER THEY WISH TO TAKE ADVANTAGE
OF THE OFFER.
If the Board of Directors fails to elect Purchaser's director nominees,
Purchaser anticipates that it will demand a special meeting for the purpose of
removing some or all of the present directors of the Company and electing
Purchaser's slate of director nominees through a shareholder vote. Purchaser
has not, as of this date, proposed a slate of director nominees. Purchaser's
slate of nominees will be proposed in compliance with the procedures set forth
in the Company's Bylaws and under the laws of the State of Minnesota, and
related disclosure will be made in accordance with applicable laws.
5
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Board Action Condition. THE OFFER IS CONDITIONED UPON PURCHASER BEING
SATISFIED IN ITS SOLE DISCRETION THAT THE BOARD HAS IRREVOCABLY TAKEN ALL
ACTIONS NECESSARY TO REDEEM THE RIGHTS OR PURCHASER HAVING DETERMINED IN ITS
SOLE DISCRETION THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE
INAPPLICABLE TO THE OFFER.
Under the Company's Rights Agreement, if Purchaser were to acquire more than
30% of the Shares without prior approval by the Board of Directors, the value
and voting rights of Purchaser's Shares could be severely diluted. A summary
description of the Rights Agreement is provided in Section 9.
PURCHASER URGES THE BOARD TO TAKE ALL ACTIONS NECESSARY TO SATISFY THE BOARD
ACTION CONDITION, THEREBY PROVIDING TO THE COMPANY'S SHAREHOLDERS THE
OPPORTUNITY TO DECIDE FOR THEMSELVES WHETHER THEY WISH TO TAKE ADVANTAGE OF
THE OFFER.
Purchaser presently intends, if necessary, to extend the Offer from time to
time until the Board Action Condition is satisfied or Purchaser determines, in
its sole discretion, that such condition is not reasonably likely to be
satisfied.
The Control Share Condition. THE OFFER IS CONDITIONED UPON PURCHASER'S
ACQUISITION OF SHARES IN THE OFFER HAVING BEEN APPROVED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE MINNESOTA CONTROL SHARE ACT (AS DEFINED BELOW) AND
ACCORDED FULL VOTING RIGHTS, OR PURCHASER HAVING DETERMINED IN ITS SOLE
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
PURCHASER IN THE OFFER.
Section 302A.671 of the Minnesota Business Corporation Act (the "Control
Share Act") will deny voting rights to substantially all of the Shares
acquired by Purchaser pursuant to the Offer, unless the acquisition of such
Shares is 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 Purchaser, by officers of the
Company and by any employee-directors of the Company).
The Control Share Condition will be satisfied if either (i) the Bylaws of
the Company 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 common stock, (ii) the
shareholders vote in accordance with the Control Share Act to confer full
voting rights to Shares acquired by Purchaser pursuant to the Offer, or (iii)
Purchaser in its sole discretion is otherwise satisfied that the Control Share
Act is inapplicable to Purchaser's acquisition of Shares in the Offer.
Under the Company's Bylaws, the Board of Directors has the ability, prior to
consummation of the Offer, to adopt a bylaw opting out of the Control Share
Act and to call a special meeting to be held in as little as 14 days to obtain
the necessary shareholder approval of such bylaw. Likewise, the Board of
Directors has the ability to call a special meeting to be held in as little as
14 days for the purpose of allowing the shareholders to approve Purchaser's
acquisition of Shares in the Offer.
PURCHASER URGES THE BOARD TO CALL A SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD PROMPTLY TO SATISFY THE CONTROL SHARE CONDITION, THEREBY PROVIDING TO THE
COMPANY'S SHAREHOLDERS THE OPPORTUNITY TO DECIDE FOR THEMSELVES WHETHER THEY
WISH TO TAKE ADVANTAGE OF THE OFFER.
If necessary, Purchaser will demand a special meeting of the Company's
shareholders for the purpose of either (i) amending the Bylaws of the Company
to opt out of the Control Share Act or (ii) conferring voting rights on all
Shares acquired by the Purchaser pursuant to the Offer.
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If a special meeting of the Company's shareholders to satisfy the Control
Share Condition or the Change of Control Condition is not held prior to the
then-scheduled Expiration Date (as defined in Section 1), the Purchaser
presently intends to extend the period of time for which the Offer is open
until immediately after such special meeting is held.
Although Purchaser 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. Certain other conditions to the Offer are described in
Section 12. Purchaser reserves the right (but shall not be obligated) to waive
any or all such conditions.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for the Maximum Number
of Shares validly tendered prior to the Expiration Date and not withdrawn in
accordance with Section 3. The term "Expiration Date" means 12:00 Midnight,
New York City time, on April 7, 1998, unless and until Purchaser, in its sole
discretion, has extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, will expire.
Consummation of the Offer is conditioned upon, among other things,
satisfaction of the Minimum Tender Condition, the Change of Control Condition,
the Board Action Condition, and the Control Share Condition. If any or all of
such conditions are not satisfied or any or all of the other events set forth
in Section 12 shall have occurred or shall be determined by Purchaser to have
occurred prior to the Expiration Date, Purchaser reserves the right (but shall
not be obligated) to (i) decline to purchase any or all of the Shares tendered
and terminate the Offer, and return all tendered Shares to tendering
shareholders, (ii) waive or reduce the Minimum Tender Condition or waive or
reduce any or all other conditions and, subject to complying with applicable
rules and regulations of the Commission, purchase all Shares validly tendered,
or (iii) extend the Offer and, subject to the right of shareholders to
withdraw Shares until the Expiration Date, retain the Shares which have been
tendered during the period or periods for which the Offer is extended.
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, Purchaser will, upon the terms and subject to the
conditions of the Offer, purchase the Maximum Number of Shares on a pro rata
basis (with adjustments to avoid purchases of fractional Shares) based upon
the number of Shares validly tendered and not withdrawn prior to the
Expiration Date. Because of the difficulty of determining the precise number
of Shares properly tendered and not withdrawn, if proration is required
Purchaser does not expect to be able to announce the final proration factor
until approximately seven New York Stock Exchange, Inc. ("NYSE") trading days
after the Expiration Date. Preliminary results of the proration will be
announced by press release as promptly as practicable after the Expiration
Date. Shareholders may obtain such preliminary information from the
Information Agent and may be able to obtain such information from their
brokers. Purchaser will not pay for any Shares accepted for payment pursuant
to the Offer until the final proration factor is known.
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during
which the Offer is open, including the occurrence of any of the events
specified in Section 12, by giving oral or written notice of such extension to
the Depositary. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the rights
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of a tendering shareholder to withdraw its Shares. See Section 3. Under no
circumstances will interest be paid on the purchase price for tendered Shares,
whether or not Purchaser exercises its right to extend the Offer.
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion at any time and from time
to time, (i) to delay acceptance for payment of, or, regardless of whether
such Shares were theretofore accepted for payment, payment for, any Shares in
order to comply in whole or in part with any applicable law, (ii) to terminate
the Offer and not accept for payment any Shares if any of the conditions
referred to in Section 12 has not been satisfied or upon the occurrence of any
of the events specified in Section 12 and (iii) to waive any condition or
otherwise amend the Offer in any respect by giving oral or written notice of
such delay, termination, waiver or amendment to the Depositary and by making a
public announcement thereof.
Purchaser acknowledges that (i) Rule 14e-l(c) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer, and (ii) Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of the preceding paragraph), any Shares upon the occurrence
of any of the events specified in Section 12 without extending the period of
time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement
in the case of an extension to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4 (c), 14d-6 (d) and 14e-1
under the Exchange Act, which require that material changes in the information
published, sent or given in connection with the Offer be promptly disseminated
to shareholders in a manner reasonably designed to inform them of such
changes) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4
(c), 14d-6 (d) and 14e-1 under the Exchange Act. Purchaser reserves the right
(but shall not be obligated) to accept payment for more than the Maximum
Number of Shares pursuant to the Offer. Purchaser has no present intention of
exercising such right. If a number of additional Shares in excess of two
percent of the outstanding Shares is to be accepted for payment, and, at the
time notice of Purchaser's decision to accept for payment such additional
Shares is first published, sent or given to holders of Shares, the Offer is
scheduled to expire at any time earlier than the tenth business day from the
date that such notice is so published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
If, prior to the Expiration Date, Purchaser should decide to increase or
decrease the number of Shares being sought or to increase or decrease the
consideration being offered in the Offer, such increase or decrease in the
number of Shares being sought or such increase or decrease in the
consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer. If at the time notice
of any such increase or decrease in the number of Shares being sought or such
increase or decrease in the consideration being offered is first published,
sent or given to holders of such Shares, the Offer is scheduled to expire at
any time earlier than the period ending on the tenth business day from and
including the date that such notice is first so published, sent or given, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 Midnight, New York City time.
A request has been made to the Company pursuant to Section 302A.461 of the
Minnesota Business Corporation Act for the use of the Company's shareholder
lists and security position listings for the purpose of communicating with
other shareholders of the Company and possibly soliciting their proxies and
related
8
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activities. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by Purchaser to record holders of
Shares, and will be furnished by Purchaser to brokers, dealers, banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder lists obtained by Purchaser (or, if applicable, who
are listed as participants in a clearing agency's security position listing)
for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES AND RIGHTS.
Valid Tender. For a shareholder to validly tender Shares and Rights pursuant
to the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as
defined below), and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date and either (i) certificates for
tendered Shares and Rights must be received by the Depositary at one of such
addresses or (ii) such Shares and Rights must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation (as defined below) must be received by the Depositary), in each
case prior to the Expiration Date, or (b) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below.
UNLESS THE BOARD ACTION CONDITION WITH RESPECT TO THE RIGHTS IS SATISFIED,
SHAREHOLDERS WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED TO
EFFECT A VALID TENDER OF SUCH SHARES. ACCORDINGLY, SHAREHOLDERS WHO SELL THEIR
RIGHTS SEPARATELY FROM THEIR SHARES AND DO NOT OTHERWISE ACQUIRE RIGHTS MAY
NOT BE ABLE TO SATISFY THE REQUIREMENTS OF THE OFFER FOR A VALID TENDER OF
SHARES. The Rights Agreement provides that until the close of business on the
Distribution Date, the Rights will be evidenced by the certificates for the
Shares and may be transferred with and only with the Shares. The Rights
Agreement further provides that, as soon as practicable following the
Distribution Date, separate certificates representing the Rights are to be
mailed by the Company or the Rights Agent to holders of record of Shares as of
the close of business on the Distribution Date. Purchaser believes that, as a
result of the commencement of the Offer, the Distribution Date may occur as
early as March 23, 1998, unless prior to such date the Board redeems the
Rights, amends the Rights Agreement to make the Rights inapplicable to the
Offer or delays the Distribution Date. UNLESS THE DISTRIBUTION DATE OCCURS, A
TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS.
If the Distribution Date occurs and separate certificates representing the
Rights are distributed by the Company or the Rights Agent to holders of Shares
prior to the time a holder's Shares are tendered pursuant to the Offer,
certificates representing a number of Rights equal to the number of Shares
tendered must be delivered to the Depositary, or, if available, a Book-Entry
Confirmation must be received by the Depositary with respect thereto, in order
for such Shares to be validly tendered. If the Distribution Date occurs and
separate certificates representing the Rights are not distributed prior to the
time Shares are tendered pursuant to the Offer, the Rights may be tendered
prior to a shareholder receiving the certificates for the Rights by use of the
guaranteed delivery procedures described below. A tender of Shares constitutes
an agreement by the tendering shareholder to deliver certificates representing
a number of Rights equal to the number of Shares tendered pursuant to the
Offer to the Depositary prior to expiration of the period permitted by such
guaranteed delivery procedures for delivery of certificates for, or a Book-
Entry Confirmation with respect to, the Rights (the "Rights Delivery Period").
However, after expiration of the Rights Delivery Period, Purchaser may elect
to reject as invalid a tender of Shares with respect to which certificates
for, or a Book-Entry Confirmation with respect to, an equal number of Rights
have not been received by the Depositary. Nevertheless, Purchaser will be
entitled to accept for payment Shares tendered by a shareholder prior to
receipt of the certificates for the Rights required to be tendered with such
Shares, or a Book-Entry Confirmation with respect to such Rights, and either
(a) subject to complying with applicable rules and regulations of the
Commission, withhold payment for such Shares pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights or
(b) make payment for Shares accepted for payment pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such
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<PAGE>
Rights in reliance upon the agreement of a tendering shareholder to deliver
the Rights and such guaranteed delivery procedures. Any determination by
Purchaser to make payment for Shares in reliance upon such agreement and such
guaranteed delivery procedures or, after expiration of the Rights Delivery
Period, to reject a tender as invalid will be made in the sole and absolute
discretion of Purchaser.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company and The Philadelphia Depository
Trust Company (each, a "Book-Entry Transfer Facility" and together, the "Book-
Entry Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase. Any financial institution that is a
participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account in accordance with such
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message, and any other
required documents, must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the tendering shareholder must
comply with the guaranteed delivery procedures described below. If the
Distribution Date occurs, the Depositary will also make a request to establish
an account with respect to the Rights at the Book-Entry Transfer Facilities,
but no assurance can be given that book-entry delivery of the Rights will be
available. If book-entry delivery of the Rights is available, the foregoing
book-entry transfer procedures will also apply to the Rights. If book-entry
delivery of the Rights is not available and the Distribution Date occurs, a
tendering shareholder will be required to tender the Rights by means of
physical delivery to the Depositary of certificates for the Rights (in which
event references in this Offer to Purchase to Book-Entry Confirmations with
respect to the Rights will be inapplicable). The confirmation of a book-entry
transfer of the Shares or the Rights into the Depositary's account at a Book-
Entry Transfer Facility as described above is referred to herein as a "Book-
Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY
IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF THE SHARES, THE RIGHTS, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
THE SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 2, includes any
participant in the Book-Entry Transfer Facilities' systems whose name appears
on a security position listing as the owner of the Shares) of the Shares and
the Rights tendered therewith and such registered holder has not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on the Letter of Transmittal or (b) if such
Shares and Rights are tendered for the account of a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). In all other
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cases, all signatures on the Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for the Shares or the Rights are registered in the name of
a person other than the signer of the Letter of Transmittal, or if payment is
to be made or certificates for the Shares or the Rights not tendered or not
accepted for payment are to be returned to a person other than the registered
holder of the certificates surrendered, the tendered certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a shareholder desires to tender the Shares and the
Rights pursuant to the Offer and such shareholder's certificates for the
Shares or the Rights are not immediately available (including because
certificates for Rights have not yet been distributed by the Company or the
Rights Agent) or the procedure for book-entry transfer cannot be completed on
a timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares and/or Rights, in proper
form for transfer (or a Book-Entry Confirmation with respect to all such
Shares and/or Rights), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents are received by the Depositary within (a)
in the case of the Shares, three trading days after the date of execution
of such Notice of Guaranteed Delivery or, (b) in the case of the Rights, a
period ending on the later of (1) three trading days after the date of
execution of such Notice of Guaranteed Delivery or (2) three business days
(as defined above) after the date certificates for the Rights are
distributed to shareholders by the Company or the Rights Agent. A "trading
day" is any day on which the NYSE is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares and, if the Distribution Date
occurs, certificates for (or a timely Book-Entry Confirmation, if available,
with respect to) the associated Rights (unless Purchaser elects to make
payment for such Shares pending receipt of the certificates for, or a Book-
Entry Confirmation with respect to, such Rights as described above), (b) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. Accordingly, tendering shareholders may be paid at
different times depending upon when certificates for the Shares (or the
Rights) or Book-Entry Confirmations with respect to the Shares (or the Rights,
if available) are actually received by the Depositary. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Board Action Condition with respect to the Rights is satisfied, the
guaranteed delivery procedures with respect to certificates for the Rights and
the requirement for the tender of the Rights will no longer apply.
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The valid tender of the Shares and, if applicable, the Rights pursuant to
one of the procedures described above will constitute a binding agreement
between the tendering shareholder and Purchaser upon the terms and subject to
the conditions of the Offer.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, the tendering shareholder ill irrevocably appoint designees of
Purchaser as such shareholder's attorneys-in-fact and proxies in the manner
set forth in the Letter of Transmittal, each with full power of substitution,
to the full extent of such shareholder's rights with respect to the Shares and
the Rights tendered by such shareholder and accepted for payment by Purchaser
and with respect to any and all other Shares, Rights or other securities or
rights issued or issuable in respect of such Shares and Rights on or after
March 10, 1998. All such proxies will be considered coupled with an interest
in the tendered Shares and Rights. Such appointment will be effective when,
and only to the extent that, Purchaser accepts for payment the Shares tendered
by such shareholder as provided herein. Upon such appointment, all prior
powers of attorney, proxies and consents given by such shareholder with
respect to such Shares, Rights or other securities or rights will, without
further action, be revoked and no subsequent powers of attorney, proxies,
consents or revocations may be given (and, if given, will not be deemed
effective). The designees of Purchaser will thereby be empowered to exercise
all voting and other rights with respect to such Shares, Rights and other
securities or rights in respect of any annual or special meeting of the
Company's shareholders, or any adjournment or postponement thereof, actions by
written consent in lieu of any such meeting or otherwise, as they in their
sole discretion deem proper. Purchaser reserves the right to require that, in
order for the Shares and the Rights to be deemed validly tendered, immediately
upon Purchaser's acceptance for payment of such Shares and Rights, Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares, Rights and other securities or rights, including voting at any
meeting of the Company's shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
or Rights will be determined by Purchaser, in its sole discretion, which
determination will be final and binding. Purchaser reserves the absolute right
to reject any or all tenders determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right
to waive any defect or irregularity in the tender of any Shares or Rights of
any particular shareholder whether or not similar defects or irregularities
are waived in the case of other shareholders. No tender of Shares or Rights
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of Purchaser, the Depositary,
the Information Agent, the Dealer Manager or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a shareholder tendering Shares
and Rights in the Offer must, unless an exemption applies, provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such shareholder is not subject to backup
withholding. If a shareholder does not provide such shareholder's correct TIN
or fails to provide the certifications described above, the Internal Revenue
Service (the "IRS") may impose a penalty on such shareholder and payment of
cash to such shareholder pursuant to the Offer may be subject to backup
withholding of 31%. All shareholders surrendering Shares pursuant to the Offer
should complete and sign the main signature form and the Substitute Form W-9
included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to Purchaser and the
Depositary). Certain shareholders (including, among others, all corporations
and certain foreign individuals and entities) are not subject to backup
withholding. In order to avoid backup withholding, non-corporate foreign
shareholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary. See Instruction 9 to the Letter of Transmittal.
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3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of the Shares and
the Rights are irrevocable. The Shares and the Rights tendered pursuant to the
Offer may be withdrawn pursuant to the procedures set forth below at any time
prior to the Expiration Date and, unless theretofore accepted for payment and
paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time
after May 8, 1998, or such later time as may apply if the Offer is extended.
The Shares or the Rights may not be withdrawn unless the associated Rights or
Shares, as the case may be, are also withdrawn. A withdrawal of the Shares or
the Rights will also constitute a withdrawal of the associated Rights or
Shares, as the case may be.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 3.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares and the Rights
to be withdrawn, the number of the Shares and the Rights to be withdrawn and
the name of the registered holder of the Shares and the Rights to be
withdrawn, if different from the name of the person who tendered the Shares
and the Rights. If certificates for the Shares or the Rights have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares or
Rights have been tendered by an Eligible Institution, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If the
Shares or the Rights have been delivered pursuant to the procedure for book-
entry transfer as set forth in Section 2, any notice of withdrawal must also
specify the name and number of the account at the applicable Book-Entry
Transfer Facility to be credited with the withdrawn Shares or Rights and
otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of the Shares and the Rights may not be rescinded, and
any Shares and Rights properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. However, withdrawn Shares and Rights may
be retendered by again following one of the procedures described in Section 2
at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
which determination will be final and binding. None of Purchaser, the
Depositary, the Information Agent, the Dealer Manager or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for the Maximum
Number of Shares validly tendered prior to the Expiration Date and not
properly withdrawn in accordance with Section 3 promptly after the later to
occur of the Expiration Date and the satisfaction or waiver of the conditions
set forth in Section 12. All questions as to the satisfaction of such terms
and conditions will be determined by Purchaser in its sole discretion, which
determination will be final and binding. See Sections 1 and 12.
Purchaser expressly reserves the right, in its sole discretion and subject
to the rules of the Commission, to delay acceptance for payment of or payment
for Shares in order to comply in whole or in part with any applicable law. Any
such delays will be effected in compliance with Rule 14e-l(c) under the
Exchange Act (relating to a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's
offer).
13
<PAGE>
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation with respect to) such Shares and, if
the Distribution Date occurs, certificates for (or a timely Book-Entry
Confirmation, if available, with respect to) the associated Rights (unless
Purchaser elects to make payment for such Shares pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights as
described in Section 2), (b) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and (c) any
other documents required by the Letter of Transmittal. The per Share
consideration paid to any shareholder pursuant to the Offer will be the
highest per Share consideration paid to any other shareholder pursuant to the
Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering shareholders. Under no circumstances will
interest be paid on the purchase price of the Shares to be paid by Purchaser,
regardless of any extension of the offer or any delay in making such payment.
Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering shareholders, Purchaser's obligation to make such
payment shall be satisfied and tendering shareholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. Purchaser will pay any
stock transfer taxes incident to the transfer to it of validly tendered
Shares, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders
of Shares pursuant to the Offer in excess of the Maximum Number of Shares), or
if Share Certificates are submitted evidencing more Shares than are tendered,
Share Certificates evidencing unpurchased Shares will be returned, without
expense to the tendering shareholder (or, in the case of Shares tendered by
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 3, such Shares will be
credited to an account maintained at the applicable Book-Entry Transfer
Facility), as promptly as practicable following the expiration or termination
of the Offer.
If, prior to the Expiration Date, Purchaser shall increase the consideration
offered to holders of Shares pursuant to the Offer, such consideration will be
paid to all holders whose Shares are purchased in the Offer.
If Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer (but subject to compliance with Rule 14e-l(c) under the Exchange Act),
the Depositary may, nevertheless, on behalf of Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 3.
14
<PAGE>
5. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.
The Shares commenced trading on the Nasdaq National Market and prices are
quoted on the Nasdaq National Market under the symbol "HEII". The following
table sets forth, for each of the periods indicated, the high and low sales
prices for the Shares on the Nasdaq National Market. The Company has not
declared or paid any cash dividends with respect to the Shares for the periods
indicated.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
--------------------
FISCAL YEAR ENDING HIGH LOW
------------------ ---------- ---------
<S> <C> <C>
AUGUST 31, 1996:
First Quarter...................................... 6.88 4.75
Second Quarter..................................... 6.63 5.25
Third Quarter...................................... 8.00 5.50
Fourth Quarter..................................... 8.00 5.50
AUGUST 31, 1997:
First Quarter...................................... 9.50 6.37
Second Quarter..................................... 12.00 8.00
Third Quarter...................................... 9.25 4.25
Fourth Quarter..................................... 6.00 4.56
AUGUST 31, 1998:
First Quarter...................................... 5.88 4.25
Second Quarter..................................... 7.88 4.13
</TABLE>
On December 1, 1997, the last trading day prior to the date on which
Purchaser began accumulating Shares, the last reported sale price on the
Nasdaq National Market for the Shares was $4.50. The Offer represents a 78%
premium over the reported closing price of the Shares on such date. On March
3, 1998, the last trading day prior to the public announcement of the terms of
the Offer, the last reported closing price on the Nasdaq National Market was
$6.375 per Share. The Offer represents a 25% premium to the reported closing
price of the Shares on March 3, 1998. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
As of the date of this Offer to Purchase, the Rights are attached to the
Shares and are not traded separately. As a result, the sales prices per Share
set forth above are also the high and low sales prices per Share and
associated Right during such periods. Upon the occurrence of the Distribution
Date, the Rights are to detach, and may trade separately, from the Shares.
Purchaser believes that, as a result of the commencement of the Offer on March
10, 1998, the Distribution Date may occur as early as March 23, 1998, unless
prior to such date the Board redeems the Rights, amends the Rights Agreement
to make the Rights inapplicable to the Offer or delays the Distribution Date.
IF THE DISTRIBUTION DATE OCCURS AND THE RIGHTS BEGIN TO TRADE SEPARATELY FROM
THE SHARES, THE COMPANY'S SHAREHOLDERS SHOULD ALSO OBTAIN A CURRENT MARKET
QUOTATION FOR THE RIGHTS.
6. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
taken from or based upon publicly available documents and records on file with
the Commission and other public sources. Neither Purchaser, the Information
Agent, nor the Dealer Manager assumes any responsibility for the accuracy or
completeness of the information concerning the Company contained in such
documents and records or for any failure by the Company to disclose events or
information which may have occurred or may affect the significance or accuracy
of any such information but which are unknown to Purchaser or the Information
Agent.
The Company is a Minnesota corporation, and its principal executive offices
are located at P.O. Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386,
telephone number (612) 443-2500. The following description of the Company's
business has been taken from the August 1997 Form 10-K:
15
<PAGE>
"HEI, Inc. is a designer and manufacturer of ultraminiature microelectronic
devices and high technology products incorporating these devices. HEI's
custom-built microelectronics are employed in medical, industrial and computer
markets. The optical switch product line and light pen product line, which
represented minor parts of the Company's sales, were sold in August 1997 and
August 1996, respectively.
"HEI sells through its Company-employed sales force based at corporate
headquarters."
"There are many sources of raw material supplies available nationally and
internationally for Company operations. The manufacture of Company products
involves assembly of components purchased from a wide variety of vendors. The
Company's business is not dependent on any single supplier."
"Following is the approximate percentage of the Company's sales to major
customers which accounted for more than 10% of total sales in fiscal years
1997, 1996 and 1995.
<TABLE>
<CAPTION>
CUSTOMER 1997 1996 1995
-------- ---- ---- ----
<S> <C> <C> <C>
Customer A.................. 55% 16%
Customer B.................. 27% 38% 12%
Customer C.................. 10%
Customer D.................. 30%
Customer E.................. 27%
</TABLE>
"In each of its product lines, the Company has significant competition,
including users who may produce their own alternative devices. The Company
obtains new business by identifying customer needs and engineering its
products to meet those needs. It competes on the basis of engineering
expertise, quality, service and price to obtain new and repeat orders."
"The estimated amount spent on Company-sponsored research and development
activities was approximately $843,000 and $849,000 for the years ended August
31, 1997 and 1996."
"At August 31, 1997, the Company employed approximately 120 persons of which
2 were part-time."
FIVE YEAR SUMMARY OF SELECTED FINANCIAL INFORMATION OF THE COMPANY (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31
-----------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales Cost of sales.............. $30,962 $20,680 $23,423 $17,295 $18,893
Cost of sales........................ 24,524 14,957 17,263 12,497 12,174
Gross profit......................... 6,438 5,723 6,160 4,798 6,719
Operating Expenses:
Selling, general and
administrative.................... 2,277 2,342 2,401 2,094 2,130
Research, development and
engineering....................... 843 849 754 679 614
Gain on sale of product line, net.. (215) (45)
Operating income..................... 3,533 2,577 3,005 2,025 3,975
Income before income taxes........... 3,980 2,833 3,250 2,102 3,997
Income taxes......................... 1,430 720 1,210 777 1,459
Net income........................... $ 2,550 $ 2,113 $ 2,040 $ 1,325 $ 2,538
Net income per common share.......... $ .60 $ .52 $ .52 $ .34 $ .66
Weighted average number of common and
common equivalent shares ........... 4,279 4,098 3,899 3,858 3,822
Balance sheet:
Working capital.................... $14,784 $10,088 $ 8,380 $ 5,927 $ 4,211
Total assets....................... 24,511 22,414 12,857 10,905 8,564
Long-term debt, less current matu-
rities............................ 4,537 5,271
Shareholders' equity............... 16,995 13,816 10,982 8,671 6,762
</TABLE>
16
<PAGE>
The following review of operations and financial information has been taken
from the November 1997 Form 10-Q.
"REVIEW OF OPERATIONS
NET SALES
1998 VS. 1997: HEI, Inc.'s net sales for the three months ended
November 29, 1997 decreased 35%, compared to the same period a year
ago reflecting the phase out in the last quarter of fiscal 1997 of
volume production of a device for use in high density disk drives.
Because the Company's sales are generally tied to the customer's
projected sales and production of the related product, the Company's
sales levels are subject to fluctuations outside the Company's
control. To the extent that sales to any one customer represent a
significant portion of the Company's sales, any change in the level of
sales to that customer can have a significant impact on the Company's
total sales. In addition, production for one customer may conclude
while production for a new customer has not yet begun or is not yet at
full volume. These factors may result in significant fluctuations in
sales from quarter to quarter.
GROSS PROFIT
1998 VS. 1997: For the three months ended November 29, 1997, gross
profit decreased $1,846,000 from last year, and the gross profit rate
decreased to 13% from 38% last year. The decreased gross profit rate
primarily reflects the impact of the first quarter in over a year
without a significant contribution from the disk drive market. Last
year's gross profit rate, at 38%, was relatively high due to the
impact of products shipped utilizing customer supplied materials.
OPERATING EXPENSES
1998 VS. 1997: Operating expenses for the three month period ended
November 29, 1997 decreased slightly from last year's comparable
period. The decrease in research, development and engineering expenses
was primarily due to reduced payroll costs. Operating expenses were
20% of net sales compared to 13% for the first quarter of last year.
The increase in the percentage to net sales is primarily due to the
effect of lower sales on fixed costs.
INCOME TAXES (BENEFIT)
The Company records income tax expense for interim periods based on
the expected effective rate for the full year. The expected effective
income tax rate for fiscal 1998 is approximately 35% compared to 36%
for fiscal 1997. Income tax benefit for the first quarter of fiscal
1998 was $55,000 as compared to income tax expense of $610,000 for the
same period a year ago.
NET INCOME (LOSS)
1998 VS. 1997: The Company had a net loss of $104,000 for the first
quarter of fiscal 1998 compared to net income of $1,010,000 for the
same period a year ago. The net loss was principally the result of
decreased sales and lower gross profit margins."
17
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) OF THE COMPANY FOR THE PERIODS ENDED
NOVEMBER 29, 1997 AND NOVEMBER 30, 1996(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Net sales............................................ $4,080 $6,258
Cost of sales........................................ 3,543 3,875
Gross profit......................................... 537 2,383
Operating Expenses:
Selling, general and administrative................ 635 607
Research, development and engineering.............. 168 213
Operating income (loss).............................. (266) 1,563
Other income, principally interest income............ (107) (57)
Income (Loss) before income taxes.................... (159) 1,620
Income taxes (benefit)............................... (55) 610
Net income (loss).................................... $ (104) $1,010
Net income (loss) per common share................... $(0.03) $ 0.24
Weighted average number of common and common
equivalent shares outstanding....................... 4,100 4,260
</TABLE>
Other Information. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the informational filing requirements
of the Exchange Act and, in accordance therewith, is obligated to file
periodic reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information,
as of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in such proxy statements and
distributed to the Company's shareholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities at the Commission's principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a site on the World Wide Web, and the
reports, proxy statements and other information filed by the Company with the
Commission may be accessed electronically on the Web at http://www.sec.gov.
Copies of such material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549.
7. CERTAIN INFORMATION CONCERNING PURCHASER.
Purchaser is a Delaware corporation, the principal executive offices of
which are located at 2154 Highland Avenue, Birmingham, AL 35205, telephone
number (205) 933-1030. Purchaser was formed for the sole purpose of acquiring
and holding shares of the Company's Common Stock. Purchaser has not conducted
any unrelated activities since its organization on February 24, 1998. Its sole
shareholder is Mr. Anthony J. Fant. The directors of Purchaser are Mr. Fant,
who is also its President and Chief Executive Officer, and Mr. Steve E.
Tondera, Jr., who is also its Vice President, Chief Financial Officer,
Treasurer and Secretary. Schedule I hereto sets forth additional background
information relating to the directors and executive officers of Purchaser.
As of the date hereof, Purchaser and Mr. Fant, together, beneficially own
734,900 Shares, representing approximately 18.1% of the 4,068,576 Shares
outstanding as of December 16, 1997, as reported in the November 1997 Form 10-
Q. Mr. Fant, as the sole shareholder of Purchaser, may be deemed to be the
beneficial owner of the Shares held by Purchaser. All such Shares were
acquired in open market transactions on the Nasdaq National Market.
18
<PAGE>
Schedule II hereto sets forth transactions in the Shares effected during the
past 60 days by Purchaser and Mr. Fant. Except as set forth in this Offer to
Purchase and Schedule II hereto, none of Purchaser, its executive officers and
directors nor, to the best knowledge of Purchaser, any associate or majority
owned subsidiary of such persons beneficially owns any equity security of the
Company, and none of Purchaser nor, to the best knowledge of Purchaser, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing has effected any
transaction in any equity security of the Company during the past 60 days.
Except an set forth in this Offer to Purchase, Purchaser does not (a) have
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan
or option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies; (b) been engaged in contacts,
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 (c) 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 applicable to the
Offer.
8. SOURCE AND AMOUNT OF FUNDS.
Purchaser estimates that the total amount of funds required by Purchaser to
acquire 467,886 Shares pursuant to the Offer and to pay related fees and
expenses will be approximately $4,400,000. To consummate the Offer, Purchaser
will rely upon capital contributions or advances made by Mr. Fant, as its sole
shareholder (including, to date, a cash contribution of $2 million), as well
as borrowings against its margin account with J. C. Bradford & Co. in the
ordinary course of business. Mr. Fant has executed a personal guarantee of
Purchaser's obligation to consummate of the Offer subject to and in accordance
with its terms and conditions. None of the 734,900 Shares beneficially owned
by Mr. Fant are held on margin or subject to any other borrowings. Purchaser
believes that its financial resources, together with those of Mr. Fant, are
sufficient to satisfy its obligations under the Offer. Accordingly, the Offer
is not conditioned upon Purchaser obtaining financing.
19
<PAGE>
9. BACKGROUND AND PURPOSE OF THE OFFER; PLANS FOR THE COMPANY.
Background of the Offer. Upon accumulating 594,900 Shares, Mr. Fant filed a
statement on Schedule 13D with the Securities and Exchange Commission and
delivered the following letter to the Company's Board of Directors:
Anthony J. Fant
2154 Highland Avenue
Birmingham, Alabama 35205
February 17, 1998
To the Board of Directors
c/o Mr. Eugene W. Courtney
HEI, Inc.
1495 Steiger Lake Lane
Victoria, Minnesota 55386
Gentlemen:
I am filing today with the Securities and Exchange Commission a
Schedule 13D relating to my beneficial ownership of the Common Stock of
HEI, Inc. (the "Company").
In the Schedule 13D, I disclose my intent to seek to gain control of
the Company's Board of Directors. I have purchased 594,900 shares
(approximately 14.6%) of the Company's outstanding Common Stock based
on my belief that the stock has been undervalued. When I began
acquiring shares in December, 1997, the price was $4.50, which I
consider to be the stock's undisturbed price.
I have noted a marked decline in the Company's operating results and
stock price since early 1997 and believe that the Board of Directors
has failed to take appropriate actions to realize the Company's true
value. Meanwhile, the directors and top management have continued to
reward themselves with stock compensation that bears no relationship to
operating results or the stock price and is on terms more favorable
than those made available to non-management employees.
Upon gaining control, I intend to evaluate a number of constructive
alternatives with a view toward maximizing value for all shareholders.
I also intend to reform the manner in which stock compensation is paid
to directors and top executives. Specifically, I plan to link stock
compensation more closely to the Company's operating results and stock
price performance, avoid the dilutive effects that current practices
can have on non-management shareholder value, and eliminate certain
compensation arrangements that promote entrenchment of management.
As the Company's single largest shareholder, I trust that you will
respect my interest in leading an honest dialogue concerning the
Company's future direction. Additionally, as I continue taking steps to
gain control, I will expect you to recognize and fulfill your fiduciary
duties to all shareholders and to refrain from taking any action that
may adversely affect our rights as shareholders or impede the
maximization of shareholder value. Please recognize that any additional
entrenchment-motivated actions you might take would result in
significant costs to the Company and would reduce value for all
shareholders.
Very truly yours,
Anthony J. Fant
20
<PAGE>
Neither the Company's Board of Directors nor management responded directly
to Mr. Fant's February 17, 1998 letter.
On February 26, 1998, Purchaser made a demand on the Company for a
shareholders list pursuant to Section 302A.461 of the Minnesota Business
Corporation Act. In addition, a financial advisor acting on behalf of
Purchaser contacted the Company's President, Mr. Eugene Courtney, who agreed
to meet with the financial advisor on February 27, 1998.
At the meeting on February 27, 1998 between Mr. Courtney and the financial
advisor, it was agreed that Mr. Fant would make himself available to meet with
directors of the Company on March 2, 1998 to discuss the possibility of
obtaining the directors' support for Purchaser's desire to gain control of the
Board of Directors of the Company.
On March 2, 1998, a meeting between representatives of Purchaser and
representatives of the Company was held to discuss the possibility of a
friendly and negotiated change of control. No meaningful progress was made
toward achieving that outcome.
On March 4, 1998, Purchaser issued the following press release announcing
the Offer:
Fant Industries Inc.
2154 Highland Avenue
Birmingham, Alabama 35205
Phone: (205) 933-1030
For further information contact:
Anthony J. Fant
(205) 933-1030
Richard Grubaugh
Beacon Hill Partners
(212) 843-8500
FOR IMMEDIATE RELEASE
FANT INDUSTRIES MAKES UNSOLICITED OFFER FOR ADDITIONAL SHARES OF HEI,
INC.
NEW YORK, NEW YORK--March 4, 1998--Fant Industries Inc., an acquisition
vehicle of Anthony J. Fant of Birmingham, Alabama, has announced a cash
tender offer for 468,000 shares, or 11 1/2%, of the Common Stock of
HEI, Inc. (Nasdaq: HEII) of Victoria, Minnesota, at a price of $8.00
net per share. The proposed offer represents a 25% premium over
yesterday's closing price of $6 3/8 per share 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 HEI's Common Stock.
HEI designs and manufactures ultraminiature microelectronic devices for
medical, telecommunications, computer peripheral and industrial control
applications worldwide.
Fant Industries stated that the purpose of the offer is to increase its
economic stake in HEI and support its efforts to gain control of HEI's
Board of Directors. Completion of the tender offer would boost Fant
Industries' HEI holdings to almost 30% when added to its current
position and shares held directly by Mr. Fant.
The Fant Industries tender offer, proration period and withdrawal
rights will expire on Tuesday, April 7, 1998 at 12:00 midnight New York
City Time unless extended.
R.J. Steichen & Co. is the Dealer Manager, and Beacon Hill Partners,
Inc. is the Information Agent.
21
<PAGE>
Promptly following issuance of the press release, Mr. Fant telephoned Mr.
Courtney to discuss with him the Offer and to propose that Mr. Courtney remain
as President of the Company for an unspecified period of time following
consummation of the Offer. Later that same day, Mr Fant sent the following
letter to Mr. Courtney:
FANT INDUSTRIES INC.
2154 Highland Avenue
Birmingham, Alabama 35205
March 4, 1998
Mr. Eugene W. Courtney
President
HEI, Inc.
1495 Steiger Lake Lane
Victoria, Minnesota 55386
Dear Gene:
Thank you again for taking the time to sit down with us Monday and
for bringing together other members of your team.
As I mentioned to you this morning, we have announced an offer to
buy 468,000 additional shares of the Company's Common Stock
(approximately 11.5% of the outstanding shares) subject to certain
conditions. We remain committed to a long-term investment in the
Company, and this purchase would boost our holdings to just under 30%
of the Company's outstanding Common Stock.
We remain committed to the discussions we have begun with you
concerning the Company's future and making changes on the Board of
Directors. Our intent is simply to keep these discussions within the
framework of a forward-moving process. We believe this to be in the
shareholders' best interest, based primarily upon remarks by your
transaction lawyer suggesting the prospect of an extended process that
may elude useful definition. We believe the industry is changing
rapidly, and we fear that windows of opportunity may close if
negotiations become protracted.
By opening up the process to shareholders, we can better ensure that
we will be in a position to capitalize on the opportunities that may
arise. We also believe an offer such as this is the most efficient
manner by which we may increase our financial commitment to the
Company.
Again, our offer need not be mutually exclusive with the current
dialogue between us, and we hope that the two things can co-exist and,
in fact, support each other.
We reiterate that we have no intention of liquidating the Company's
assets, putting the Company on the block, moving operations out of
Victoria, or otherwise disrupting the business. Our commitment is long
term, and we will remain committed to maximizing shareholder value. We
urge you to work with us in leading the Company into the twenty-first
century.
Very truly yours,
Anthony J. Fant
President
22
<PAGE>
On March 5, 1998, Mr. Fant received the following letter from Mr.
Courtney:
March 5, 1998
Mr. Anthony J. Fant, President
Fant Industries Inc.
2154 Highland Avenue
Birmingham, Alabama 35205
Dear Mr. Fant:
We appreciated the opportunity to meet with you earlier this week. I
am disappointed, however, that you have chosen to proceed with a
tender offer without allowing us to engage in further discussions
concerning your ideas for the company and the backgrounds of you and
your associates.
In view of the tender offer, the Board obviously has obligations to
consider the offer and, to the extent that you have information that
might be useful in our considerations, please provide it to me.
Further, if you believe it to be appropriate to provide such
information, it would be helpful if it were provided in writing.
While the process of consideration and response will doubtless
require my full and immediate attention, I am still hopeful that we
may find a mutually convenient time to meet personally and continue
discussions of your ideas and plans for HEI, and I will look forward
to that opportunity.
Sincerely,
Eugene W. Courtney
23
<PAGE>
In response to Mr. Courtney's March 5, 1998 letter, Mr. Fant sent
the following letter to Mr. Courtney on the same day:
FANT INDUSTRIES INC.
2154 Highland Avenue
Birmingham, Alabama 35205
March 5, 1998
Mr. Eugene W. Courtney
President & CEO
HEI, Inc.
P.O. Box 5000
Victoria, MN 55386-5000
Dear Mr. Courtney:
Thank you for your letter of today. We would also like to continue
our discussions from earlier this week and do not feel the tender
offer impedes that process.
We appreciate your consideration of our offer. We believe it is a
very attractive offer and one that is in the best interest of all
shareholders. We would remind you that, at $8 per share, our offer
represents a 78% premium over the closing price of $4.50 per share on
December 1, 1997, which was the day before we began accumulating the
stock.
Regarding your request for information about our tender offer, we
will forward such information promptly upon its completion. We expect
to deliver such information to you no later than Tuesday, March 10th.
We will also furnish additional information about ourselves and our
plans in a timely manner in accordance with applicable laws.
As we discussed yesterday, we are travelling to Minneapolis this
afternoon and have kept our schedules open for a meeting with you
Friday. As we are in transit, please call John Sanders in our
Birmingham office at (205) 933-1030, to let us know when you will be
available. Alternatively, you may contact us directly at the Embassy
Suites Centre Village in downtown Minneapolis at (612) 333-3111.
Very truly yours,
Anthony J. Fant
President and CEO
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Later on March 5, 1998, Mr. Courtney contacted Purchaser's office and
indicated that he would not meet with Mr. Fant on Friday, March 6, 1998. In
response, Mr. Fant sent the following letter to Mr. Courtney:
FANT INDUSTRIES INC.
2154 Highland Avenue
Birmingham, Alabama 35205
March 6, 1998
Mr. Eugene W. Courtney
President & CEO
HEI, Inc.
P.O. Box 5000
Victoria, MN 55386-5000
Dear Mr. Courtney:
Based on our telephone conversation Wednesday morning, and your subsequent
letter, I understood we would meet Friday. I was very disappointed on arriving
at my hotel in Minneapolis last night to find a message saying you would not
be able to meet with us.
I hope this development doesn't indicate an unwillingness to continue our
discussions. I firmly believe a negotiated solution for change in control of
the Board of Directors is in everyone's best interest, particularly the
shareholders. It is my desire to expeditiously pursue such an outcome.
Very truly yours,
Anthony J. Fant
President and CEO
Except for the foregoing, there have been no material contacts or
negotiations between Purchaser or its affiliates, on the one hand, and the
Company and its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of Shares or
other securities of the Company, an election of directors, or a sale or other
transfer of a material amount of the Company's assets.
Purpose of the Offer. The purpose of the Offer is to increase the equity
interest of Purchaser and Mr. Fant in the Company and support their efforts to
gain control over the management, operations and assets of the Company. Upon
gaining control of the Company, Purchaser intends to (1) explore ways to
deploy the Company's assets more productively, which may include the
initiation of a program to acquire other companies in the industry, (2) seek
to increase the utilization and operating efficiency of the Company's recently
expanded facility in Victoria, Minnesota, and (3) seek to stabilize the
Company's cash flows. The Purchaser also plans to reform the manner in which
stock compensation is paid to the Company's Board of Directors and senior
management. Specifically, Purchaser plans to link stock compensation more
closely to the Company's operating results and stock price performance, avoid
the dilutive effects that the current practices can have on non-management
shareholder value, and eliminate certain compensation arrangements that
promote entrenchment of management. Purchaser has no intention of liquidating
the Company's assets, moving operations out of Victoria, Minnesota, or
otherwise disrupting operations. Rather, Purchaser will seek to enhance the
Company's long-term growth prospects. Purchaser does not plan to effect,
directly or indirectly, a business combination with the Company.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH
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PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO PROXY SOLICITATION MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE
ACT, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
Plans for the Company. In connection with the Offer, Purchaser has reviewed,
and will continue to review, on the basis of publicly available information,
various possible business strategies that it might seek to influence the
Company to adopt in the event that Purchaser is able to obtain control of the
Company's Board of Directors. In addition, if and to the extent that Purchaser
is able to control the Company or otherwise obtains access to the books and
records of the Company, Purchaser intends to conduct a detailed review of the
Company and its assets, financial projections, corporate structure,
capitalization, operations, management and personnel and consider and
determine what, if any, changes would be desirable in light of the
circumstances which then exist. Such strategies could include, among other
things, changes in the Company's business, corporate structure,
capitalization, operations or management. However, Purchaser has no intention
of liquidating the Company's assets, moving operations out of Victoria,
Minnesota, or otherwise disrupting operations. Purchaser has no present
intention to seek to acquire the entire equity interest in the Company or to
consummate a merger or other business combination transaction between the
Company and Purchaser.
The Rights Agreement. 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 limited extension 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 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).
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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
Ncurrent 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 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 Agreements 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, copies of which may be obtained in the manner set forth in Section
6.
Certain Change of Control Provisions. Based on publicly available
information, Purchaser believes that the Company is a party to employment
agreements with certain of its executive officers, including Messrs. Eugene W.
Courtney, Jerald H. Mortenson and Dale A. Nordquist, and that each such
agreement includes a "change of control" provision which may be triggered by
recomposition of the Company's Board of Directors in the manner contemplated
by the Offer. The Company's 1989 Omnibus Stock Compensation Plan, as amended,
as well as its 1991 Stock Option Plan for Non-employee Directors, as amended,
also includes change of control provisions that may be triggered by a
recomposition of the Board or by consummation of the Offer. If triggered, such
change of control provisions could operate to vest certain monetary and other
rights in the Company's employees, officers and non-employee directors
(including "golden parachutes" in the case of Messrs. Courtney, Mortenson and
Nordquist). The Offer is not conditioned upon waiver or elimination of any
such rights. Copies of the foregoing agreements and plans may be obtained in
the manner set forth in Section 6.
10. DIVIDENDS AND DISTRIBUTIONS.
If, on or after March 10, 1998, the Company should split, combine or
otherwise change the Shares or its capitalization, or shall disclose that it
has taken any such action, then, subject to the provisions of Section 12,
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<PAGE>
Purchaser may, in its sole judgment, make such adjustments in the Offer price
and the other terms of the Offer as it deems appropriate to reflect such
split, combination or other change (including, without limitation, the number
and type of securities offered to be purchased, the amounts payable therefor
and the fees payable hereunder).
If, on or after March 10, 1998, the Company should declare or pay any cash
or stock dividend or other distribution on or issue any rights with respect to
the Shares payable or distributable to shareholders of record on a date before
the transfer to the name of Purchaser or its nominee or transferee on the
Company's stock transfer records of the Shares accepted for payment pursuant
to the Offer, then, subject to the provisions of Section 12, (i) the Offer
price payable by Purchaser pursuant to the Offer will be reduced by the amount
of any such cash dividend or cash distribution and (ii) the whole of any such
non-cash dividend, distribution or right will be received and held by the
tendering shareholder for the account of Purchaser and shall be required to be
promptly remitted and transferred by each tendering shareholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance, Purchaser will be entitled
to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct
from the purchase price the amount or value thereof, as determined by
Purchaser, in its sole discretion.
11. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATIONS;
REGISTRATION UNDER THE EXCHANGE ACT; MARGIN REGULATIONS.
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade
publicly. Consequently, depending upon the number of Shares purchased and the
number of remaining holders of Shares, the purchase of Shares pursuant to the
Offer may adversely affect the liquidity and market value of the remaining
Shares held by the public. Purchaser cannot predict whether the reduction in
the number of Shares that might otherwise trade publicly would have an adverse
or beneficial effect on the market price for, or marketability of, the Shares
or whether it would cause future market prices to be greater or less than the
Offer price.
The Shares are currently listed and traded on the Nasdaq National Market,
which constitutes the principal trading market for the Shares. Depending upon
the aggregate market value and the number of Shares not purchased pursuant to
the Offer, the Shares may no longer meet the quantitative maintenance criteria
of the National Association of Securities Dealers, Inc. (the "NASD") for
continued inclusion on the Nasdaq National Market and may cease to be
authorized for quotation on such markets. The Nasdaq National Market's
published guidelines require that an issuer have at least 200,000 publicly
held shares (exclusive of holdings of officers, directors or beneficial owners
of more than 10%), held either by at least 400 beneficial shareholders or 300
beneficial shareholders of round lots, with a market value of at least $1
million and must have net tangible assets of at least either $1 million, $2
million or $4 million depending on profitability levels during the issuer's
four most recent fiscal years. If these standards are not met, shares of an
issuer might nevertheless continue to be included in the Nasdaq Stock Market
with quotations published in the Nasdaq Stock Market's "additional list" or in
one of the local lists, but if the number of beneficial holders were to fall
below 300, or if the number of publicly held shares were to fall below 100,000
or there were not at least two registered and active market makers for the
Shares, the NASD's rules provide that such shares would no longer be
"qualified for reporting" by the Nasdaq Stock Market.
The Offer will not result in a reduction of the Company's publicly held
shares below the required minimum amount. However, it is possible that the
number of beneficial holders of the Shares may significantly decrease if
Purchaser acquires 467,886 or more Shares pursuant to the Offer. According to
the August 1997 Form 10-K, as of August 31, 1997, there were approximately 490
holders of record of Shares, not including beneficial owners whose shares were
in street names. If, as a result of the purchase of Shares pursuant to the
Offer or otherwise, the Shares no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq National Market or in any other tier of the
Nasdaq Stock Market, and the Shares are no longer included in the Nasdaq
National Market or in any other tier of the Nasdaq Stock Market, the market
for Shares could be adversely affected. In
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the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that Shares would continue to trade in the over-the-counter market and that
price quotations would be reported by other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of Shares remaining at such time, the
interest in maintaining a market in Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the
Commission if such Shares are not listed on a national securities exchange and
there are fewer than 300 holders of record of the Shares. The termination of
the registration of the Shares under the Exchange Act would substantially
reduce the information required to be furnished by the Company to its
shareholders and to the Commission, and would make certain of the provisions
of the Exchange Act, such as the short-swing profit recovery provisions of
Section 16(b) and the requirement of furnishing a proxy statement in
connection with shareholders' meetings and the related requirement of an
annual report to shareholders, and the requirements of Rule 13e-3 with respect
to going private transactions, no longer applicable with respect to the Shares
or to the Company. Furthermore, if registration of the Shares under the
Exchange Act were terminated, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended, may be impaired or, with respect to certain persons, eliminated.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers.
12. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer, and in addition to (and not in
limitation of) Purchaser's rights to extend and amend the Offer at any time,
in its sole discretion, Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-l(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any
tendered Shares, and may terminate the Offer, if, in the sole judgment of
Purchaser (i) at or prior to the Expiration Date, the Control Share Condition
has not been satisfied, or (ii) at any time on or after March 10, 1998 and
before the time of payment for any such Shares (whether or not any Shares have
theretofore been accepted for payment pursuant to the Offer), any of the
following events or conditions exist or shall occur and remain in effect or
shall be determined by Purchaser to exist or have occurred:
(a) there shall have been instituted, pending or threatened any action or
proceeding by any court, government or governmental authority or agency,
domestic or foreign, which (i) seeks to challenge the acquisition by
Purchaser (or any of its affiliates) of Shares pursuant to the Offer,
restrain or prohibit the making or consummation of the Offer, or obtain
damages in connection therewith in an amount which would reasonably be
expected to have a material adverse effect, (ii) seeks to make the purchase
of or payment for some or all of the Shares pursuant to the Offer illegal,
(iii) seeks to impose limitations on the ability of Purchaser (or any of
its affiliates) effectively to acquire or hold, or to require Purchaser or
the Company or any of their respective affiliates or subsidiaries to
dispose of or hold separate, any portion of the assets or the business of
Purchaser and its affiliates or any material portion of the assets or the
business of the Company and its subsidiaries taken as a whole, as a result
of the Offer, (iv) seeks to impose limitations on the ability of Purchaser
(or its affiliates) to exercise full rights of ownership of the Shares
purchased by it, including, without limitation, the right to vote the
Shares purchased by it on all matters
29
<PAGE>
properly presented to the shareholders of the Company, or (v) otherwise, in
the sole judgment of Purchaser, might materially adversely affect Purchaser
or the value of the Shares; or
(b) there shall have been promulgated, enacted, issued entered, enforced
or deemed applicable to the Offer, by any statute, rule, regulation,
judgment, decree, order or injunction, that is reasonably likely to
directly or indirectly result in any of the consequences referred to in
clauses (i) through (v) of subsection (a) above; or
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, capitalization, shareholders' equity,
condition (financial or otherwise), operations, licenses, franchises,
permits, permit applications, results of operations or prospects of the
Company which, in the sole judgment of Purchaser, is or may be materially
adverse, or Purchaser shall have become aware of any fact which, in the
sole judgment of Purchaser, has or may have material adverse significance
with respect to either the value of the Company or the value of the Shares
to Purchaser;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the Nasdaq National Market, for
a period in excess of three hours (excluding suspensions or limitations
resulting solely from physical damage or interference with the Nasdaq Stock
Market not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks by federal or
state authorities in the United States, (iii) any limitation (whether or
not mandatory) by any governmental authority or agency on, or other event
which, in the sole judgment of Purchaser, might materially adversely affect
the extension of credit by banks or other lending institutions, (iv)
commencement of a war, armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or any other currency exchange rates or a
suspension of, or limitation on, the markets therefor, (vi) any decline in
either the Dow Jones Industrial Average or the Standard & Poor's Index of
500 Industrial Companies by an amount in excess of 15% measured from the
close of business on March 10, 1998 or (vii) in the case of any of the
foregoing existing on March 10, 1998, a material acceleration or worsening
thereof;
(e) the Company or any of its subsidiaries or affiliates shall have (i)
split, combined or otherwise changed, or authorized or proposed the split,
combination or other change, of the Shares or its capitalization, (ii)
acquired or otherwise caused a reduction in the number of, or authorized or
proposed the acquisition or other reduction in the number of, any presently
outstanding Shares or other securities or other equity interests, (iii)
issued, distributed or sold, or authorized or proposed the issuance,
distribution or sale of, additional Shares, other than Shares issued or
sold upon the exercise or conversion (in accordance with the publicly
disclosed terms thereof) of employee stock options outstanding on August
31, 1997 or issued since that date in the ordinary course of business
consistent with past practice, shares of any other class of capital stock
or other equity interests, other voting securities, debt securities or any
securities convertible into, or rights, warrants or options, conditional or
otherwise, to acquire, any of the foregoing, (iv) declared, paid or
proposed to declare or pay any cash dividend or other distribution on any
shares of capital stock of the Company, (v) altered or proposed to alter
any material term of any outstanding security or material contract, permit
or license, (vi) incurred any debt otherwise than in the ordinary course of
business or any debt containing, in the sole judgment of Purchaser,
burdensome covenants or security provisions, (vii) authorized, recommended,
proposed or entered into an agreement with respect to any merger,
consolidation, recapitalization, liquidation, dissolution, business
combination, acquisition of assets, disposition of assets, release or
relinquishment of any material contractual or other right of the Company or
any of its subsidiaries or any comparable event not in the ordinary course
of business, (viii) authorized, recommended, proposed or entered into, or
announced its intention to authorize, recommend, propose or enter into, any
agreement or arrangement with any person or group that, in Purchaser's sole
opinion, could adversely affect either the value of the Company or any of
its subsidiaries, or the value of the Shares to Purchaser, (ix) entered
into any new employment, change in control, severance, executive
compensation or similar agreement, arrangement or plan with or for one or
more of its employees, consultants or directors, or entered into or
amended, or made grants or awards pursuant to, any agreements, arrangements
or plans so as to provide for
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<PAGE>
increased benefits to one or more employees, consultants or directors,
whether or not as a result of or in connection with the transactions
contemplated by the Offer, (x) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in
Section 3(c) of the Employee Retirement Income Security Act of 1974, as
amended) of the Company or any of its subsidiaries, or Purchaser shall have
become aware of any such action which was not previously disclosed in
publicly available filings or (xi) amended or authorized or proposed any
amendment to its Articles or Bylaws or similar organizational documents, or
Purchaser shall become aware that the Company or any of its subsidiaries
shall have proposed or adopted any such amendment which shall not have been
previously disclosed;
(f) a tender or exchange offer for any Shares shall be made or publicly
proposed to be made by any other person (including the Company or any of
its subsidiaries or affiliates) or it shall be publicly disclosed or
Purchaser shall otherwise learn that (i) any person, entity (including the
Company or any of its subsidiaries) or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares) other than acquisitions
for bona fide arbitrage purposes only and except as disclosed in a Schedule
13D or Schedule 13G on file with the Commission on the date of this Offer
to Purchase, (ii) any such person, entity group, which before the date of
this Offer to Purchase, had filed such a Schedule with the Commission has
acquired or proposes to acquire, through the acquisition of stock, the
formation of a group or otherwise, beneficial ownership of an additional 1%
or more of any class or series of capital stock of the Company (including
the Shares), or shall have been granted any right, option or warrant,
conditional or otherwise, to acquire beneficial ownership of an additional
1% or more of any class or series of capital stock of the Company
(including the Shares), (iii) any person or group shall enter into a
definitive agreement or an agreement in principle or make a proposal with
respect to a tender offer or exchange offer or a merger, consolidation or
other business combination with or involving the Company, or (iv) any
person shall file a Notification and Report Form under the HSR Act or make
a public announcement reflecting an intent to acquire the Company or any
assets or securities of the Company;
(g) (i) any material contractual right of the Company or any of its
subsidiaries or affiliates shall be impaired or otherwise adversely
affected or any material amount of indebtedness of the Company or any of
its subsidiaries shall become accelerated or otherwise become due before
its stated due date, in either case, with or without notice or the lapse of
time or both, as a result of the transactions contemplated by the Offer or
(ii) any covenant, term or condition in any of the Company's or any of its
subsidiaries' instruments or agreements is or may be materially adverse to
the value of the Shares in the hands of Purchaser (including, but not
limited to, any event of default that may ensue as a result of the
consummation of the Offer);
(h) Purchaser shall not have obtained any waiver, consent, extension,
approval, action or non-action from any governmental authority or agency
which is necessary to consummate the Offer; or
(i) any approval, permit, authorization, consent or other action of any
domestic or foreign governmental, administrative or regulatory agency,
authority, tribunal or third party shall not have been obtained on terms
satisfactory to Purchaser, in its sole discretion, which, in the sole
judgment of Purchaser in any such case, and regardless of the circumstances
(including any action or inaction by Purchaser or any of its affiliates)
giving rise to any such condition, makes it inadvisable to proceed with the
Offer and/or with such acceptance for payment or payment. The foregoing
conditions are for the sole benefit of Purchaser and may be asserted by
Purchaser, in its sole discretion, regardless of the circumstances
(including any action or omission by Purchaser) giving rise to any such
conditions or may be waived by Purchaser, in its sole discretion, in whole
or in part, at any time and from time to time. The failure by Purchaser at
any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any
determination by Purchaser concerning any condition or event described in
this Section 12 shall be final
31
<PAGE>
and binding upon all parties. Should the Offer be terminated pursuant to
the foregoing provisions, all tendered Shares not theretofore accepted for
payment shall forthwith be returned by the Depositary to the tendering
shareholders.
13. CERTAIN LEGAL MATTERS.
General. Except as disclosed herein, based on a review of publicly available
filings by the Company with the Commission, Purchaser is not aware of any
license or regulatory permit that appears to be material to the business of
the Company and that might be adversely affected by Purchaser's acquisition of
Shares pursuant to the Offer, or of any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required for the acquisition or ownership of Shares by
Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought. While Purchaser does not currently intend to delay acceptance for
payment of Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if required, would be obtained without substantial conditions or that adverse
consequences would not result to the business of the Company or Purchaser in
the event that such approvals were not obtained or such other actions were not
taken or in order to obtain any such approval or other action. Purchaser's
obligation under the Offer to accept for payment or pay for Shares is subject
to certain conditions. See Section 12.
State Takeover Laws. The company and certain of its subsidiaries conduct
business in a number of states throughout the United States, some of which
have adopted laws and regulations applicable to offers to acquires shares of
corporations that are incorporated or have substantial assets, shareholders
and/or a principal place of business in such states. In Edgar v. MITE Corp.
the Supreme Court of the United States held that the Illinois Business
Takeover Statute, which involved state securities laws which made the takeover
of certain corporations more difficult, imposed a substantial burden on
interstate commerce and was therefore unconstitutional. In CTS Corp. v.
Dynamics Corp. of America, however, the Supreme court of the United States
held that a state may, as a matter of corporate law and in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were
applicable only under certain conditions.
The Company is incorporated under the laws of the State of Minnesota. The
Minnesota Control Share Act requires, among other things, that in order to
vote shares of an "issuing public corporation" acquired over a 20%, 33% or 50%
threshold, an "Acquiring Person" must receive the approval of the holders of a
majority of all shares entitled to vote and the holders of a majority of
shares entitled to vote excluding all "interested shares" at a meeting to be
held no later than 55 calendar days following delivery of, among other things,
an information statement by the Acquiring Person to the issuing public
corporation, unless the Acquiring Person agrees to a later date. "Interested
shares" are defined to mean shares beneficially owned by an Acquiring Person,
by any officer of the issuing public corporation and by employee-directors of
the issuing public corporation. An "Acquiring Person" is defined as any person
that makes or proposes to make an acquisition, directly or indirectly, of
beneficial ownership of shares of an issuing public corporation that would,
when added to all other shares beneficially owned by such person, entitle such
person immediately after such acquisition to exercise or direct the exercise
of voting power over a new range of voting power within any of the ranges
referred to above. In order to obtain the right under the Control Share Act to
vote all Shares that may be acquired by Purchaser pursuant to the Offer,
Purchaser would be required to deliver to the Company an Information Statement
containing the information required by the Control Share Act and, in
accordance with the Control Share Act, request that the Company call a special
meeting of its shareholders for the sole purpose of considering the voting
rights to be accorded to all Shares acquired by Purchaser pursuant to the
Offer.
The above provisions do not apply to a control share acquisition of shares
of an issuing public corporation whose articles of incorporation or bylaws
provide that the Control Share Act does not apply to control share
acquisitions of its shares. The Company's Articles of Incorporation, as
amended, and Bylaws, as amended, currently do not exclude the Company from the
restrictions imposed by the Control Share Act.
32
<PAGE>
In addition, Section 302A.673 of the Minnesota Business Corporation Act
would prohibit any "business combination," including any merger, for a period
of four years following the date that Purchaser first acquires beneficial
ownership, directly or indirectly, of 10% or more of the outstanding Shares if
Purchaser does not receive the approval of a special committee composed of all
of the disinterested members of the Company's Board of Directors prior to such
acquisition. Purchaser currently has no intention to consummate a merger or
business combination transaction with the Company.
The Minnesota Takeover Disclosure Law, Minnesota Statutes Ch. 80B.01 et
seq., requires certain disclosures and filing of disclosure material with the
Minnesota Commissioner of Commerce (the "Commissioner"). On March 10, 1998
Purchaser filed disclosure material with the Commissioner. Although the
Commissioner does not approve such material, he does review it for the
adequacy of such disclosure and is empowered to summarily suspend the Offer in
Minnesota within three days of such filing if the material does not provide
full disclosure. Such summary suspension, if made, would be effective until a
hearing is held (within ten days of the summary suspension) and a
determination made (within three days of such hearing, but no more than
sixteen days after the initial summary suspension) to make any such suspension
permanent, subject to corrective disclosure.
Purchaser has not determined whether any other state takeover laws and
regulations will by their terms apply to the Offer, and, except as set forth
herein, Purchaser has not presently sought to comply with any state takeover
statute or regulation. Purchaser reserves the right to challenge the
applicability or validity of any state law or regulation purporting to apply
to the Offer, and neither anything in this Offer nor any action taken in
connection herewith is intended as a waiver of such right. In the event it is
asserted that one or more state takeover statutes is applicable to the Offer
and an appropriate court does not determine that such statute is inapplicable
or invalid as applied to the Offer, Purchaser might be required to file
certain information with, or to receive approval from, the relevant state
authorities, and Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer.
Antitrust Laws. The Offer is not subject to the filing and waiting period
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes (and may also be a taxable
transaction under applicable state, local or other tax laws). In general, a
shareholder will recognize gain or loss for such purposes equal to the
difference between such shareholder's adjusted tax basis for the Shares such
shareholder sells in such transaction and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer. Such gain or loss will be capital gain or loss if the Shares are
a capital asset in the hands of the shareholder and will be long-term capital
gain or loss if the Shares were held for more than one year on the date of
sale. An individual shareholder's long-term capital gain will be taxed at the
lowest applicable rate (generally 20%) if such shareholder held the Shares for
more than eighteen months on the date of sale.
Payments in connection with the Offer may be subject to "backup withholding"
at a rate of 31%. Backup withholding generally applies if the shareholder (i)
fails to furnish such shareholder's social security number or other applicable
taxpayer identification number ("TIN"); (ii) furnishes an incorrect TIN; or
(iii) under certain circumstances, fails to provide a certified statement,
signed under penalties of perjury, that the TIN provided is such shareholder's
correct number and that such shareholder is not subject to backup withholding.
Backup withholding is not an additional tax but merely an advance payment,
which may be refunded to the extent it results in an overpayment of tax.
Certain persons generally are entitled to exemption from backup withholding,
including corporations and financial institutions. Certain penalties apply for
failure to furnish correct information and for failure to include reportable
payments in income. Each shareholder should consult with his own tax
33
<PAGE>
advisor as to such shareholder's qualification for exemption from backup
withholding and the procedure for obtaining such exemption. Tendering
shareholders may be able to prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal.
The foregoing discussion may not be applicable to a shareholder who acquired
Shares pursuant to the exercise of employee stock options or otherwise as
compensation, or to a shareholder who is neither a citizen nor resident of the
United States or who is otherwise subject to special tax treatment under the
Internal Revenue Code. In addition, the foregoing discussion does not address
the tax treatment of holders of options or warrants to acquire Shares.
The federal income tax discussion set forth above is included for general
information only and is based upon present law. Shareholders are urged to
consult their tax advisors with respect to the specific tax consequences of
the Offer to them, including the application and effect of the alternative
minimum tax, and state, local or foreign income and other tax laws.
15. FEES AND EXPENSES.
R.J. Steichen & Co. is acting as Dealer Manager for the Offer and as
Purchaser's financial advisor in connection with Purchaser's gaining control
of the Company, including the Offer. Pursuant to the terms of R.J. Steichen &
Co.'s engagement, Purchaser has agreed to pay R.J. Steichen & Co., for its
services as Dealer Manager and financial advisor, an initial financial
advisory retainer fee of $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, Purchaser 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.
Purchaser has retained Beacon Hill Partners, Inc. to act as the Information
Agent. The Information Agent may contact holders of Shares by mail, telephone,
telex, telecopy and personal interviews and may request brokers, dealers and
other nominee shareholders to forward the Offer to beneficial owners of
Shares. The Information Agent will receive reasonable and customary
compensation together with reimbursement for certain out-of-pocket expenses
and will be indemnified against certain liabilities and expenses, including
certain liabilities under the federal securities laws.
Purchaser has retained Firstar Bank of Minnesota, N.A. to act as the
Depositary in connection with the Offer. The Depositary has not been retained
to make solicitations or recommendations in its role as Depositary. The
Depositary will receive reasonable and customary compensation for its
services, will be reimbursed for certain out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering material to their customers.
16. MISCELLANEOUS.
The Offer is being made to all holders of Shares. Purchaser is not aware of
any jurisdiction where the making of the Offer is prohibited by administrative
or judicial action pursuant to any valid state statute. If Purchaser becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, Purchaser will make a good faith effort
to comply with any such state statute or seek to have such statute declared
inapplicable to the Offer. If, after such good faith effort, Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
34
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Purchaser has filed with the Commission a Tender Offer Statement on Schedule
14D-1, together with all exhibits thereto, pursuant to Rule 14d-3 of the
General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer. Such Tender Offer Statement
and any amendments thereto, including exhibits, may be inspected and copies
may be obtained from the offices of the Commission in the manner set forth in
Section 6 (except that they will not be available at the regional offices of
the Commission).
Fant Industries Inc.
March 10, 1998
35
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The name, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of
Purchaser are set forth below. The principal business address of each director
and executive officer is 2154 Highland Avenue, Birmingham, AL 35205. Each such
person is a citizen of the United States.
<TABLE>
<CAPTION>
POSITION WITH PURCHASER; PRINCIPAL
OCCUPATION
NAME OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---- -------------------------------------------
<C> <S>
Anthony J. Fant.................. Director, President and Chief Executive
Officer of Purchaser. Mr. Fant has been
Director, President and 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 Chief Financial Officer of
Purchaser. Mr. Tondera 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>
36
<PAGE>
SCHEDULE II
The following table sets forth information concerning transactions in Shares
during the past sixty (60) days by Purchaser and Mr. Fant. All such
transactions were effected in open market purchases on the Nasdaq National
Market.
<TABLE>
<CAPTION>
TRANSACTION NO. OF SHARES PRICE PER
NAME DATE PURCHASED SHARE/1/
- ---- ----------- ------------- ---------
<S> <C> <C> <C>
Anthony J. Fant............................ 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
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
Fant Industries Inc........................ 02/24/98 10,000 /2/
</TABLE>
- --------
/1/ Does not include brokerage commission.
/2/ Represents a contribution of 10,000 Shares by Anthony J. Fant to Fant
Industries Inc.
37
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each shareholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
FIRSTAR BANK OF MINNESOTA, N.A.
(612) 229-2600
By Mail:
101 East Fifth Street
St. Paul, Minnesota 55101
Corporate Trust Department
Attention: Frank P. Leslie III
By Hand or Overnight Delivery:
101 East Fifth Street
St. Paul, Minnesota 55101
Corporate Trust Department
Attention: Frank P. Leslie III
By Facsimile (For Eligible Institutions Only):
(612) 229-6415
Confirm Facsimile by Telephone:
(612) 229-2600
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may
be directed to the Information Agent or the Depositary. Shareholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
Toll-Free (800) 253-3814
or
Collect (212) 843-8500
The Dealer Manager for the Offer is:
RJ STEICHEN & CO
One Financial Plaza
Suite 100
120 South 6th Street
Minneapolis, Minnesota 55402-1800
(612) 341-6200
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
AT
$8.00 NET PER SHARE IN CASH
PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 10, 1998
BY
FANT INDUSTRIES INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, APRIL 7, 1998 UNLESS THE OFFER IS
EXTENDED TO A LATER DATE AND TIME (THE "EXPIRATION DATE"). SHARES THAT ARE
TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Depositary for the Offer is:
FIRSTAR BANK OF MINNESOTA, N.A.
(612) 229-2600
By Facsimile Transmission By Hand or
By Mail: (For Eligible Overnight Delivery:
Institutions Only):
101 East Fifth Street (612) 229-6415 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Corporate Trust Corporate Trust
Department Department
Confirm Facsimile by Telephone:
(612) 229-2600
---------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY
TO THE DEPOSITARY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED SHARE CERTIFICATE(S) TENDERED
HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
(PLEASE FILL IN, IF BLANK)
- -------------------------------------------------------------------------------
TOTAL NUMBER NUMBER
CERTIFICATE OF OF SHARES
NUMBER(S)* SHARES TENDERED**
REPRESENTED
BY
CERTIFICATE(S)*
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------
*Need not be completed by shareholders tendering by book-entry transfer.
**Unless otherwise indicated, it will be assumed that all Shares being
delivered to the Depositary are being tendered. See Instruction 4.
<PAGE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
DESCRIPTION OF RIGHTS TENDERED
- -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE(S) FOR RIGHTS TENDERED*
HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
(PLEASE FILL IN, IF BLANK)
- -------------------------------------------------------------------------------
TOTAL NUMBER NUMBER
CERTIFICATE OF OF RIGHTS
NUMBER(S)** RIGHTS TENDERED***
REPRESENTED
BY
CERTIFICATE(S)
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL RIGHTS
- -------------------------------------------------------------------------------
* If the tendered Rights are represented by separate certificates, complete
using the certificate numbers of such certificates for Rights.
Shareholders tendering Rights which are not represented by separate
certificates will need to submit an additional Letter of Transmittal if
certificates for Rights are distributed.
** Need not be completed by shareholders tendering by book-entry transfer.
*** Unless otherwise indicated, it will be assumed that all Rights being
delivered to the Depositary are being tendered. See Instruction 4.
This Letter of Transmittal is to be used either if certificates evidencing
Shares and/or Rights (each as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase dated March 10,
1998 (the "Offer to Purchase")) is utilized, if delivery of Shares and/or
Rights is to be made by book-entry transfer to the account maintained by
Firstar Bank of Minnesota, N.A. (the "Depositary") at The Depository Trust
Company or Philadelphia Depository Trust Company (each, a "Book-Entry Transfer
Facility" and together, the "Book-entry Transfer Facilities") pursuant to the
procedures set forth in Section 2 of the Offer to Purchase. Unless the Board
Action Condition (as defined in the Offer to Purchase) with respect to the
Rights is satisfied, holders of Shares will be required to tender one Right
for each Share tendered to effect a valid tender of such Share.
Holders whose certificates for Shares and, if applicable, Rights, are not
immediately available (including, if the Distribution Date has occurred, but
Rights Certificates have not yet been distributed by the Company), or who
cannot deliver confirmation of the book-entry transfer of their Shares into
the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase), must
tender their Shares and/or Rights according to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2
of this Letter of Transmittal. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
2
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company [_]The Philadelphia Depository Trust
Company
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY (AS DEFINED IN THE OFFER TO PURCHASE) PREVIOUSLY SENT
TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If Delivery by Book-Entry Transfer Facility:
[_]The Depository Trust Company [_]The Philadelphia Depository Trust
Company
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
3
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Fant Industries Inc., a Delaware
corporation (the "Purchaser"), the above described shares of common stock, par
value $0.05 per share (the "Shares"), of HEI, Inc., a Minnesota corporation
(the "Company"), together with the associated common stock purchase rights
(the "Rights" issued pursuant to the Rights Agreement, dated as of May 27,
1988, as amended, between the Company and Norwest Bank Minnesota, N.A., as
Rights Agent (the "Rights Agreement"), at a price of $8.00 per Share (and
associated Right), net to the seller in cash, without interest thereon (the
"Offer Price"), upon the terms and subject to the Conditions set forth in the
Offer to Purchase and in this related Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer"). All references to the
Rights shall include all benefits that may inure to the holders of the Rights
pursuant to the Rights Agreement and unless the context requires otherwise,
all references to Shares herein shall include the associated Rights.
Subject to, and effective upon, acceptance for payment of the Shares and
Rights tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and
to all the Shares and Rights that are being tendered hereby (and any and all
other Shares, rights or other securities issued or issuable in respect thereof
on or after March 10, 1998) and irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and Rights (and any such other shares, rights or
securities) with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares and Rights (and any such other shares, rights or
securities), or transfer ownership of such Shares and Rights (and any such
other shares, rights or securities) on the account books maintained by one of
the Book-Entry Transfer Facilities, together in either such case with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Purchaser, (b) present such Shares and Rights (and any such other Shares,
rights or securities) for transfer on the books of the Company and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares and Rights (and any other such shares, rights or securities), all in
accordance with the terms of the Offer.
The undersigned understands that, unless the Board Action Condition with
respect to the Rights is satisfied, shareholders will be required to tender
one Right for each Share tendered in order to effect a valid tender of Shares
in accordance with the procedures set forth in Section 2 of the Offer to
Purchase. If the Distribution Date occurs and separate certificates
representing the Rights are distributed to holders of Shares prior to the time
Shares are tendered herewith, certificates representing a number of Rights
equal to the number of Shares being tendered herewith must be delivered to the
Depositary or, if available, a Book-Entry Confirmation must be received by the
Depositary with respect thereto, in order for such Shares tendered herewith to
be validly tendered. If the Distribution Date occurs and separate certificates
representing the Rights are not distributed prior to the time Shares are
tendered herewith, Rights may be tendered prior to a shareholder receiving
separate certificates for Rights by use of the guaranteed delivery procedures
described in Section 2 of the Offer to Purchase. A tender of Shares
constitutes an agreement by the tendering shareholder to deliver certificates
representing a number of Rights equal to the number of Shares tendered
pursuant to the Offer to the Depositary prior to expiration of the period
permitted by such guaranteed delivery procedures for delivery of certificates
for, or a Book-Entry Confirmation with respect to, Rights (the "Rights
Delivery Period"). However, after expiration of the Rights Delivery Period,
the Purchaser may elect to reject as invalid a tender of Shares with respect
to which certificates for, or a Book-Entry Confirmation with respect to, an
equal number of Rights has not been received by the Depositary. Nevertheless,
the Purchaser will be entitled to accept for payment Shares tendered by the
undersigned prior to the receipt of the certificates for the Rights required
to be tendered with such Shares, or a Book-Entry Confirmation with respect to
such Rights, and either (a) subject to complying with the applicable rules and
regulations of the Securities and Exchange Commission, withhold payment for
such Shares pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for Shares
accepted for payment pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights in reliance upon the agreement of a
tendering shareholder to deliver Rights and such guaranteed delivery
procedures. Any determination by the Purchaser to make payment for Shares in
reliance upon such agreement and such guaranteed delivery procedures or, after
the expiration of the Rights Delivery Period, to reject a tender as invalid
will be made in the sole and absolute discretion of the Purchaser.
If, on or after March 10, 1998, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other
4
<PAGE>
voting securities or any securities convertible into, or rights, warrants or
options, conditional or otherwise, to acquire, any of the foregoing, payable
or distributable to shareholders of record on a date prior to the transfer of
the Shares purchased pursuant to the Offer to the Purchaser or its nominee or
transferee on the Company's stock transfer records, then, subject to the
provisions of Section 12 of the Offer to Purchase, (a) the Offer Price may, in
the sole discretion of the Purchaser, be reduced by the amount of any such
cash dividend or cash distribution and (b) the whole of any such non-cash
dividend, distribution or issuance to be received by the tendering shareholder
will (i) be received and held by the tendering shareholder for the account of
the Purchaser and shall be required to be promptly remitted and transferred by
each tendering shareholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance, the Purchaser will be entitled to all rights and
privileges as owner of any such non-cash dividend, distribution, issuance or
proceeds and may withhold the entire purchase price or deduct from the
purchase price the amount of value thereof, as determined by the Purchaser in
its sole discretion.
The undersigned hereby irrevocably appoints Mr. Anthony J. Fant and Mr.
Steve E. Tondera, Jr., in their respective capacities as officers of the
Purchaser, and any individual who shall thereafter proceed to any such offices
of the Purchaser, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution to the full extent of such
shareholder's rights with respect to tendered Shares and Rights (and any and
all other Shares, rights or securities issued or issuable in respect thereof
on or after March 10, 1998), to vote in such manner as each such attorney and
proxy or his substitute shall in his sole discretion deem proper, and
otherwise act with respect to all the Shares and Rights tendered hereby which
have been accepted for payment by the Purchaser prior to the time of such vote
which the undersigned is entitled to vote at any meeting of shareholders
(whether annual or special and whether or not an adjourned meeting) of the
Company, or otherwise. This proxy is coupled with an interest in the Company
and in the Shares and Rights and is irrevocable and is granted in
consideration of, and is effective when, if and to the extent that the
Purchaser accepts such Shares and Rights for payment pursuant to the Offer.
Such acceptance for payment shall revoke, without further action, all prior
proxies granted by the undersigned at any time with respect to such Shares and
Rights (and any such other Shares or other securities) and no subsequent
proxies will be given (and if given will be deemed not to be effective) with
respect thereto by the undersigned. The undersigned acknowledges that in order
for Shares and Rights to be deemed validly tendered, immediately upon the
acceptance for payment of such Shares and Rights, the Purchaser or the
Purchaser's designee must be able to exercise full voting and all other rights
which inure to a record and beneficial holder with respect to such Shares and
Rights.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares and Rights
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after March 10, 1998), and that, when the
same are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete or confirm the sale, assignment and transfer of the
Shares and Rights tendered hereby (and any and all such other Shares, rights
or other securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives of
the undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable, provided that Shares and Rights tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment and paid for by Purchaser pursuant to the
Offer, may also be withdrawn at any time after May 8, 1998, or such later time
as may apply if the Offer is extended.
The undersigned understands that tenders of Shares and Rights pursuant to
any one of the procedures described in Section 2 of the Offer to Purchase and
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept
for payment any of the Shares and Rights tendered hereby.
5
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares or Rights not tendered or accepted for payment in the names(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
certificates for Shares or Rights not tendered or accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature. In the event that both the Special
Delivery Instructions and the Special Payment Instructions are completed,
please issue the check for the purchase price and/or return any certificates
for Shares or Rights not tendered or accepted for payment in the name of, and
deliver such check and/or return such certificates to the person or persons so
indicated. Shareholders delivering Shares or Rights by book-entry transfer may
request that any Shares or Rights not accepted for payment be returned by
crediting such account maintained at the Book-Entry Transfer Facility as such
shareholder may designate by making an appropriate entry under "Special
Payment Instructions." The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
or Rights from the name of the registered holder thereof if the Purchaser does
not accept for payment any of the Shares or Rights so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 (SEE INSTRUCTIONS 1, 5, 6 AND 7
OF OF
THIS LETTER OF TRANSMITTAL) THIS LETTER OF TRANSMITTAL)
To be completed ONLY if To be completed ONLY if
certificates for Shares and/or certificates for Shares and/or
Rights not tendered or not Rights not tendered or not
purchased and/or the check for purchased and/or the check for
the purchase price of Shares the purchase price of Shares
and/or Rights purchased are to be and/or Rights purchased are to be
issued in the name of someone sent to someone other than the
other than the undersigned, or if undersigned, or to the
Shares and/or Rights delivered by undersigned at an address other
book-entry transfer which are not than that shown above.
purchased are to be returned by
credit to an account maintained Mail [_] Check and/or [_] Certificates
at the Book-Entry Transfer to:
Facility other than that
designated above. Name _____________________________
Issue [_] Check and/or [_] Certificates (PLEASE PRINT)
to: Address __________________________
Name _____________________________ ----------------------------------
(PLEASE PRINT) (ZIP CODE)
Address __________________________
----------------------------------
(ZIP CODE)
----------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-
9 BELOW)
[_]Credit unpurchased Shares
and/or Rights delivered by
book-entry transfer to the
Book-Entry Transfer Facility
account set forth below:
----------------------------------
(ACCOUNT NUMBER)
6
<PAGE>
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
............................................................................
............................................................................
(SIGNATURE(S) OF HOLDER(S))
Dated: ..............................................................., 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5 of this Letter of Transmittal.)
Name(s) ....................................................................
............................................................................
(PLEASE PRINT)
Capacity (Full title).......................................................
Address.....................................................................
......................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number..............................................
Tax Identification or Social Security No....................................
(Complete Substitute form W-9 on Reverse)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)
Authorized Signature .......................................................
Name........................................................................
(PLEASE PRINT)
Title.......................................................................
Name of Firm................................................................
Address
......................................................................
......................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number..............................................
Dated: ..............................................................., 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares and/or Rights (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares or
Rights) tendered herewith, unless such holder has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the reverse hereof or (ii) if such Shares and/or Rights are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing
of the Securities Transfer Agents Medallion Program (each, an "Eligible
Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5
of this Letter of Transmittal.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by shareholders either if certificates are to
be forwarded herewith or, unless an Agent's Message is utilized, if delivery
of Shares and/or Rights is to be made by book-entry transfer pursuant to the
procedures set forth in Section 2 of the Offer to Purchase. For a shareholder
validly to tender Shares and Rights pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees or an Agent's
Message (in connection with book-entry transfer) and any other required
documents, must be received by the Depositary at one of its addressees set
forth herein prior to the Expiration Date and either (i) certificates for
tendered Shares and Rights must be received by the Depositary at one of such
addresses prior to the Expiration Date or (ii) Shares and Rights must be
delivered pursuant to the procedures for book-entry transfer set forth herein
and a Book-Entry Confirmation must be received by the Depositary prior to the
Expiration Date or (b) the tendering shareholder must comply with the
guaranteed delivery procedures set forth below and in Section 2 of the Offer
to Purchase.
Unless the Board Action Condition with respect to the Rights is satisfied,
shareholders will be required to tender one Right for each Share tendered in
order to effect a valid tender of Shares. Unless the Distribution Date occurs,
a tender of Shares will also constitute a tender of the associated Rights. The
Rights are currently represented by the certificates for the Shares with
respect to which the Rights were issued. The Rights Agreement provides that
until the close of business on the Distribution Date, the Rights will be
evidenced by the certificates for the Shares and may be transferred with and
only with the Shares. The Rights Agreement further provides that, as soon as
practicable following the Distribution Date, separate certificates
representing the Rights are to be mailed by the Company or the Rights Agent to
holders of record of Shares as of the close of business on the Distribution
Date. If the Distribution Date occurs and separate certificates representing
the Rights are distributed prior to the time Shares are tendered herewith,
certificates representing a number of Rights equal to the number of Shares
being tendered herewith must be delivered to the Depositary or, if available,
a Book-Entry Confirmation must be received by the Depositary with respect
thereto, in order for such Shares tendered herewith to be validly tendered. If
the Distribution Date occurs and separate certificates representing the Rights
are not distributed prior to the time Shares are tendered herewith, Rights may
be tendered prior to the shareholder receiving separate certificates for
Rights by use of the guaranteed delivery procedures described below.
Shareholders whose certificates for Shares or Rights are not immediately
available (including because certificates for Rights have not yet been
distributed by the Company or the Rights Agent) or who cannot deliver their
certificates and all other required documents to the Depositary prior to the
Expiration Date or who cannot comply with the book-entry transfer procedure on
a timely basis may tender their Shares and Rights by properly completing and
duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in Section 2 of the Offer to Purchase.
Pursuant to such procedures, (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (iii) the
certificates for all tendered Shares and/or Rights, in proper form for
transfer (or a Book-Entry Confirmation with respect to all tendered Shares
and/or Rights), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the
8
<PAGE>
Depositary within (a) in the case of Shares, three trading days after the date
of execution of such Notice of Guaranteed Delivery or (b) in the case of
Rights, a period ending on the later of (1) three trading days after the date
of execution of such Notice of Guaranteed Delivery or (2) three business days
(as defined in the Offer to Purchase) after the date certificates for Rights
are distributed to shareholders by the Company or the Rights Agent, all as
provided in Section 2 of the Offer to Purchase. A "trading day" is any day on
which the New York Stock Exchange (the "NYSE") is open for business.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares and the Rights
tendered hereby whether or not such Rights are delivered simultaneously with
such Shares.
THE METHOD OF DELIVERY OF THE SHARES, THE RIGHTS, THE LETTER TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
THE SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares or Rights will be purchased. All tendering shareholders, by
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), waive any right to receive any notice of the acceptance of their
Shares or Rights for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and, if applicable, Rights
should be listed on a separate signed schedule attached hereto.
4. Partial Tenders. (Not applicable to shareholders who tender by book-entry
transfer.) If fewer than all the Shares or Rights evidenced by any certificate
submitted are to be tendered, fill in the number of Shares or Rights which are
to be tendered in the box entitled "Description of Shares to be Tendered" and
"Description of Rights to be Tendered" respectively. In such case, new
certificate(s) for the remainder of the Shares or Rights that were evidenced
by your old certificate(s) will be sent to you, unless otherwise provided in
the appropriate box on this Letter of Transmittal, as soon as practicable
after the Expiration Date. All Shares and Rights represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature(s) must correspond exactly to the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares or Rights tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares or Rights are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares or Rights listed and transmitted hereby, no endorsement of certificates
or separate stock powers is required unless payment or certificates for Shares
or Rights not tendered or purchased are to be issued to a person other than
the registered owner(s). Signatures on such certificates or stock powers must
be guaranteed by an Eligible Institution.
9
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares or Rights listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6 of this
Letter of Transmittal, the Purchaser will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of purchased Shares and
Rights to it or its order pursuant to the Offer. If payment of the purchase
price is to be made, or if certificates for Shares and/or Rights not tendered
or purchased are to be registered in the name of any person other than the
registered holder, or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder
or such person) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6 OF THIS LETTER OF TRANSMITTAL, IT
WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE
CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or certificates
for unpurchased Shares or Rights are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be
sent and/or such certificates are to be resumed to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be
completed. Shareholders tendering Shares or Rights by book-entry transfer may
request that Shares and Rights not purchased be credited to such account
maintained at the Book-Entry Transfer Facility as such shareholder may
designate hereon. If no such instructions are given, such Shares and Rights
not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above.
8. Requests for Assistance or Additional Copies. Requests for assistance may
be directed to the Dealer Manager or the Information Agent (as such terms are
defined in the Offer to Purchase) at the addresses set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the Dealer
Manager or the Information Agent at the addresses set forth below or from your
broker, dealer, commercial bank or trust company.
9. Waiver of Conditions. The conditions of the Offer may be waived, in whole
or in part, by the Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares or Rights tendered.
10. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify, under penalties of perjury, that such number is correct
and that such shareholder is not subject to backup withholding of federal
income tax. If a tendering shareholder has been notified by the Internal
Revenue Service that such shareholder is subject to backup withholding, such
shareholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such shareholder has since been notified by the Internal
Revenue Service that such shareholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering shareholder to 31% federal income tax withholding with
respect to any payments received pursuant to the Offer and Proposed Merger (as
defined in the Offer to Purchase). If the tendering shareholder has not been
issued a TIN and has applied for one or intends to apply for one in the near
future, such shareholder should write "Applied For" in the space provided for
the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute
Form W-9. "If Applied For" is written in Part I and the Depositary is not
provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such shareholder until a TIN is provided to
the Depositary.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares or Rights has been lost, destroyed or stolen, the
shareholder should promptly notify the Depositary. The shareholder will then
be instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates
have been followed.
10
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS
ADDRESSES SET FORTH HEREIN PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a shareholder whose tendered
Shares are accepted for payment is required by law to provide the Depositary
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the
shareholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such shareholder with respect
to Shares and Rights purchased pursuant to the Offer may be subject to backup
withholding of 31%.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies with respect to a shareholder, the Depositary
is required to withhold 31% of any payments made to such shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares or Rights purchased pursuant to the Offer, the
shareholder is required to notify the Depositary of such shareholder's correct
TIN by completing the form below certifying (a) that the TIN provided on the
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN),
and (b) that such shareholder is not subject to backup withholding because (i)
such shareholder is exempt from backup withholding, (ii) such shareholder has
not been notified by the Internal Revenue Service that such shareholder is
subject to backup withholding as a result of a failure to report all interest
or dividends or (iii) such shareholder has been notified by the Internal
Revenue Service that such shareholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares
and/or Rights tendered hereby. If the Shares and/or Rights are in more than
one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report. If the tendering
shareholder has not been issued a TIN and has applied for a number or intends
to apply for a number in the near future, the shareholder should write
"Applied For" in the space provided for in the TIN in Part I, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% of all payments of the purchase price to such shareholder until a
TIN is provided to the Depositary.
11
<PAGE>
PAYER'S NAME:
-----------------------------
PART I--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND OR
CERTIFY BY SIGNING AND
DATING BELOW.
-----------------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
--------------------------------------------------------------
PART II--For Payees exempt from backup withholding, see the
enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete
as instructed therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or a Taxpayer Identification
Number has not been issued to me) and either (a) I have
mailed or delivered an application to receive a
SUBSTITUTE Taxpayer Identification Number to the appropriate
FORM W-9 Internal Revenue Service ("IRS") or Social Security
Administration office or (b) I intend to mail or
deliver an application in the near future. I understand
that if I do not provide a Taxpayer Identification
Number within 60 days, 31% of all reportable payments
made to me thereafter will be withheld until I provide
a number, and
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR
TAXPAYER
IDENTIFICATION
NUMBER (TIN) (2) I am not subject to backup withholding either because
(a) I am exempt from backup withholding, (b) I have not
been notified by the IRS that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do
not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE ______________________________________________________ DATE , 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
12
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, NY 10004
(Call Collect) (212) 843-8500
or
CALL TOLL-FREE (800) 253-3814
The Dealer Manager for the Offer is:
RJ STEICHEN & CO
One Financial Plaza
Suite 100
120 South 6th Street
Minneapolis, Minnesota 55402-1800
(612) 341-6200
<PAGE>
EXHIBIT (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED
COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
TO
FANT INDUSTRIES INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to tender Shares (as defined below) and Rights (as defined below)
pursuant to the Offer (as defined below) if (i) certificates representing
shares (the "Shares") of common stock, par value $0.05 per share (the "Common
Stock"), of HEI, Inc., a Minnesota corporation (the "Company"), or if
applicable, certificates for the associated common stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of May 27, 1988, as
amended, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent
(the "Rights Agreement"), are not immediately available (including, if a
Distribution Date (as defined in the Offer to Purchase, dated March 10, 1998
(the "Offer to Purchase")) has occurred, because certificates for Rights have
not yet been distributed); (ii) time will not permit all required documents to
reach Firstar Bank of Minnesota, N.A., as Depositary (the "Depositary"), prior
to the Expiration Date (as defined in the Offer to Purchase); or (iii) the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile to the Depositary. See Section 2 of the
Offer to Purchase.
The Depositary for the Offer is:
FIRSTAR BANK OF MINNESOTA, N.A.
(612) 229-2600
By Mail: By Facsimile Transmission By Hand or
(For Eligible Overnight Delivery:
Institutions Only):
101 East Fifth Street
St. Paul, Minnesota 55101 101 East Fifth Street
Corporate Trust (612) 229-6415 St. Paul, Minnesota 55101
Department
Corporate Trust Department
Confirm Facsimile by
Telephone:
(612) 229-2600
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Fant Industries Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged, the number
of Shares and Rights indicated below pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares: ___________________________________________________________
Number of Rights: ___________________________________________________________
Name(s) of Record Holder(s): ________________________________________________
-----------------------------------------------------------------------------
PLEASE TYPE OR PRINT
-----------------------------------------------------------------------------
Address(es): ________________________________________________________________
ZIP CODE
Area Code and Tel. No.: _____________________________________________________
Certificate No(s). (if available) ___________________________________________
-----------------------------------------------------------------------------
Check ONE box if Shares or Rights will be tendered by book-entry transfer:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Signature(s): _______________________________________________________________
-----------------------------------------------------------------------------
Account Number: _____________________________________________________________
Dated: , 1998
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares (or Rights, if applicable) effected hereby complies with
Rule 14e-4 under the Securities Exchange Act of 1934, as amended and (b)
guarantees delivery to the Depositary, at one of its addresses set forth
above, of certificates representing the Shares and Rights tendered hereby in
proper form for transfer, or confirmation of book-entry transfer of such
Shares and Rights into the Depositary's accounts at The Depository Trust
Company or The Philadelphia Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), and any other required documents, within (a) in the case
of Shares, three New York Stock Exchange, Inc. ("NYSE") trading days after
the date hereof or (b) in the case of Rights, a period ending on the later
of (i) three NYSE trading days after the date hereof or (ii) three business
days after the date certificates for Rights are distributed to stockholders.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
the certificates for Shares and Rights to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to
such Eligible Institution.
Name of Firm: _______________________________________________________________
-----------------------------------------------------------------------------
AUTHORIZED SIGNATURE
Address(es): ________________________________________________________________
ZIP CODE
Area Code and Tel. No.: _____________________________________________________
Name: _______________________________________________________________________
PLEASE TYPE OR PRINT
Title: ______________________________________________________________________
Dated: , 1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE.
CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
467,886 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
BY
FANT INDUSTRIES INC.
AT
$8.00 NET PER SHARE IN CASH
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, APRIL 7, 1998, UNLESS THE OFFER IS
EXTENDED. SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
March 10, 1998
To Brokers, Dealers, Commercial Banks, Trust Companies And Other Nominees:
We have been engaged by Fant Industries Inc., a Delaware corporation
("Purchaser"), to act as Dealer Manager in connection with Purchaser's offer
to purchase 467,886 shares of common stock, par value $0.05 per share (the
"Shares"), of HEI, Inc., a Minnesota corporation (the "Company"), or such
greater number of Shares that will equal 11.5% of the Shares outstanding as of
the Expiration Date (hereinafter defined) (such number of Shares being the
"Maximum Number"), in each case together with (unless and until Purchaser
declares that the Board Action Condition (as defined below) is satisfied) the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of May 27, 1988, as it may from time to time be
supplemented or amended (the "Rights Agreement"), between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agent"), at a price
of $8.00 per Share (and associated Right), net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG, OTHER THINGS (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, INCLUDING THE RIGHTS ASSOCIATED THEREWITH, WHICH CONSTITUTES
11.5% OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK (AND RIGHTS)
OF THE COMPANY, (2) THE ELECTION, BY BOARD RESOLUTION OR SHAREHOLDER VOTE, OF
A SUFFICIENT NUMBER OF PURCHASER'S DIRECTOR NOMINEES TO CONSTITUTE A MAJORITY
OF THE COMPANY'S BOARD OF DIRECTORS (THE "CHANGE OF CONTROL CONDITION"), (3)
REDEMPTION OF THE RIGHTS BY THE BOARD OF DIRECTORS OF THE COMPANY, OR
PURCHASER HAVING DETERMINED IN ITS SOLE DISCRETION THAT THE RIGHTS HAVE BEEN
INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER (THE "BOARD ACTION
CONDITION"), AND (4) THE ACQUISITION OF SHARES IN THE OFFER HAVING BEEN
APPROVED IN ACCORDANCE WITH THE REQUIREMENTS OF THE MINNESOTA CONTROL SHARE
ACT (AS DEFINED IN THE OFFER TO PURCHASE) AND ACCORDED FULL VOTING RIGHTS, OR
PURCHASER HAVING DETERMINED IN ITS SOLE DISCRETION THAT SUCH STATUTE IS
INAPPLICABLE TO THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE THE INTRODUCTION AND
SECTIONS 1, 12 AND 13 OF THE OFFER TO PURCHASE.
THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
<PAGE>
Unless the Board Action Condition with respect to the Rights is satisfied,
shareholders will be required to tender one Right for each Share tendered in
order to effect a valid tender of Shares in accordance with the procedures set
forth in Section 2 of the Offer to Purchase. If the Distribution Date occurs
and separate certificates representing the Rights are distributed to holders
of Shares prior to the time Shares are tendered herewith, certificates
representing a number of Rights equal to the number of Shares being tendered
herewith must be delivered to the Depositary or, if available, a Book-Entry
Confirmation must be received by the Depositary with respect thereto, in order
for such Shares tendered herewith to be validly tendered. If the Distribution
Date occurs and separate certificates representing the Rights are not
distributed prior to the time Shares are tendered herewith, Rights may be
tendered prior to a shareholder receiving separate certificates for Rights by
use of the guaranteed delivery procedures described in Section 2 of the Offer
to Purchase. A tender of Shares constitutes an agreement by the tendering
shareholder to deliver certificates representing a number of Rights equal to
the number of Shares tendered pursuant to the Offer to the Depositary prior to
expiration of the period permitted by such guaranteed delivery procedures for
delivery of certificates for, or a Book-Entry Confirmation with respect to,
Rights (the "Rights Delivery Period"). However, after expiration of the Rights
Delivery Period, the Purchaser may elect to reject as invalid a tender of
Shares with respect to which certificates for, or a Book-Entry Confirmation
with respect to, an equal number of Rights has not been received by the
Depositary. Nevertheless, the Purchaser will be entitled to accept for payment
Shares tendered by the undersigned prior to the receipt of the certificates
for the Rights required to be tendered with such Shares, or a Book-Entry
Confirmation with respect to such Rights, and either (a) subject to complying
with the applicable rules and regulations of the Securities and Exchange
Commission, withhold payment for such Shares pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights or
(b) make payment for Shares accepted for payment pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights in
reliance upon the agreement of a tendering shareholder to deliver Rights and
such guaranteed delivery procedures. Any determination by the Purchaser to
make payment for Shares in reliance upon such agreement and such guaranteed
delivery procedures or, after the expiration of the Rights Delivery Period, to
reject a tender as invalid will be made in the sole and absolute discretion of
the Purchaser.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1.Offer to Purchase dated March 10, 1998;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) or if the procedure for book-entry transfer cannot be
completed on a timely basis;
4. A form of letter which may sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer; and
5. A return envelope addressed to Firstar Bank of Minnesota, N.A., the
Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for the Maximum
Number of Shares which are validly tendered prior to the Expiration Date and
not theretofore properly withdrawn when, as and if Purchaser gives oral or
written notice to the Depositary of Purchaser's acceptance of such Shares for
payment pursuant to the Offer. Payment for Shares purchased pursuant to the
Offer will in all cases be made only after timely receipt by the Depositary of
certificates for such Shares, or timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at the Depository Trust Company
or the Philadelphia Depository Trust Company, pursuant to the procedures
described in Section 2 of
2
<PAGE>
the Offer to Purchase, a properly completed and duly executed Letter of
Transmittal (or a properly completed and manually signed facsimile thereof) or
an Agent's Message in connection with a book-entry transfer, and all other
documents required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager and the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant
to the Offer. The Purchaser will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their
customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of
the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, APRIL 7, 1998, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (of facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares, and any other
required documents, should be sent to the Depositary, and certificates
representing the tendered Shares should be delivered or such Shares should be
tendered by book-entry transfer, all in accordance with the Instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedure for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2, "Procedure for Tendering Shares and
Rights" in the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers
set forth on the back cover of the Offer to purchase.
Very truly yours,
R.J. Steichen & Co.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY, OR ANY AFFILIATE OF ANY OF THE FOREGOING,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
EXHIBIT (a)(5)
OFFER TO PURCHASE
FOR CASH UP TO 467,886
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED
COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
AT
$8.00 NET PER SHARE IN CASH
BY
FANT INDUSTRIES INC.
March 10, 1998
To Our Clients:
Enclosed for your consideration is the Offer to Purchase, dated March 10,
1998 (the "Offer to Purchase") and the Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") relating to an
offer by Fant Industries Inc., a Delaware corporation ("Purchaser"), to
purchase (i) 467,886 shares (the "Shares") of common stock, par value $0.05
per share, of HEI, Inc., a Minnesota corporation (the "Company"), or such
greater number of Shares which constitutes 11.5% of the total number of Shares
outstanding as of the Expiration Date (as defined in the Offer to Purchase),
and (ii) (unless and until Purchaser declares that the Board Action Condition
(as defined in the Offer to Purchase) is satisfied) the associated common
stock purchase rights (the "Rights") issued pursuant to the Rights Agreement,
dated as of May 27, 1988, as amended, by and between the Company and Norwest
Bank Minnesota, N.A., as Rights Agent, at a purchase price of $8.00 per Share
(including the associated Right), net to the seller in cash, without interest
thereon (the "Offer Price") upon the terms and subject to the conditions set
forth in the Offer to Purchase.
Unless the Rights are redeemed prior to the Expiration Date, holders of
Shares will be required to tender one associated Right for each Share tendered
in order to effect a valid tender of such Share. Accordingly, shareholders who
sell their Rights separately from their Shares and do not otherwise acquire
Rights may not be able to satisfy the requirements of the Offer for the tender
of Shares. If the Distribution Date (as defined in the Offer to Purchase) has
not occurred prior to the Expiration Date, a tender of Shares will also
constitute a tender of the associated Rights. If the Distribution Date has
occurred and separate certificates representing the Rights have been
distributed to holders of Shares prior to the time a holder's Shares are
purchased pursuant to the Offer, in order for Rights (and the corresponding
Shares) to be validly tendered, certificates representing a number of Rights
equal to the number of Shares tendered must be delivered to the Depositary (as
defined in the Offer to Purchase) or, if available, a Book-Entry Confirmation
(as defined in the Offer to Purchase) must be received by the Depositary with
respect thereto. If the Distribution Date has occurred and separate
certificates representing the rights have not been distributed prior to the
time Shares are purchased pursuant to the Offer, Rights may be tendered prior
to a shareholder receiving the certificates for Rights by use of the
guaranteed delivery procedure described in Section 2 of the Offer to Purchase.
In any case, a tender of Shares constitutes an agreement by the tendering
shareholder to deliver certificates representing a number of Rights equal to
the number of Shares tendered pursuant to the Offer to the Depositary within
three business days after the date certificates for Rights
<PAGE>
are distributed. Purchaser reserves the right to require that the Depositary
receive certificates, or a Book-Entry Confirmation, if available, with respect
to such Rights prior to accepting the related Shares for payment pursuant to
the Offer if the Distribution Date has occurred prior to the Expiration Date.
If a shareholder desires to tender Shares and Rights pursuant to the Offer
and such shareholder's certificates representing Shares or, if applicable,
certificates representing the Rights are not immediately available (including
because certificates for Rights have not yet been distributed) or time will
not permit all required documents to reach the Depositary prior to the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, such Shares or Rights may nevertheless be tendered
according to the guaranteed delivery procedures set forth in Section 2 of the
Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of
documents to a Book-Entry Transfer Facility (as defined in the Offer to
Purchase) in accordance with the Book-Entry Transfer Facility's procedures
does not constitute delivery to the Depositary.
A tender of such Shares and Rights can be made only by us as the holder of
record and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES OR RIGHTS HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of such
Shares and Rights held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $8.00 per Share, including the associated Rights,
net to the seller in cash without interest.
2. The Offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Tuesday, April 7, 1998, unless the Offer
is extended to a later date and time. Shares which are tendered pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date.
3. The Offer is being made for 11.5% of the outstanding Shares.
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares, including the Rights, which constitute 11.5% of the outstanding
Shares of the Company.
5. Shareholders who tender Shares and Rights will not be obligated to pay
brokerage commissions, solicitation fees or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase
of Shares and Rights by Purchaser pursuant to the Offer.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares or Rights pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares or Rights in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of Purchaser by the Dealer Manager (as defined in the Offer
to Purchase) or one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares and Rights, please
complete, sign and return to us the form set forth below. An envelope to
return your instructions to us is enclosed. Your instructions to us should be
forwarded in ample time to permit us to submit a tender on your behalf prior
to the expiration of the Offer. If you authorize the tender of your Shares and
Rights, all such Shares and Rights will be tendered unless otherwise specified
on the instruction form set forth below.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH 467,886 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED
COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated March 10, 1998, and the Letter of Transmittal (which, together
as amended from time to time constitute the "Offer") relating to the offer by
Fant Industries Inc., a Delaware corporation ("Purchaser"), to purchase (i)
467,886 shares (the "Shares") of common stock, par value $0.05 per share (the
"Common Stock"), of HEI, Inc., a Minnesota corporation (the "Company"), and
(ii) (unless and until Purchaser declares that the Board Action Condition (as
defined in the Offer to Purchase) is satisfied) the associated common stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated
as of May 27, 1988, as amended, between the Company and Norwest Bank
Minnesota, N.A., as Rights Agent (the "Rights Agreement").
This will instruct you to tender to Purchaser the number of Shares and
Rights indicated below (or if no number is indicated below, all Shares and
Rights) held by you for the account of the undersigned, on the terms and
subject to the conditions set forth in the Offer.
NUMBER OF SHARES AND RIGHTS TO SIGN HERE
BE TENDERED:*
---------------------------------------
SHARES AND RIGHTS:
---------------------------------------
Account Number: ______________________ SIGNATURE(S)
Dated: ________________________ , 1998 ---------------------------------------
---------------------------------------
PLEASE PRINT NAME(S) AND ADDRESS(ES)
HERE
---------------------------------------
AREA CODE AND TELEPHONE NUMBER
---------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY
NUMBER(S)
- -------
* Unless otherwise indicated, it will be assumed that all of your Shares and
Rights held by us for your account are to be tendered.
3
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social security numbers have nine digits separated by two hyphens: i.e. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to give
the payer.
- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals (1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person (1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor (1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person (3)
minor, or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee (1)
(grantor is also
trustee)
b. So-called trust account The actual owner
that is not a legal or (1)
valid trust under State
law
8. Sole proprietorship The owner (4)
account
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------
<S> <C>
9. A valid trust, estate or The legal entity
pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.) (5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, in, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- -----------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service (the
"IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one non-resident partner.
. Payments and patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1984, payers
must generally withhold 20% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
FANT INDUSTRIES INC.
2154 HIGHLAND AVENUE
BIRMINGHAM, ALABAMA 35205
PHONE: (205) 933-1030
For further information contact:
Anthony J. Fant
(205) 933-1030
Richard Grubaugh
Beacon Hill Partners
(212) 843-8500
FOR IMMEDIATE RELEASE
FANT INDUSTRIES MAKES UNSOLICITED OFFER FOR ADDITIONAL SHARES OF HEI, INC.
NEW YORK, NEW YORK--March 4, 1998--Fant Industries Inc., an acquisition
vehicle of Anthony J. Fant of Birmingham, Alabama, has announced a cash tender
offer for 468,000 shares, or 11 1/2%, of the Common Stock of HEI, Inc.
(Nasdaq: HEII) of Victoria, Minnesota, at a price of $8.00 net per share. The
proposed offer represents a 25% premium over yesterday's closing price of $6
3/8 per share 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 HEI's
Common Stock.
HEI designs and manufactures ultraminiature microelectronic devices for
medical, telecommunications, computer peripheral and industrial control
applications worldwide.
Fant Industries stated that the purpose of the offer is to increase its
economic stake in HEI and support its efforts to gain control of HEI's Board
of Directors. Completion of the tender offer would boost Fant Industries' HEI
holdings to almost 30% when added to its current position and shares held
directly by Mr. Fant.
The Fant Industries tender offer, proration period and withdrawal rights
will expire on Tuesday, April 7, 1998 at 12:00 midnight New York City Time
unless extended.
R.J. Steichen & Co. is the Dealer Manager, and Beacon Hill Partners, Inc. is
the Information Agent.
<PAGE>
EXHIBIT (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase dated March 10, 1998 and the related Letter of
Transmittal (and any amendments thereto) and is being made to all holders of
Shares. Purchaser (as defined below) is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action
pursuant to state statute. If Purchaser becomes aware of any state where the
making of the Offer is prohibited, Purchaser will make a good faith effort to
comply with any such statute. If, after such good faith effort, Purchaser
cannot comply with any applicable statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares in such
state. In those jurisdictions where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall
be deemed to be made on behalf of Purchaser by R.J. Steichen & Co. or one or
more registered brokers or dealers licensed under the laws of such
jurisdictions.
NOTICE OF OFFER TO PURCHASE
FOR CASH 467,886
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED
COMMON STOCK PURCHASE RIGHTS)
OF
HEI, INC.
AT
$8.00 NET PER SHARE IN CASH
BY
FANT INDUSTRIES INC.
Fant Industries Inc., a Delaware corporation ("Purchaser"), is offering to
purchase up to 467,886 shares of common stock, par value $.05 per share (the
"Shares"), of HEI, Inc., a Minnesota corporation (the "Company"), and the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of May 27, 1988, as amended (the "Rights
Agreement"), between the Company and Norwest Bank Minnesota, N.A., as Rights
Agent (the "Rights Agent"), at a purchase price of $8.00 per Share (and
associated Rights), 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 March 10, 1998 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). All references to Rights shall be deemed to include all benefits
that may inure to the shareholders of the Company or to holders of Rights
pursuant to the Rights Agreement and unless the context requires otherwise,
all references to Shares shall be deemed to refer also to the associated
Rights. Holders of Shares will be required to tender the Rights associated
with each Share tendered in order to effect a valid tender of such Share. If
separate certificates for the Rights are not issued, a valid tender of Shares
will also constitute a tender of the associated Rights.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME ON TUESDAY, APRIL 7, 1998, UNLESS
THE OFFER IS EXTENDED TO A LATER DATE AND TIME (THE "EXPIRATION DATE").
SHARES THAT ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO THE EXPIRATION DATE.
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<PAGE>
The Offer is conditioned upon, among, other things, (1) there being validly
tendered and not withdrawn prior to the expiration date a number of Shares of
common stock, including the Rights associated therewith, which constitutes
11.5% of the total number of outstanding Shares of common stock (and Rights)
of the Company (the "Minimum Tender Condition"), (2) the election, Board
resolution or shareholder vote, of a sufficient number of director nominees to
constitute a majority of the Company's Board of Directors (the "Change of
Control Condition"), (3) redemption of the Rights by the Board of Directors of
the Company or Purchaser's determination in its sole discretion that the
Rights have been invalidated or are otherwise inapplicable to the Offer (the
"Board Action Condition"), (4) the acquisition of Shares in the Offer have
been approved in accordance with the requirements of the Minnesota Control
Share Act (as defined in the Offer to Purchase) and accorded full voting
rights, or Purchaser having determined in its sole discretion that such
statute is inapplicable to the Offer or that it otherwise will not have the
effect of denying voting rights to the Shares acquired by Purchaser in the
Offer (the "Control Share Condition"). The Offer is not conditioned on
obtaining financing. Certain other conditions to the Offer are described in
Section 12 of the Offer to Purchase. Purchaser reserves the right (but shall
not be obligated) to waive any or all such conditions. PURCHASER URGES THE
BOARD TO COOPERATE WITH PURCHASER IN SEEKING TO SATISFY THE CONDITIONS,
THEREBY PROVIDING TO THE COMPANY'S SHAREHOLDERS THE OPPORTUNITY TO DECIDE FOR
THEMSELVES WHETHER THEY WISH TO TAKE ADVANTAGE OF THE OFFER.
The purpose of the Offer is to increase the equity interest of Mr. Fant and
Purchaser in the Company and support their efforts to gain control over the
management, operations and assets of the Company. Upon gaining control,
Purchaser intends to (1) explore ways to deploy the Company's assets more
productively, which may include the initiation of a program to acquire other
companies in the industry, (2) seek to increase the utilization and operating
efficiency of the Company's recently expanded facility in Victoria, Minnesota,
and (3) seek to stabilize the Company's cash flows. Purchaser also plans to
reform the manner in which stock compensation is paid to the Company's Board
of Directors and senior management. Specifically, Purchaser plans to link
stock compensation more closely to the Company's operating results and stock
price performance, avoid the dilutive effects that the current practices can
have on non-management shareholder value, and eliminate certain compensation
arrangements that promote entrenchment of management. Purchaser has no
intention of liquidating the Company's assets, moving operations out of
Victoria, Minnesota, or otherwise disrupting operations. Purchaser does not
plan to effect, directly or indirectly, a business combination with the
Company. Rather, Purchaser will seek to enhance the Company's long-term growth
prospects. THIS NOTICE OF OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION
OF A PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING
OR ANY SPECIAL MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION
WHICH PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO PROXY SOLICITATION
MATERIALS COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
Purchaser reserves the right to assign its right to purchase Shares tendered
pursuant to the Offer and its other rights under the Offer to one or more of
its affiliates, including its sole shareholder, Mr. Fant. Any such assignment
shall not relieve Purchaser of its obligations under the Offer and shall in no
way prejudice the rights of tendering shareholders to receive payment for
Shares duly tendered.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to Firstar
Bank of Minnesota, N.A. (the "Depositary") of Purchaser's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant
to the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from Purchaser and transmitting such payments to
shareholders whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY
PURCHASER, REGARDLESS OF ANY
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<PAGE>
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
representing Shares and, if applicable, Rights, or timely confirmation of a
book-entry transfer of such Shares and, if applicable, Rights into the
Depositary's account at The Depository Trust Company or The Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility" and together,
the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase, (ii) the Letter or Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in Section 2 of the
Offer to Purchase) in connection with a book-entry transfer, and (iii) any
other documents required by the Letter of Transmittal.
Purchaser reserves the right, in its sole discretion, to extend the Offer at
any time and from time to time, notwithstanding the prior satisfaction of the
conditions to the Offer. Subject to the applicable rules and regulations of
the Securities and Exchange Commission, Purchaser reserves the right, in its
sole discretion, at any time and from time to time, and regardless of whether
or not any of the events set forth in Section 12 of the Offer to Purchase
shall have occurred, to (i) extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and the payment for, any
Shares, by giving oral or written notice of such extension to the Depositary
or (ii) amend the Offer in any respect by giving oral or written notice of
such amendment to the Depositary. During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the
Offer, subject to the rights of a tendering shareholder to withdraw such
shareholder's Shares. Any extension, delay, termination, waiver or amendment
of the Offer will be followed as promptly as practicable by public
announcement thereof, to be made no later than 9:00 A.M., New York City time,
on the next business day after the previously scheduled Expiration Date (as
defined below). The term "Expiration Date" means 12:00 Midnight, New York City
time, on Tuesday, April 7, 1998, unless and until Purchaser, in its sole
discretion, shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by
Purchaser pursuant to the Offer, may also be withdrawn at any time after May
8, 1998 (or such later date as may apply in case the Offer is extended). For a
withdrawal to be effective, written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered such
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder if different from that of the person who tendered such
Shares. If certificates for the Shares or, if applicable, Rights to be
withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, the serial numbers shown
on such certificates must be submitted to the Depositary and the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in Section 2 of the Offer to Purchase) unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares, in which case a notice of withdrawal will
be effective if delivered to the Depositary by any method of delivery
described in the second sentence of this paragraph. A withdrawal of Shares or
Rights shall also constitute a withdrawal of the associated Rights or Shares,
as applicable. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by Purchaser, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by Purchaser or by the Company to record
holders of Shares and furnished to brokers, dealers, commercial banks,
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<PAGE>
trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent as set forth below. Requests for copies of the Offer
to Purchase and the related Letter of Transmittal and all other tender offer
materials may be directed to the Information Agent or the Dealer Manager, and
copies will be furnished promptly at Purchaser's expense. Purchaser will not
pay any fees or commissions to any broker or dealer or any other person (other
than the Dealer Manager, the Depositary and the Information Agent) for
soliciting tenders of Shares pursuant to the Offer.
4
<PAGE>
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
Call Collect (212) 843-8500
or
CALL TOLL FREE (800) 253-3814
The Dealer Manager for the Offer is:
RJ STEICHEN & CO
One Financial Plaza
Suite 100
120 South 6th Street
Minneapolis, Minnesota 55402-1800
(612) 341-6200
March 10, 1998
5
<PAGE>
EXHIBIT (b)(1)
SECURITIES ACCOUNT MARGIN AGREEMENT
CONSENT TO LOAN OF SECURITIES:
In consideration of the acceptance by J.C. Bradford & Co. ("Bradford") of
the account(s) in which the undersigned applicants(s) (all such signatories
hereto, whether acting in their individual or representative capacities, are
referred to in this Agreement as "you") have an interest, alone or with
others, which you have opened or open in the future, with Bradford for the
purchase and sale of securities, or commodities you agree as follows:
1. RULES AND REGULATIONS: All transactions for your account shall be subject
to the then applicable constitution, rules, regulations, customs and usages
of the exchange or market and its clearing house, if any, where executed by
Bradford or its agents; and, where applicable, the Securities Exchange Act
of 1934, as amended; the Commodity Exchange Act, as amended; the rules and
regulations of the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System and the Commodity Futures Trading
Commission.
2. WAIVER: You agree that no provision of this Agreement shall be waived,
altered, modified or amended unless committed to in writing and signed by a
partner of Bradford. No waiver of any provision of this Agreement shall be
deemed a waiver of any other provision, nor a continuing waiver of the
provision(s) so waived.
3. SEVERABILITY: If any provision of this Agreement is held to be invalid,
void or unenforceable by reason of any law, rule, administrative order or
judicial decision, that determination shall not affect the validity of the
remaining provisions of this Agreement.
4. SECURITY INTEREST: All monies, securities, commodities or contracts
relating thereto and all other property in any account in which you have an
interest (held either individually, jointly or otherwise) or which may at
any time be in Bradford's possession for any purpose, including
safekeeping, shall be subject to a general lien for the discharge of all
obligations you may have to Bradford, however and whenever arising. All
securities and other property shall be held by Bradford as security for the
payment of all such obligations or indebtedness in any account in which you
may have an interest.
5. LOAN OR PLEDGE OF SECURITIES: All monies, securities and commodities or
contracts relating thereto and all other property which Bradford may at any
time be carrying for you or in which you may have an interest, may from
time to time and without notice be carried in Bradford's general loans and
may be pledged, repledged, hypothecated or rehypothecated, separately or in
common with other securities or any other property for the sum due Bradford
thereon or for a greater sum without retaining in Bradford's possession and
control for delivery a like amount of similar securities or commodities.
Subject to applicable law, Bradford, without notice to you, may apply
and/or transfer any or all monies, securities, commodities or contracts
relating thereto and all other property interchangeably between accounts or
to accounts in which you have an interest or which are guaranteed by you
(except regulated commodity accounts). Bradford is hereby specifically
authorized to transfer to your cash account on settlement day any excess
funds available in any of your other accounts, including but not limited to
any free balances in any margin account, sufficient to make full payment of
cash purchases. You agree that any debit occurring in any of your accounts
may be transferred at Bradford's option to your margin account. You hereby
authorize Bradford, from time to time, to lend, separately or together with
property of others, to itself or others, any property it may be carrying
for you on margin. This authorization shall apply to all accounts for you.
6. INTEREST CHARGES: Debit balances in your accounts shall be charged
interest or service charges in accordance with Bradford's policies and at
prevailing rates determined by Bradford.
7. LIQUIDATION: You understand that, notwithstanding a general policy of
giving customers notice of a margin deficiency, Bradford is not obligated
to request additional margin from you in the event your account falls below
minimum maintenance requirements. More importantly, there may be
circumstances where Bradford will liquidate securities and/or other
property in the account without notice to you to ensure
1
<PAGE>
that minimum maintenance requirements are satisfied. Bradford shall have the
right in accordance with its general policies regarding margin maintenance
requirements to require additional collateral or the liquidation of any
securities and other property whenever in its discretion it considers it
necessary for its protection, including in the event of, but not limited to:
Your failure to promptly meet any call for additional collateral; the filing
of a petition in bankruptcy by or against you; the appointment of a receiver
is filed by or against you; an attachment is levied against any account in
which you have an interest or; your death. In such event, Bradford is
authorized to sell any and all securities and other property in any account
of yours, whether carried individually or jointly with others, to buy all
securities or other property which may be short in such Account(s), to
cancel any open orders and to close any or all outstanding contracts, all
without demand for margin or additional margin, other notice of sale or
purchase, or other notice of advertisement each of which is expressly waived
by you. Any such sales or purchases may be made at Bradford's discretion on
any exchange or other market where such business is usually transacted or at
public auction or private sale, and Bradford may be the purchaser for its
own account. It is understood a prior demand, or call, or prior notice of
the time and place of such sale or purchase shall not be considered a waiver
of Bradford's right to sell or buy without demand or notice as herein
provided.
8. MARGIN: You will at all times maintain positions and margins in your
accounts as Bradford, in its discretion, may from time to time require and
will pay on demand any debit balance owing with respect to such accounts.
9. GOVERNING LAW: This agreement shall be governed by the laws of the State of
New York, and shall inure to Bradford's successors and assigns, and shall be
binding on you, your heirs, executors, administrators and assigns.
10. ARBITRATION DISCLOSURES:
. ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
. PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
. THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
. THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
11. ARBITRATION: I AGREE, AND BY CARRYING AN ACCOUNT FOR ME, BRADFORD AGREES,
THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN US CONCERNING ANY TRANSACTION
WHETHER CONSTRUCTION, PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT
BETWEEN US, WHETHER ENTERED INTO PRIOR, ON OR SUBSEQUENT TO THE DATE HEREOF,
SHALL BE DETERMINED BY ARBITRATION. ANY ARBITRATION UNDER THIS AGREEMENT
SHALL BE GOVERNED BY THE ARBITRATION AND SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK, BEFORE THE NEW YORK STOCK EXCHANGE, INC. OR AN ARBITRATION
FACILITY PROVIDED BY ANY OTHER EXCHANGE OF WHICH BRADFORD IS A MEMBER, OR
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. AND IN ACCORDANCE WITH
THE ARBITRATION RULES PERTAINING TO THE SELECTED ORGANIZATION. I MAY ELECT
IN THE FIRST INSTANCE WHETHER ARBITRATION SHALL BE BY AN EXCHANGE OR SELF-
REGULATORY ORGANIZATION OF WHICH THE BROKER IS A MEMBER, BUT IF I FAIL TO
MAKE SUCH ELECTION BY REGISTERED LETTER OR TELEGRAM ADDRESSED TO BRADFORD AT
ITS MAIN OFFICE, BEFORE THE EXPIRATION OF FIVE (5) DAYS AFTER RECEIPT OF A
WRITTEN REQUEST FROM BRADFORD TO MAKE SUCH ELECTION, THEN BRADFORD SHALL
MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR OF THE MAJORITY OF
THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN
ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
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<PAGE>
12. SALE ORDERS/DELIVERIES: You agree that when placing a sell order, all
"short" sale orders shall be designated as "short" and all "long" sale
orders shall be designated as "long". You represent that any sell order
which you designate as "long" shall be for securities then owned by you and
if such securities are not then deliverable from your account, that you
will deliver them on or before settlement date. In the case of the sale of
any security, commodity or other property by Bradford at your direction,
Bradford's inability to deliver the same to the purchaser by reason of your
failure to supply Bradford therewith, you authorize Bradford to borrow such
security, commodity or other property necessary to make delivery thereof
and you agree to be responsible for any loss which Bradford may sustain
thereby and any premiums which it may be required to pay thereon and for
any additional loss which it may sustain by reason of its inability to
borrow the security, commodity or other property sold on your behalf.
13. BROKER: You understand that in all transactions between you and Bradford,
Bradford shall be acting as broker for you except when Bradford discloses
to you that, with respect to such transaction, it is acting as dealers for
its account or as broker for some other person.
14. COMMUNICATIONS: Confirmations of transactions and statements of your
account shall be conclusive if not objected to in writing to Bradford
within 5 days and 10 days respectively after transmitted to you by mail or
otherwise. Communications may be sent to you at the address shown on
Bradford's records for your account or at such other address as you may
hereafter provide to Bradford in writing. All communications sent, whether
by mail, telegraph, messenger or otherwise will be deemed given, whether
actually received or not.
15. REPRESENTATIONS: You represent that you are of legal age, are not an
employee or member of any exchange or a member firm or any corporation of
which any exchange owns a majority interest or the NASD or of a bank, trust
company, insurance company or other employer engaged in the business of a
broker-dealer and that you will promptly notify Bradford if you become so
employed. You further represent that, unless otherwise disclosed to
Bradford in writing, no one except you has an interest in the account or
accounts maintained with Bradford in your name.
16. AGREEMENT CONTAINS ENTIRE UNDERSTANDING/ASSIGNMENT: This Agreement
contains the entire understanding between you and Bradford concerning the
subject matter of this Agreement. You may not assign the rights and
obligations hereunder without first obtaining the prior written consent of
Bradford.
BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT:
1. THE SECURITIES IN YOUR MARGIN ACCOUNT MAY BE LOANED TO BRADFORD OR LOANED
OUT TO OTHERS; AND
2. THAT YOU HAVE RECEIVED A COPY OF THIS AGREEMENT; AND
3. THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PARAGRAPH 11.
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MARGIN INTEREST RATES
We are furnishing the following information in order that you may be
informed of the terms and conditions governing our charges for credit extended
to or maintained for you.
1. CASH ACCOUNTS: Generally, interest is not charged on debit balances in
cash accounts, unless there is also a margin debit balance in your
account, in which case interest is charged on the total debit balance.
However, interest may also be charged on cash account debit balances in
unusual circumstances, such as: a prepayment (payment prior to
settlement date) of the proceeds of a sale, in which case there would be
interest charged for the number of days of early payment; a late payment
(after settlement date) for securities purchased; or a debit balance
arising from a sell-out or buy-in following a customer's failure to pay
for securities purchased or to deliver securities sold.
2. RATE: The annual rate of charge will be determined in accordance with the
following:
<TABLE>
<CAPTION>
AVERAGE DEBIT
BALANCE MAXIMUM CREDIT RATE
------------- -------------------
<S> <C>
Less than $25,000 Base Rate + 1.75%
$25,000--$49,999 Base Rate + 1.50%
$50,000--$99,999 Base Rate + 1.00%
$100,000--$499,999 Base Rate + .50%
Over $500,000 Base Rate + .25%
</TABLE>
Our Base Rate will generally be Prime Rate as quoted in the Wall Street
Journal. When your interest rate is to be increased for any reason,
other than to adjust to changes in the base rate, at least 30 days
prior written notice will be given.
3. COMPUTATION OF CHARGES: As stated in our margin agreement, our margin
accounts and related finance charges are governed by the laws of the
State of New York. In computing credit charges, balances are calculated
daily for all types of accounts of a customer, except credit balances in
short accounts (Type 5).
In computing credit charges, cash and margin (Type 1 & 2 Daily
Balances) are netted against each other. Each net debit is added to
obtain an aggregate debit for the period. This aggregate is multiplied
times the interest rate and then divided by 360 days to obtain the
interest charges. For those days that have a net credit, this net of
cash and margin accounts is carried over and netted against other
accounts carried for you (other than short accounts). The same method
is then used (adding, multiplying by the rate and dividing by 360).
If you sell short (or short against the box), and the market value of
the security you sold increases above your selling price, the increase
will be charged to your Margin Account (Type 2) with an offsetting
credit to your Short Account (Type 5) and interest will be charged in
the Margin Account on the increase. Conversely, interest is reduced by
any decrease in market value. This is known as "Marking to the Market."
Our interest is calculated and posted on the last business day of the
month with the last day of the period being the previous day. Interest
for December will similarly be calculated and posted on the last
working day of the calendar year. To enable you to confirm the accuracy
of the monthly interest charge as shown on your statement, the
following information will be shown on the statement: the interest
rate, the average balance, the beginning and ending dates of the
interest period, and the ending debit balance.
4. COLLATERAL: Your Customer Agreement with us provides a lien on all
securities which we hold for you to secure the discharge of all your
obligations to us, and gives us the right at any time to require you to
deposit such additional collateral as, in our sole discretion, we
determine is necessary as security for your obligations to us. Without
limiting our aforesaid discretionary authority, we have some general
guidelines which may be changed or discontinued by us at any time. For
instance, if your account
4
<PAGE>
should fall below 30% equity at any time, a call will be sent to you for
additional cash or collateral to bring your equity up to 30%. We may
also decline to extend credit on certain securities because of price,
market conditions, concentration; etc., which we feel would be both to
your interest and the Firm's to be on a fully paid basis. There may be
times also when the firm is extending credit on particular securities,
but due to market or other conditions may feel it necessary to call on
you for sufficient cash or collateral in the order to make that security
fully paid for.
5
<PAGE>
EXHIBIT (b)(2)
GUARANTEE
OF
ANTHONY J. FANT
For value received, ANTHONY J. FANT, an individual (the "Guarantor"),
hereby unconditionally and irrevocably guarantees the full performance by Fant
Industries Inc. ("Purchaser") as and when required of its obligations to
consummate its offer to purchase shares of the Common Stock, par value $0.05 per
share, of HEI, Inc. as announced on March 4, 1998 and subject to and in
accordance with the terms of such offer.
The Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of merger or bankruptcy of Purchaser,
any right to require a proceeding first against the Purchaser, protest or notice
with respect to the aforementioned obligations, setoff, counter claim, notice of
acceptance and all notices or demands whatsoever and covenants that this
Guarantee will not be discharged except upon complete performance of the
obligations contained in this Guarantee.
This Guarantee shall be deemed to be a contract made under the laws of the
State of New York and shall for all purposes be governed by and construed in
accordance with the laws of such State.
IN WITNESS WHEREOF, ANTHONY J. FANT has duly executed this Guarantee.
Dated: March 9, 1998
/s/ ANTHONY J. FANT
______________________________
ANTHONY J. FANT, an individual
