[TEXT]
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant { }
Filed by a Party other than the Registrant {x}
Check the appropriate box:
{x} Preliminary Proxy Statement { } Confidential, for Use of the
Commission Only (as permitted
{ } Definitive Proxy Statement by Rule 14a-6(e) (2))
{ } Definitive Additional Materials
{ } Soliciting Material Pursuant to Section 240.14a-11 or Section
240.14a-12
HEI, Inc.
(Name of Registrant as Specified In Its Charter)
FANT INDUSTRIES INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
{x} No fee required.
{ } Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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{ } Fee paid previously with preliminary materials.
{ } Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of filing.
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PRELIMINARY COPY, MATERIALS DATED MARCH 27, 1998
PROXY STATEMENT
of
FANT INDUSTRIES INC.
______________
SPECIAL MEETING OF SHAREHOLDERS
of
HEI, INC.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY CARD
This proxy statement (the "Proxy Statement") and the enclosed GREEN
proxy card are being furnished to holders of the common stock, par value
$0.05 per share (the "Shares"), of HEI, Inc., a Minnesota corporation (the
"Company" or "HEI"), by Fant Industries Inc., a Delaware corporation ("Fant
Industries") formed by Mr. Anthony J. Fant (together with Fant Industries,
the "Fant Group"), in connection with the solicitation of proxies from the
Company's shareholders to be used at a special meeting of shareholders of the
Company including any adjournments or postponements, continuations or
rescheduling thereof (the "Special Meeting"), to take the following actions:
(i) remove all members of the Board of Directors of the Company (the "Board")
(and any person or persons elected or designated prior to the Special Meeting
to fill any vacancy or newly created directorship) other than Eugene W.
Courtney, and elect the directors nominated by the Fant Group (the "Fant
Nominees") who are committed to completing the Offer (as defined below) and
leading changes designed to create new value for all shareholders (the
"Director Replacement Proposals"); and (ii) adopt an amendment to the bylaws
of the Company (the "Bylaws") to opt out of Section 302A.671 of the Minnesota
Business Corporation Act (the "Control Share Act") so that Shares acquired by
Fant Industries in the Offer will have voting rights equal to those of all
other outstanding Shares (the "Bylaws Proposal" and, together with the
Director Replacement Proposals, the "Proposals"). The principal executive
offices of the Company are located at 1495 Steiger Lake Lane, Victoria,
Minnesota 55386. This Proxy Statement and the GREEN proxy card are first
being furnished to the Company's shareholders on or about April __, 1998.
YOUR VOTE IS IMPORTANT! A VOTE FOR OUR NOMINEES AND THE PROPOSED BYLAW
AMENDMENT IS A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR
FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING
THE OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT
STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES
AND THE PROPOSED BYLAW AMENDMENT.
Although the Company has not yet called the Special Meeting or
determined the date it will be held, the Fant Group is entitled under the
Company's Bylaws and under the Minnesota Business Corporation Act to demand
the Special Meeting and is soliciting proxies for use at the Special Meeting
whenever it may be held. Alternatively, the Board can call the Special
Meeting, which could be held after only 14 days. If the Board fails to call
the Special Meeting promptly, the Fant Group will exercise its right to
demand the Special Meeting. The record date for determining shareholders
entitled to notice of and to vote at the Special Meeting (the "Record Date")
has not yet been set by the Company. Shareholders of record at the close of
business on the Record Date will be entitled to one vote at the Special
Meeting for each Share held by them on the Record Date. The Fant Group
beneficially owns 734,900 Shares, which represent approximately 18.1% of the
Shares outstanding (based on information publicly disclosed by the Company),
and intends to vote such Shares FOR the Proposals.
THIS SOLICITATION IS BEING MADE BY THE FANT GROUP AND NOT ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY.
On March 10, 1998, Fant Industries commenced a cash tender offer at a
price of $8.00 per Share (including the associated Right), net to the seller
in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated the same date (the "Offer
to Purchase") and the related letter of transmittal (the "Letter of
Transmittal") (which, as amended from time to time, together constitute the
"Offer") for (i) 467,886 Shares or such greater number of Shares which
constitute 11.5% of the total number of Shares outstanding as of the date
Shares are accepted for payment in the Offer, and (ii) unless and until
validly redeemed by the Board, the common stock purchase rights (the
"Rights") associated therewith and issued pursuant to the Rights Agreement,
dated as of May 27, 1988, between the Company and Norwest Bank Minnesota,
N.A., as Rights Agent (the "Rights Agreement").
The purpose of the Offer is to increase the equity interest of the Fant
Group in the Company and support its efforts to gain control over the
management, operations and assets of the Company. The Fant Group wants to
provide the strategic leadership needed to make HEI a dynamic, growing
company. The Fant Group has invested approximately $4.3 million to acquire
more than 18% of the Company's outstanding common stock and is by far the
largest shareholder. As such, its interest in maximizing shareholder value
is directly aligned with yours. The Fant Group has absolutely no intention
of liquidating the Company's assets, laying off employees, moving operations
out of Victoria, Minnesota, or otherwise disrupting operations. Rather, the
Fant Group wants to work with, and not against, management to enhance the
Company's long-term growth prospects and increase shareholder value through
carefully selected acquisitions, long-term investments for expansion, and
diversification of its customer base.
The Offer is currently scheduled to expire at 12:00 Midnight, New York
City time, on Tuesday, April 7, 1998, unless extended to a later date and
time (the "Expiration Date"). Shares which are tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date.
THIS PROXY STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR
AN OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE
OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, WHICH YOU SHOULD
HAVE ALREADY RECEIVED. IF YOU HAVE NOT ALREADY RECEIVED THE OFFER TO
PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, PLEASE CALL BEACON HILL
PARTNERS, INC. AT (800) 843-8500.
PROPOSALS
The Fant Group is soliciting proxies in support of the following two
sets of proposals to be considered and voted upon at the Special Meeting:
DIRECTOR REPLACEMENT PROPOSALS
1. To remove all of the current members of the Company's Board of
Directors and any person or persons elected or designated by the Board
to fill any vacancy or newly created directorship, other than Eugene W.
Courtney; and
2. To elect to the Board such number of the following Fant Nominees
that when added to Mr. Courtney equals the size of the Board: Anthony
J. Fant, Edwin W. Finch, III, Steve E. Tondera, Jr. and
________________. The first three of such individuals will be nominated
for election to succeed the current Directors (or any Director named to
fill any vacancy created by the death, retirement, resignation or
removal of any of such four Directors) of the Company, other than Mr.
Courtney. The fourth of such individuals will be nominated for election
to fill the currently vacant directorship (or to succeed any Director
named to fill such vacancy). One or more additional individuals will be
nominated for election (a) in the event that the Company purports to
increase the number of Directorships pursuant to Section 3.09 of the
Bylaws, to each additional Directorship created, and/or (b) in the event
any of the four individuals named above or Mr. Courtney is unable for
any reason to serve as a Director.
Additional nominations made pursuant to the preceding clause are without
prejudice to the position of the Fant Group that any attempt to increase the
size of the Board constitutes an unlawful manipulation of the Company's
corporate machinery to disenfranchise the Company's shareholders. The Fant
Group plans to distribute to the shareholders of the Company supplemental
materials if the Board amends the Bylaws after the date of this Proxy
Statement to increase the number of Directors of the Company.
BYLAWS PROPOSAL
1. To adopt the following resolution:
RESOLVED, that the Bylaws of the Company are hereby amended, by
adding a new section reading as follows:
"Control Share Act. The provisions of Section 302A.671 of the
Minnesota Business Corporation Act shall not apply to control
share acquisitions of shares of this corporation."
The adoption of BOTH sets of Proposals is necessary to ensure that
shareholders who wish to tender their Shares to Fant Industries pursuant to
the Offer will have the opportunity to do so. Abstentions and broker non-
votes will have the same effect as votes against the Proposals.
The Fant Group is not aware of any other proposals to be brought before
the Special Meeting. However, should other proposals be brought before the
Special Meeting, the persons named as proxies on the enclosed GREEN proxy
card will vote on such matters in their discretion.
A VOTE FOR THE FANT NOMINEES IS A VOTE FOR CHANGE. ALL OF THEM ARE
COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO DELIVERING TO YOU (1)
IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG TERM VALUE BY SETTING
THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US
IN VOTING FOR THE FANT NOMINEES AND THE PROPOSED BYLAW AMENDMENT.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN, WE URGE YOU TO PROMPTLY
SIGN, DATE AND MAIL (OR FAX BOTH SIDES OF) THE ENCLOSED GREEN PROXY CARD TO
VOTE FOR THE PROPOSALS.
ELECTION OF THE FANT NOMINEES AND THE ADOPTION OF THE BYLAWS PROPOSAL
WILL BE AN IMPORTANT STEP IN REACHING THE GOAL OF CONSUMMATING THE OFFER AND
MAXIMIZING SHAREHOLDER VALUE. HOWEVER, YOU MUST TENDER YOUR SHARES PURSUANT
TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE OFFER. YOUR VOTE FOR THE
PROPOSALS DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT TO THE OFFER,
AND YOUR FAILURE TO VOTE FOR THE PROPOSALS DOES NOT PREVENT YOU FROM TENDERING
YOUR SHARES PURSUANT TO THE OFFER.
IMPORTANT NOTE: If you hold your Shares in the name of one or more
brokerage firms, banks or nominees, only they can exercise voting rights with
respect to your Shares and only upon receipt of your specific instructions.
Accordingly, it is critical that you promptly sign, date and mail the
enclosed GREEN proxy card in the envelope provided or contact the person
responsible for your account and give instructions to sign, date and mail the
GREEN proxy card representing your Shares. Fant Industries urges you to
confirm in writing your instructions to the person responsible for your
account and to provide a copy of those instructions to Fant Industries
in care of Beacon Hill Partners, Inc., who is assisting in this solicitation,
at the address and telephone numbers set forth below and on the back cover of
this Proxy Statement, so that Fant Industries will be aware of all
instructions and can attempt to ensure that such instructions are followed.
If you have any questions regarding your proxy, or need assistance in
voting your Shares, please call:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
20TH FLOOR
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 253-3814
FAX (212) 843-4384
WHY YOU SHOULD VOTE FOR THE PROPOSALS
YOUR VOTE IS IMPORTANT! A VOTE FOR OUR DIRECTOR NOMINEES AND THE
PROPOSED BYLAW AMENDMENT IS A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED,
SUBJECT TO THEIR FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE
BY CONSUMMATING THE OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON
THE CORRECT STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR
OUR NOMINEES AND THE PROPOSED BYLAW AMENDMENT.
The adoption of BOTH sets of Proposals is necessary to ensure that
shareholders who wish to tender their Shares to Fant Industries pursuant to
the Offer will have the opportunity to do so.
- IMMEDIATE CASH PREMIUM
The value of the Offer at $8.00 per Share is a 25% PREMIUM
over the closing market price of $63/8 on the Nasdaq National
Market on March 3, 1998, the last full trading day prior to
Fant Industries' public announcement of the Offer and a 78%
PREMIUM over the closing price of $41/2 per share on December
1, 1997, which was the day before Mr. Fant began accumulating
the Shares. The Offer is subject to certain conditions and
will not be consummated until those conditions are satisfied
or waived. There are procedures available to the Company's
Board of Directors enabling it to facilitate prompt
consummation of the Offer. Further information concerning the
Offer is contained in the Offer to Purchase and related Letter
of Transmittal.
- PARTICIPATION IN THE COMPANY'S REVITALIZATION AND FUTURE GROWTH
The Fant Nominees have many years of experience in
identifying, screening and implementing strategic
opportunities and enhancing values. They are committed to
revitalizing HEI and making it a dynamic, growing company.
Upon gaining control of the Board, they will seek to position
the Company as an industry leader, increase its visibility,
and enhance market liquidity, through initiatives that may
include strategic acquisitions and corporate financing
activities.
The Fant Group believes that the election of the Fant Nominees to the
Board is in the best interests of the Company's shareholders and is necessary
for enhancing the Company's long-term growth prospects and maximizing
shareholder value.
DIRECTOR REPLACEMENT PROPOSALS
REMOVAL OF CURRENT DIRECTORS
The essential first step toward revitalizing HEI is to change control of
the Board.
LACK OF STRATEGIC DIRECTION. The most serious, far-reaching failure of
the current Board is that it has not set a strategic direction for employing
the Company's assets productively. The Company's 1997 Annual Report
indicates that as of November 29, 1997, $13.3 million, or about 70% of its
total market capitalization at that time, was held in the form of cash and
short-term investments. While the Company's senior managers may be satisfied
maintaining substantial assets in what they have referred to as a "rainy day
fund," the Fant Group believes that this practice reflects a lack of vision
and an inability or unwillingness to identify opportunities for participating
in the industry's growth.
DANGEROUSLY NARROW CUSTOMER BASE. For each of the past five fiscal
years, a minimum of 64% of the Company's net sales have come from two or
three customers. For fiscal 1997, 82% of the Company's net sales were
derived solely from two customers. In the face of such a highly concentrated
customer base, the Company has failed to generate repeat business from its
largest customers. In fiscal 1996, the Company lost significant business
from two of its largest customers accounting for 30% and 27%, respectively,
of fiscal 1995 net sales. In fiscal 1997, the Company lost all business from
its single largest customer, which had accounted for 55% of fiscal 1997 net
sales. In view of the instability of the Company's customer base, the Fant
Group questions the wisdom of management's decision to invest in plant
expansion in fiscal 1996.
VOLATILE OPERATING RESULTS. The Company's recent operating results have
been volatile and disappointing. The Company's net sales for the first
quarter of fiscal 1998 decreased 35% from the same period in fiscal 1997.
Yet the Company failed to reduce expenses commensurately, even while
acknowledging in the 1997 Annual Report that an "unexpected decline in
revenues, without corresponding and timely reductions in expenses, could have
a material adverse effect on the Company's business, results of operations,
or financial conditions." The result was a decline in the Company's gross
profit margin to 13% in the first quarter of fiscal 1998 from 38% for the
same period in fiscal 1997.
EXCESSIVE MANAGEMENT BONUSES. The Board sets and approves management
salary and bonuses, including stock compensation, through the Board's
Compensation Committee. DURING CALENDAR YEAR 1997, THE COMPANY'S STOCK PRICE
FELL FROM A HIGH OF 123/8 ON JANUARY 20, 1997 TO 43/4 ON DECEMBER 31, 1997, A
DECREASE IN SHAREHOLDER VALUE OF OVER $30 MILLION, OR 62%. Despite this
disappointing 1997 year for the shareholders, the Board found it appropriate
to reward the top three managers with options to purchase 67,500 Shares (all
other employees as a group received 65,000). During the past three fiscal
years, in the face of volatile operating results, the Board has approved
steadily increasing cash bonuses to these top three managers, including cash
bonuses of over $90,000 in fiscal 1997. Over the past nine years, these top
three managers have been granted 442,500 options, while all other employees
as a group have received options to purchase 420,500 Shares over the same
period.
IRRATIONAL SYSTEM OF DIRECTOR STOCK COMPENSATION. In the face of poor
operating performance and a resulting decline in the market value of the
Shares, the current directors have continued to reward themselves through the
Company's Stock Option Plan for Non-Employee Directors (the "Plan"). Under
the Plan, 10,000 Shares are granted annually to each non-employee director,
regardless of the Company's operating results and stock price performance.
Options to purchase 160,000 Shares, representing approximately 4% of all
currently outstanding Shares, have been awarded to Directors in the last four
years. In total, options to purchase 400,000 Shares (including the options
previously granted for 160,000 Shares), representing approximately 10% of all
currently outstanding Shares, have been reserved under the Plan for
compensating directors. The Board amended the Plan on November 19, 1997 to
extend the term of options received under the Plan from 5 years to 10 years.
This amendment was enacted after the Board received options with an exercise
price of $11.325 per Share and reflects the Board's lack of faith that the
stock price will exceed $11.325 within the next 5 years. The Fant Group
believes that, to create appropriate incentives, stock compensation should
bear a close relationship to actual operating results and shareholder value.
INADEQUATE PERSONAL FINANCIAL COMMITMENT. As set forth in the table
below, the current directors and executive officers as a group hold currently
issued Shares representing only about 4% of the Company's total Shares
outstanding. The Fant Group believes that to have their interests aligned
with those of shareholders, the Company's directors and executive officers
must have a much greater personal financial stake in its stock performance,
through cash equity investments that put their own money at risk.
DIRECTORS AND PERCENT OF
EXECUTIVE OFFICERS SHARES DIRECTLY OWNED OUTSTANDING SHARES
Eugene W. Courtney 82,740(1) 2.0%
William R. Franta 5,211 *
Robert L. Brueck 2,000 *
Frederick M. Zimmerman 900 *
Jerald H. Mortenson 67,197 1.6%
Dale A. Nordquist 14,564 *
All directors and executive
officers as a group 172,612 4.2%
- --------------------
* Less than one percent.
(1) Includes 46,974 shares held jointly with Mr. Courtney's spouse.
Additionally, when directors and executive officers have exercised their
stock options, they have consistently sold the Shares within a matter of
days. The Fant Group regards this practice as a further reflection of their
unwillingness to make a personal financial commitment through Share ownership
and their low expectations for the Company's future.
FAILURE TO ATTRACT INSTITUTIONAL INVESTORS. The institutional holdings
of the Company's common stock are only about [ ]% in the aggregate. The Fant
Group believes that this extremely low level of institutional interest
reflects a lack of enthusiasm by professional investors in the Company's
future. The Fant Group noted an exodus by institutional investors in the
second half of 1997, including FMR Corp. which had owned more than 6% of the
Company's stock.
YOU ARE URGED TO VOTE FOR THE REMOVAL OF THE CURRENT BOARD ON THE
ENCLOSED GREEN PROXY CARD.
ELECTION OF FANT NOMINEES
The Fant Group wants to provide the strategic leadership needed to make
HEI a dynamic, growing company. The Fant Group has invested approximately
$4.3 million to acquire more than 18% of the Company's outstanding common
stock, and is by far the largest shareholder. As such, its interest in
maximizing shareholder value is directly aligned with yours. The Fant Group
has absolutely no intention of liquidating the Company's assets, laying off
employees, moving operations out of Victoria, Minnesota, or otherwise
disrupting the Company's operations. Rather, the Fant Group wants to work
with, and not against, management to enhance the Company's long-term growth
prospects and increase shareholder value through carefully selected
acquisitions, long-term investments for expansion, and diversification of the
Company's customer base.
In addition, Mr. Fant personally has asked Mr. Courtney to remain as
President of the Company following the election of the Fant Nominees. The
Fant Group recognizes Mr. Courtney's value to the Company and would like to
see him continue to oversee the day-to-day operations.
The Fant Nominees obviously do not plan to, nor could they, micro-manage
design and manufacture of microelectronic devices or any other high
technology products. The Company has plenty of talented, highly skilled
people for this purpose as well as for other day-to-day operations. Yet the
Company is missing one element that is essential for real growth, and that
element is strategic leadership. This is what the Fant Nominees intend to
bring to the Company.
The Fant Nominees are committed, subject to their fiduciary duties, to
delivering to you (1) immediate value by consummating the Offer and (2) long
term value by setting the Company on the correct strategic path for growth.
We urge you to join us in voting FOR our nominees.
DELIVERY OF IMMEDIATE CASH
The value of the Fant Industries Offer at $8.00 per Share is a 25%
PREMIUM over the recent stock price and a 78% PREMIUM over the price on the
day before Mr. Fant began accumulating Shares. Upon their election, the Fant
Nominees are expected, subject to their fiduciary duties to the Company's
shareholders, to remove any obstacles to the consummation of the Offer that
the current members of the Board have failed to remove. In particular, the
Fant Nominees are expected to redeem the Rights (or amend the Rights
Agreement to make the Rights inapplicable to the Offer), which would have the
effect of satisfying the Board Action Condition (as defined herein) to the
Offer. The all cash offer is not conditioned upon Fant Industries obtaining
financing.
REFORM OF DIRECTOR STOCK COMPENSATION
The Fant Nominees are committed to reforming the current stock
compensation arrangements immediately. It is vital that the interests of the
Company's directors and management correlate with the interests of
shareholders. The Fant Group plans to link stock compensation directly to
the Company's operating performance and shareholder value.
CREATION OF LONG-TERM VALUE
First Steps. Upon gaining control of the Board, the Fant Nominees will
aggressively screen numerous strategic opportunities with a view toward
revitalizing the Company.
- The Fant Nominees will explore ways to employ the Company's assets
more productively. The accumulation of cash by the Company without
a strategic plan for its use provides little opportunity for
growth. The Fant Group will seek to employ this cash through
strategic acquisitions and investments that contribute to the long-
term growth of the Company.
- The Fant Nominees will seek to increase the utilization and
operating efficiency of the Company's recently expanded facility in
Victoria, Minnesota. The Fant Nominees will challenge management
to rethink its sales strategy and, if appropriate, will invest in a
substantial and directed sales and marketing program to expand and
diversify the Company's customer base.
- The Fant Group will seek to stabilize the Company's cash flows. In
addition to expanding and diversifying the Company's customer base
towards this objective, the Fant Group will seek out opportunities
that allow the Company to grow in related areas that complement
current operations. The Fant Group will also explore opportunities
to develop, manufacture and market proprietary products and may
seek strategic partners for such endeavors.
Strategic Vision. The Fant Group believes that the contract electronics
manufacturing industry and specifically the microelectronics segment of that
industry represents one of the most attractive opportunities for high
compound annual growth of any industry. Our goal is to see the Company
become a major competitor in this industry--on a global scale--during the
next ten to fifteen years.
Intense competition from around the world dictates that the Company
think globally. We must be flexible enough to evolve as markets and
technology continue to change. The Fant Group will bring to the Company the
vision and determination needed for the future. We believe the true
potential of the Company has barely been tapped and that a paradigm shift in
leadership is needed to reinvigorate the Company and enable it to reach its
true potential. Such a change can occur only with leaders who believe there
are unlimited opportunities for those who seek them and who are committed to
capitalizing on them as they are identified. The current Board views the
Company as being dependant on its existing customers' needs in order to
achieve growth and lacks the vision to seek out and create its own
opportunities for growth. The Fant Group is the catalyst needed to lead the
Company into the twenty-first century.
The Fant Group views the Company's Victoria, Minnesota facility as the
anchor of its plan for expansion and aggressive growth. We believe the
intensely competitive nature of the Company's business dictates that it
become one of the most efficient producers of contract microelectronic
components in the world. To that end we will seek to lead the industry in
achieving high levels of plant loading at the Victoria facility.
With the Victoria facility as the anchor and technology hub of the
Company, the Fant Group plans to seek opportunities to expand the Company's
manufacturing capabilities, through the acquisition or construction of
additional facilities that will allow the Company to compete for the long-
term business it has consistently missed out on. We have noted a distinct
pattern in which the Company is able to attract a new and relatively large
customer, complete the design and start-up process for manufacturing a
particular product for that customer, and soon thereafter have the customer
move long-term production of that product to another manufacturer. The
Company is missing out on long-term business from its customers by developing
the product manufacturing design process but failing to retain the customer
throughout the on-going production of the customer's product. The additional
facilities will provide the increased manufacturing capabilities the
Company's customers demand. The Company is not merely a research and
development source - it is a microelectronics manufacturer. The Company must
have the facilities to allow it to not only provide design and prototyping
functions, but to enjoy the benefits of long-term high volume production runs
for the products it develops.
The Fant Nominees believe the Company may be missing out on new business
for long-term production as a result of concerns many potential customers may
have with risking their entire manufacturing capacity in one plant. They may
be willing to have their initial prototyping completed in a single facility
but the risk of committing their long-term, high volume production to a
single facility entails an unacceptable risk for many potential customers.
More and more, electronics companies are outsourcing the engineering and
manufacturing needs of their business. The Company must be positioned to
compete for the business created by this trend. Additionally, major
electronics manufacturers are expanding at an extraordinary rate as new
markets are emerging in Latin America, Asia, Eastern Europe and elsewhere.
The Fant Group will seek opportunities, including the acquisition of existing
facilities or construction of new facilities in these emerging markets that
will allow the Company to compete in the global marketplace. The Fant Group
believes that to succeed in such a marketplace, the Company must become the
lowest cost manufacturing source to win new customers and retain existing
customers while maintaining its standards for quality.
The Fant Group will seek opportunities to engage in partnerships, joint
ventures and similar strategic alliances for the development of new products
and processes. Such arrangements may offer important strategic value and
represent a path to long-term growth and more consistent performance. We
will also seek acquisition opportunities that could result in increased
utilization of the Company's existing manufacturing facilities and yield
synergistic benefits. We will seek to develop proprietary products to
increase the Company's financial stability. These goals require a marketing
effort hitherto undreamed of by the existing Board of Directors.
No assurance can be given that the Fant Nominees will be able to
implement any of the foregoing plans or produce favorable financial results.
Any actions undertaken, however, will be with a view towards enhancing value
of the Company for the benefit of all shareholders.
BUSINESS EXPERIENCE OF ANTHONY FANT
Mr. Fant began his successful business career in 1985 when he built a
single television station. Over the next 12 years he acquired, built or
managed a number of additional underperforming or undeveloped television and
radio stations in diverse areas of the country. From 1993 through 1996, a
total of eight television and radio properties were purchased in seven
states, including Minnesota. In the process of acquiring these stations, Mr.
Fant instituted a highly intensive and aggressive screening of a multitude of
stations to achieve the objective of identifying underperforming or
undervalued assets. All eight of the acquired stations were either not on
the air, in bankruptcy, or otherwise underperforming and undervalued.
Following the acquisition of these properties, innovative steps were
formulated and taken to enhance and realize their true value. The strategies
employed by Mr. Fant to revitalize each station included, among other things,
repositioning the transmitting towers to better reach a greater population,
affiliating with different or new networks to create brand recognition for
the station, forming joint ventures with local broadcasters to increase
profitability while reducing risk, increasing cash flow by reducing wasteful
spending, and expanding sales and marketing efforts.
In 1996, Mr. Fant began to focus on divesting his television and radio
assets to capitalize one to sharply escalating station values, new media
market conditions and changes in federal ownership rules, among other things.
Currently, the Fant Group has sold or has contracts to sell all of the eight
broadcasting properties for in excess of $53,000,000, which represents a 400%
increase in the value of the stations over the total cost of acquisition and
improvements. None of these sales resulted in the liquidation of any
station. Each station was sold as a profitable on-going business.
Mr. Fant continues to invest in a variety of other businesses using the
same approach of identifying and understanding the underlying assets of a
business and formulating innovative steps to realize its full potential, and
he now owns a number of businesses in diverse industries.
In each of his endeavors, Mr. Fant's success was not attributable to his
prior knowledge and experience in the specific industry. Rather, it was his
strategic insight and desire to identify undervalued businesses and to
revitalize each one according to its own specific needs. The Fant Group
believes that this strategic leadership is the essential element missing in
the Company's formula for success. In HEI, Mr. Fant sees an opportunity to
create a dynamic engine of growth and believes that Mr. Fant can provide the
necessary leadership toward that end.
THE SHAREHOLDERS HAVE THE RIGHT TO DECIDE
The Fant Group believes anti-takeover defenses such as the Rights
Agreement and the Control Share Act reduce shareholder value over the long
run by entrenching management and by reducing the probability that someone,
like Fant Industries, will make a bid for Shares at a price above market
value. The Fant Group further believes that when an offer is made to acquire
Shares, the shareholders, not the Board, should have the final word on
whether the offer is accepted. Absent the Rights Agreement, a bidder such as
Fant Industries could make an offer to all shareholders to buy their Shares
at a fixed price above the market value without prior approval of the Board.
Shareholders would have the option to accept the Offer and tender their
Shares or reject the Offer if they believe the premium offered is
insufficient. With the Rights Agreement in place, a bidder is effectively
required to seek Board approval prior to making an offer to shareholders.
Absent that approval, the Board can declare the bidder unfriendly and trigger
the Rights Agreement. Consequently, the Fant Group believes that the Rights
Agreement provides the current members of the Board an entrenchment mechanism
to protect and enhance their own welfare prior to approving any bidder's
offer, by placing them in a position to persuade the bidder to spend funds
that could otherwise go directly to the shareholders.
The Fant Group believes that the shareholders (who are the true owners
of the Company) should have the right to decide what is or is not a fair
price for their Shares and whether to accept or reject an offer for their
Shares, and not the Directors (who merely act as agents for the owners). The
Rights Agreement currently in place takes these decisions away from the
shareholders. Election of the Fant Nominees will expedite the redemption of
the Rights, properly returning shareholders' right to control the Company's
future, and as a consequence, will satisfy the Board Action Condition (as
defined hereinafter) to the Offer.
THE FANT GROUP URGES ALL SHAREHOLDERS TO AFFIRM THEIR RIGHT TO DECIDE
THE COMPANY'S FUTURE BY VOTING FOR THE ELECTION OF THE FANT NOMINEES.
THE FANT NOMINEES
The following table sets forth the name, present principal occupation,
business address and business experience for the past five years, and certain
other information, with respect to each of the Fant Nominees. This
information has been furnished to Fant Industries by the respective Fant
Nominees. Each of the Fant Nominees has consented to serve as a Director
and, if elected, would hold office until the 1999 Annual Meeting of
Shareholders of the Company and until his or her successor has been elected
and qualified or until earlier death, retirement, resignation or removal.
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE LAST FIVE YEARS
<S> <C>
Anthony J. Fant ( ) Director, President and Chief Executive Officer of Fant
2154 Highland Avenue Industries. Mr. Fant has been Director, President and Chief
Birmingham, AL 35205 Executive Officer of Fant Broadcasting Company (including,
for these purposes, various affiliated companies engaged
primarily in television and radio broadcasting) since 1986.
Edwin W. Finch, III ( ) Director and President of FHL Capital Corporation since 1984.
600 North 20th Street FHL Capital is an investment banking and business valuation
Birmingham, AL 35203 firm specializing in mergers and acquisitions. Mr. Finch
served as President of Pinson Valley Millworks, Inc., a
distributor of millworks products, from 1988 through 1996.
Steve E. Tondera, Jr. ( ) Director, Vice President, Treasurer, Secretary and Chief
2154 Highland Avenue Financial Officer of Fant Industries. Mr. Tondera has been
Birmingham, AL 35205 Senior Vice President and Chief Financial Officer of Fant
Broadcasting Company (including, for these purposes, various
affiliated companies engaged primarily in television and
radio broadcasting) since 1994 and Director since 1995.
Prior to such time, Mr. Tondera was a principal of Humphryes
& Associates, P.C., a public accounting firm.
</TABLE>
- --------------------
The Fant Nominees will not receive any compensation from Fant Industries
for their services as Directors of the Company. Fant Industries has agreed
to indemnify all of the Fant Nominees against any costs, expenses and other
liabilities associated with their nomination and the election contest. Fant
Industries has also agreed to reimburse Fant Nominees for counsel fees that
they may have incurred in reviewing the materials sent to them by Fant
Industries in connection with their consideration of service as a Fant
Nominee. Each of the Fant Nominees has executed a written consent agreeing
to be a Fant Nominee for election as a Director of the Company and to serve
as a Director if so elected. Within the past ten years, none of the Fant
Nominees has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
According to the Company's public filings, if elected as Directors of
the Company, the Fant Nominees who are not employees of the Company would
receive $750 per quarter, plus $700 for each regular meeting of the Board and
$300 for each committee or special Board meeting attended. Each committee
chairperson would receive an annual retainer of $300. All Directors of the
Company would be reimbursed by the Company for expenses incurred in
connection with their services as Directors of the Company. The Fant
Nominees, if elected, will be indemnified by the Company for service as a
Director of the Company to the extent indemnification is provided to
Directors of the Company under the Bylaws. In addition, Fant Industries
believes that upon election, the Fant Nominees will be covered by the
Company's officer and director liability insurance. Fant Industries
disclaims any responsibility for the accuracy of the foregoing information,
which has been extracted from the Company's public filings.
None of the Fant Nominees is adverse to the Company or any of its
subsidiaries in any material pending legal proceedings.
Fant Industries does not expect that any of the Fant Nominees will be
unable to stand for election, but, in the event that any vacancy in the Fant
Nominees should occur, the Shares represented by the enclosed GREEN proxy
card will be voted in each such case for a substitute nominee selected by
Fant Industries from among the Fant Nominees listed above. In addition, Fant
Industries reserves the right to nominate substitute or additional persons if
the Company makes or announces any changes to its Bylaws or takes or
announces any other action that has, or if consummated would have, the effect
of disqualifying any or all of the Fant Nominees. In any such case, Shares
represented by the enclosed GREEN proxy card will be voted for all such
substitute or additional nominees selected by Fant Industries.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "Commission"), the GREEN proxy card affords each shareholder
the opportunity to designate the names of any of the Fant Nominees whom he or
she does not desire to elect to the Board. Notwithstanding the foregoing,
the Fant Group urges shareholders to vote FOR all of the Fant Nominees on the
enclosed GREEN proxy card. The persons named as proxies in the enclosed
GREEN proxy card will vote, in their discretion, for each of the Fant
Nominees who is nominated for election and for whom authority has not been
withheld.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE FANT NOMINEES ON THE
ENCLOSED GREEN PROXY CARD.
BYLAWS PROPOSAL
Pursuant to the Control Share Act, substantially all of the Shares
acquired by Fant Industries pursuant to the Offer will be denied voting
rights, unless voting rights for such Shares are approved by (i) the
affirmative vote of the holders of a majority of all outstanding Shares
entitled to vote, and (ii) the affirmative vote of a majority of all
outstanding Shares entitled to vote, excluding holders of "interested shares"
(generally, Shares held by Fant Industries, by officers of the Company and by
any employee-directors of the Company).
The Control Share Act does not apply if either (i) the Bylaws are
amended by the Company's shareholders prior to consummation of the Offer to
provide that the Control Share Act shall be inapplicable to control share
acquisitions of the Company's Shares, or (ii) the shareholders vote in
accordance with the Control Share Act to confer full voting rights to Shares
acquired by Fant Industries pursuant to the Offer.
The Bylaws Proposal contemplates the adoption of a bylaw to "opt out" of
the Control Share Act, so that all shareholders have the right to vote their
Shares, regardless of the number of Shares they own or how such Shares were
acquired. Investors, such as Fant Industries, who are otherwise interested
in purchasing a significant number of Shares at a premium over the current
price may be unwilling to do so if such Shares are subject to the loss of
voting rights pursuant to the Control Share Act. Upon shareholder approval
of the Bylaws Proposal, the Company's shareholders will have access to
persons interested in acquiring their Shares without the obstruction created
by the Control Share Act. The adoption of the Bylaws Proposal will have the
affect of satisfying the Control Share Condition (as defined herein) to
consummating the Offer.
YOUR VOTE FOR THE PROPOSED BYLAW AMENDMENT IS A VOTE FOR CHANGE. WE
URGE YOU TO VOTE FOR THE PROPOSED BYLAW AMENDMENT. The Fant Group believes
that all public company shareholders, including the Company's shareholders,
should have equal voting rights, regardless of the number of shares owned.
The Fant Group further believes that the Control Share Act decreases the
attractiveness of the Shares in the public market and may limit the ability
of a shareholder to receive a premium for his/her shares, because it is
unlikely that any investor will purchase a significant number of Shares
unless it is certain to be able to exercise full voting rights for such
Shares. The Control Share Act therefore, makes it likely that the
shareholders will never have the opportunity to sell their Shares to an
investor, such as Fant Industries, who is willing to purchase a significant
number of shares at a premium over the recent historical market prices for
the Shares. The Fant Group believes that even though the Company's
shareholders can grant voting rights for Shares otherwise subject to voting
restrictions under the Control Share Act, no significant investor is likely
to offer to purchase Shares or offer a premium for the Shares unless it is
certain to be able to exercise full voting rights, and that the best way to
provide that certainty is for the Company to "opt out" of the Control Share
Act.
THE FANT GROUP URGES ALL SHAREHOLDERS TO AFFIRM THEIR RIGHTS TO DECIDE
FOR THEMSELVES WHETHER TO TAKE ADVANTAGE OF THE OFFER BY VOTING FOR THE
BYLAWS PROPOSAL.
By voting for the adoption of the Bylaws Proposal, you will be sending
the Board a strong message that the shareholders of the Company, as the true
owners of the Company, demand that every shareholder be entitled to equal
rights to vote their shares and to decide for themselves whether to accept
the Offer.
YOU ARE URGED TO VOTE FOR THE ADOPTION OF THE BYLAWS PROPOSAL ON THE
ENCLOSED GREEN PROXY CARD.
BACKGROUND OF THE SOLICITATION
EVENTS LEADING TO FANT INDUSTRIES' TENDER 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 Board.
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
Neither the Board nor management responded directly to Mr. Fant's
February 17, 1998 letter.
On February 26, 1998, Fant Industries 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 adviser acting on behalf of Fant
Industries contacted the Company's President, Mr. Eugene Courtney, who agreed
to meet with the financial adviser on February 27, 1998.
At the meeting on February 27, 1998 between Mr. Courtney and the
financial adviser, 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 Fant Industries' desire
to gain control of the Board.
On March 2, 1998, a meeting between representatives of Fant Industries
and representatives of the Company was held to discuss the possibility of
Fant Industries obtaining control of the Board. As of this date, there has
been no meaningful progress toward achieving that outcome as a result of that
meeting or otherwise.
On March 4, 1998, Fant Industries 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.
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
On March 5, 1998, Fant Industries 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
In response to Mr. Courtney's March 5, 1998 letter, Fant Industries 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 $8.00 per share, our offer represents a 78%
premium over the closing price of $41/2 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
Later on March 5, 1998, Mr. Courtney contacted Fant Industries' 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:
Base 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 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
On March 9, 1998, Fant Industries received the following letter from Mr.
Courtney:
9 March 1998
Mr. Anthony J. Fant, President
Fant Industries Inc.
2154 Highland Avenue
Birmingham, Alabama 35205
Re: Your letter of March 6, 1998
Dear Mr. Fant:
I regret any confusion related to the possibility of a face-to-face
meeting, and the fact that circumstances have prevented such a meeting to
date. As stated in my letter last Thursday, I would have, indeed, preferred
to meet and discuss the situation prior to your issuance of a tender offer.
As mentioned in our earlier conversation on the subject, it was my hope
that we might meet--perhaps as early as this past Friday--to review your
responses regarding your proposed board members and other plans for HEI. We
had not, however, set a time or date for such a meeting. As I now understand
it, these responses will not be complete and available to us until sometime
this week.
Further, as you may well imagine, the tender offer itself creates
obligations on our part that require, when added to the other immediate
demands on my time, my full and complete attention for the near term.
With the insight gained from the information that you will be supplying
shortly, it may be mutually desirable to set a future time and place to meet,
however.
Sincerely,
Eugene W. Courtney
Fant Industries Inc.
2154 Highland Avenue
Birmingham, Alabama 35205
March 16, 1998
Mr. Eugene W. Courtney
President & CEO
HEI, Inc.
Post Office Box 5000
Victoria, MN 55386-5000
Dear Mr. Courtney:
You and I have traded a number of letters over the past few weeks but
have been unable to make tangible progress toward our objective of a smooth
and orderly negotiated change of control.
I am writing today to request that we schedule a meeting in Victoria or
Minneapolis, with the only participants being the Company's existing
directors and the slate of directors we are considering internally. At this
meeting, I propose we discuss the following items:
(1) Change of the composition of the Board including possible
expansion to a number that will give us clear control (this
would not necessarily involve the removal or resignation of
any incumbent); and
(2) Background and experience of members of our slate of
directors, with every opportunity being allowed for direct
questions.
We would like this meeting to be in a casual and relaxed setting, and we
will come in a cooperative spirit. Within a reasonable time prior to the
meeting, we will furnish to you biographical information about each member of
our slate as well as information demonstrating our track record in business.
This will give members of the existing Board an opportunity to prepare and
ask meaningful questions.
The benefits of a cooperative process to shareholders are enormous. As
the Company's largest shareholder, we are vitally concerned that substantial
value could be eroded in the course of a control contest, and we sincerely
wish to avoid that outcome. Our goal of putting the Company on the current
strategic path is clear. Our preference is to work with existing directors
----
and management, and we believe that a cooperative process is in everyone's
best interest.
We would like to schedule the meeting at a mutually agreeable time and
believe that, to minimize distractions, a Saturday may be preferable to a
business day.
Please contact me after you have consulted with your colleagues.
Sincerely yours,
Anthony J. Fant
President & CEO
On March 20, 1998, Mr. Fant received the following letter from Mr.
Courtney:
HEI INC
1495 Steiger Lake Lane
P.O. Box 5000
Victoria, MN 55386-5000
March 20, 1998
Anthony J. Fant
Fant Industries Inc.
2154 Highland Avenue South
Birmingham, Alabama 35209
Dear Mr. Fant
I have reviewed with the Board your letter of March 16, 1998, and your
letter to shareholders of March 17, 1998.
We agree that cooperation with you as a shareholder is desirable to the
extent, of course, that it is in the best interests of all of the Company's
shareholders. The course you have taken to date is, however, far from
cooperative. Misleading, manipulative correspondence and your apparent
expectation that the Board abdicate its responsibilities only increases the
Board's concerns about your motives and qualifications.
You have chosen, unilaterally, to proceed with your offer and forced the
Company to incur the expenses required to respond to the offer as required
under federal securities laws. You have structured the offer in a manner
that may be very adverse to the remaining shareholders who would own more
than 70% of the outstanding stock. You have provided us with no meaningful
information regarding your plans for the Company, and in fact have taken
every opportunity to avoid giving the Board or the shareholders any answers
or information. You know that the Board has a fiduciary obligation to act on
behalf of all shareholders and yet you suggest that it is inappropriate for
the Board to exercise those responsibilities. You also must know that
partial tender offers of this nature can maximize pressure on shareholders to
tender because of concerns for the prospects of the Company and the value of
the shares once control has been transferred. Yet you suggest that an
oversubscription to your coercive offer will somehow send a message to the
Board.
The Board is not willing to engage in further unproductive discussions
that only involve vague suggestions and lack specificity. As stated
previously, if you have plans and strategies for the Company, we need to know
those plans and strategies in detail and in writing. Further, we would need
to know the reasons why these plans require Board control for their
implementation if they are, indeed, in the best interests of all
shareholders.
You should also be aware that the Board won't hesitate to take
appropriate action to protect the interests of the Company and its
shareholders. We encourage you to refrain from any further misleading,
unconstructive communications with shareholders.
Sincerely,
Eugene W. Courtney
P.S. I am sure it was an oversight, but the opening paragraph of your letter
states, "You and I... our objective of a smooth and orderly negotiated change
of control." The Board clearly understands that such a change is your
objective. While we remain willing to consider your reasons and
justification therefor, we share no such common objective at the present.
Except for the foregoing, there have been no material contacts or
negotiations between the Fant Group, 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.
FANT INDUSTRIES' TENDER OFFER
The primary purpose of this solicitation of proxies is to replace the
current Board with the Fant Nominees who believe that the Company's
shareholders should have the opportunity to approve the Offer and to amend
the Bylaws to opt out of the Control Share Act.
The Offer is subject to the fulfillment of a number of conditions,
including, without limitation, the following:
Minimum Tender Condition. The Offer is conditioned upon there being
validly tendered and not withdrawn prior to the expiration date at least that
number of Shares (the "Minimum Number of Shares") which constitute 11.5% of
the total number of Shares outstanding on the date Shares are accepted for
payment, without giving effect to any dilution that might result from
exercise of the rights (the "Minimum Tender Condition"). Fant Industries
reserves the right (subject to the applicable rules and regulations of the
Securities and Exchange Commission), which it presently has no intention of
exercising, to waive or reduce the Minimum Tender Condition and to elect to
purchase, pursuant to the Offer, fewer than the Minimum Number of Shares.
According to the Company's Quarterly Report on Form 10-Q for the period
ended November 29, 1997, 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 states that, as of August 31,
1997 there were 447,000 Shares subject to options outstanding under the
Company's stock option plans. The Fant Group currently owns an aggregate of
734,900 Shares which were recently acquired in open market purchases. Based
on the foregoing, the Minimum Number of Shares is 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
Fant Nominees to constitute a majority of the Company's Board.
The Change of Control Condition can be satisfied either by an election
by the existing Board or by a vote of the Company's shareholders. As set
forth in the Bylaws, the Board has the ability, without a shareholder vote,
to increase the number of members that constitute the Board and to fill the
newly-created directorships with Fant Nominees. Likewise, the Board can fill
any vacancies caused by resignations of current members by a resolution of
the remaining directors.
WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE
FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
Board Action Condition. The Offer is conditioned upon Fant Industries
being satisfied in its sole discretion that the Board has irrevocably taken
all actions necessary to redeem the Rights or Fant Industries having
determined in its sole discretion that the Rights have been invalidated or
are otherwise inapplicable to the Offer.
Set forth below is a summary description of the Rights Agreement derived
from the Company's Form 8 filed on June 27, 1988.
On May 27, 1988, the Company's Board declared a dividend distribution of
one Right for each outstanding Share. The dividend is payable to the
shareholders of record on June 10, 1988. Each Right entitles the registered
holder to purchase from the Company one-fourth (1/4) of one Share at a price
of $6.00 (the "Purchase Price"), subject to adjustment.
The Rights will not be exercisable until the earlier of ten business
days (subject to deferral by the Board) following a public announcement that
(i) an "Acquiring Person" (as defined in the Rights Agreement), which term
does not include the Company or an employee benefit plan of the Company, has
acquired beneficial ownership (as defined in the Rights Agreement) of 20% or
more of the outstanding Shares of the Company or (ii) a tender offer or
exchange offer for 30% or more of the outstanding Shares has been commenced
or announced (the earlier of such dates being called the "Distribution
Date"). The Rights are not exercisable until the Distribution Date. The
Rights will expire on June 10, 1998 unless earlier redeemed by the Company as
described below.
Until the Distribution Date the Rights will be evidenced, with respect
to any Share certificates outstanding as of June 10, 1987 by such Share
certificates with a copy of the Company's Form 8 Summary of Rights attached
thereto. The Rights Agreement provides that, until the Distribution Date,
the Rights will be transferred with and only with the Share certificates.
New Share certificates issued after June 10, 1988 (or as soon as practicable
thereafter) upon transfer or new issuance of Shares will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
the surrender for transfer of any Share certificates outstanding as of
June 10, 1988, even without a copy of the Company's Form 8 Summary of Rights
attached thereto, will also constitute the transfer of the Rights associated
with the Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of Shares as of
the close of business on the Distribution Date and such separate certificates
alone will evidence the Rights.
The Purchase Price payable, and the number of Shares or other securities
or property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend
on, or a subdivision, combination or reclassification of, the Shares,
(ii) upon the grant to holders of the Shares of certain rights or warrants to
subscribe for Shares or convertible securities at less than the current
market price of the Shares or (iii) upon the distribution to holders of the
Shares of evidences of indebtedness or assets (excluding regular periodic
cash dividends out of earnings or retained earnings at a rate not in excess
of 125% of the rate of the last cash dividend theretofore paid or dividends
payable in Shares) or of subscription rights or warrants (other than those
referred to above).
In the event that the Company is acquired in a merger or other business
combination by an Acquiring Person or after an Acquiring Person has acquired
more than 40% of the Company's Shares or 50% or more of the Company's assets
or earning power is sold in one transaction or a series of transactions to an
Acquiring Person, proper provision shall be made so that each holder of a
Right shall thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price, that number of one-fourths (1/4) of full
shares of common stock of the Acquiring Person or other acquiring entity
which at the time of such transaction would have a market value of two times
the Purchase Price. In the event that the Company is the surviving
corporation in a merger and the Shares are not changed or exchanged, or in
the event that an Acquiring Person engages in one of a number of self-dealing
transactions specified in the Rights Agreement, or in the event any person
acquires 30% or more of the outstanding Shares without prior approval of the
Board of Directors, proper provision shall be made so that each holder of a
Right will thereafter have the right to receive upon exercise thereof at the
then current Purchase Price that number of one-fourths (1/4) of full shares
of Shares having a market value of two times the Purchase Price. Upon the
occurrence of any of the transactions referred to in this paragraph, any
rights that are or were at any time beneficially owned by an Acquiring Person
engaging in any of such transactions or receiving the benefits thereof on or
after the time the Acquiring Person became such shall become void.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. Fractional shares may not be issued in the discretion
of the Company and, in lieu thereof, an adjustment in cash may be made based
on the market price of the Shares on the last trading date prior to the date
of exercise.
At any time prior to ten business days after an announcement that an
Acquiring Person (as defined in the Rights Agreement) has acquired, or
obtained the right to acquire, 20% or more of the outstanding shares of
Common Stock of the Company, subject to extension by the Board of Directors,
the Company may redeem all but not some of the Rights at a price of $.05 per
Right (the "Redemption Price"). Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the description
included in the Company's Form 8 filed on June 27, 1988, and the text of the
Rights Agreement as set forth as an exhibit to the Company's Registration
Statement on Form 8-A filed May 31, 1988, as amended by Form 8 filed on June
27, 1988 and by Form 8-A filed on March 19, 1998.
Fant Industries presently intends, if necessary, to extend the Offer
from time to time until the Board Action Condition is satisfied or it
determines, in its sole discretion, that such condition is not reasonably
likely to be satisfied.
WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE
FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
The Control Share Condition. The Offer is conditioned upon Fant
Industries' acquisition of Shares in the Offer having been approved in
accordance with the requirements of the Control Share Act and accorded full
voting rights, or Fant Industries determination in its 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 Fant Industries in
the Offer.
WE URGE YOU TO VOTE FOR THE PROPOSED BYLAW AMENDMENT FOR THE OPPORTUNITY
TO DECIDE FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER.
Although Fant Industries will seek to consummate the Offer as soon as
practicable after the Expiration Date, satisfaction of the foregoing
conditions depends upon a variety of factors and legal requirements that may
affect the timing of such consummation. Fant Industries reserves the right
(but shall not be obligated) to waive any or all such conditions.
EVENTS RELATED TO THIS SOLICITATION
If the Company's Board fails to cooperate and call the Special Meeting
promptly, the Fant Group intends to exercise its rights, as a holder in the
aggregate of over 18% of the Company's outstanding Shares, to demand that the
Company hold a Special Meeting of its shareholders pursuant to Section
302A.433 of the Minnesota Business Corporation Act and Section 2.03 of the
Bylaws.
Under Section 302A.433 of the Minnesota Business Corporation Act and
Section 2.03 of the Company Bylaws, a special meeting of the Company's
shareholders is required to be held upon the written demand of the holders of
record of Shares representing at least 10% of all the votes entitled to be
cast on any issue proposed to be considered at the Special Meeting, except
that a Special Meeting for the purpose of considering any action to directly
or indirectly effect a business combination, including any action to change
or otherwise affect the composition of the Board for that purpose, must be
called by shareholders holding not less than 25% of all Shares entitled to
vote. Fant Industries does not intend to effect, directly or indirectly, a
business combination with the Company.
Under Section 302A.433 of the Minnesota Business Corporation Act and
Section 2.07 of the Bylaws, the Special Meeting may be held within 14 days of
the date notice is given to shareholders, but it must be held not later than
90 days after the date the Special Meeting is demanded.
The solicitation of proxies for the Special Meeting is an effort to
ensure that shareholders have the choice of electing the Fant Nominees to the
Company's Board who, once elected, will expedite the consummation of the
Offer and through new leadership and policies will be committed to maximizing
shareholder value. The replacement of the Board with the Fant Nominees and
the adoption of the Bylaws Proposal are essential steps to ensure that the
best interests of the shareholders are accorded their appropriate highest
priority.
A VOTE FOR OUR DIRECTOR NOMINEES AND THE PROPOSED BYLAW AMENDMENT IS A
VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY
DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER
AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH
FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE
PROPOSED BYLAW AMENDMENT.
VOTING AND PROXY PROCEDURES
Only shareholders of record on the Record Date will be entitled to
notice of and to vote at the Special Meeting. Each Share is entitled to one
vote upon each matter presented at the Special Meeting. Shareholders who
sell Shares before the Record Date (or acquire them without voting rights
after the Record Date) may not vote such Shares. Shareholders of record on
the Record Date, will retain their voting rights in connection with the
Special Meeting even if they sell such Shares after the Record Date.
Pursuant to Section 2.04 of the Bylaws, the holders of a majority of the
Shares entitled to vote constitutes a quorum for the transaction of any
business at the Special Meeting. Based on publicly available information,
Fant Industries believes that the only outstanding class of securities of the
Company entitled to vote at the Special Meeting are the Shares. According to
publicly available information, as of February 28, 1998, there were 4,069,909
Shares issued and outstanding.
Shares represented by properly executed GREEN proxy cards will be voted
at the Special Meeting as marked and, in the absence of specific
instructions, will be voted FOR the removal of current members of the Board,
FOR the election of Fant Nominees to the Board, FOR the adoption of the
Bylaws Proposal and in the discretion of the persons named as proxies on all
other matters as may properly come before the Special Meeting. Pursuant to
Section 3.10 of the Bylaws, any or all of the directors may be removed from
the Board at any time, with or without cause, by the affirmative vote of the
shareholders holding a majority of the Shares entitled to vote at the Special
Meeting. Election of the Fant Nominees requires the affirmative vote of a
majority of the Shares represented and entitled to vote at the Special
Meeting. For the purpose of adopting the Bylaws Proposal, Section 10.01 of
the Bylaws requires a majority vote of the shareholders present or
represented at any special meeting. Abstentions and broker non-votes will
have the same effect as votes against all Proposals and will each be included
in determining the number of Shares present for purposes of determining the
presence of a quorum.
Shareholders of the Company may revoke their proxies at any time prior
to its exercise by attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy) or by delivering a written notice or
revocation. The delivery of a subsequently dated proxy which is properly
completed will constitute a revocation of any earlier proxy. The revocation
may be delivered either to Fant Industries in care of Beacon Hill Partners,
Inc. at the address set forth on the back cover of this Proxy Statement or to
the Company at P.O. Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386 or
any other address provided by the Company. Although a revocation is
effective if delivered to the Company, Fant Industries requests that either
the original or photostatic copies of all revocations be mailed to Fant
Industries in care of Beacon Hill Partners, Inc. at the address set forth on
the back cover of this Proxy Statement so that Fant Industries will be aware
of all revocations and can more accurately determine if and when proxies have
been received from the holders of record on the Record Date of a majority of
the outstanding Shares.
IF YOU WISH TO VOTE FOR THE REMOVAL OF THE CURRENT MEMBERS OF THE BOARD,
FOR THE ELECTION OF THE FANT NOMINEES TO THE BOARD AND FOR THE ADOPTION OF
THE BYLAWS PROPOSAL, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GREEN
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. REGISTERED HOLDERS
MAY FAX BOTH SIDES OF THE ENCLOSED GREEN PROXY CARD TO BEACON HILL PARTNERS,
INC. AT THE NUMBER SET FORTH ON THE BACK COVER OF THIS PROXY STATEMENT.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being
made by Fant Industries. Proxies may be solicited by mail, facsimile,
telephone, telegraph, in person and by advertisements. Solicitations may be
made by certain directors, officers and employees of Fant Industries, none
whom will receive additional compensation for such solicitation.
Fant Industries has retained Beacon Hill Partners, Inc. for solicitation
and advisory services in connection with this solicitation, for which Beacon
Hill Partners, Inc. will receive a fee of up to $30,000 together with
reimbursement for its reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. Beacon Hill Partners, Inc.
will solicit proxies from individuals, brokers, banks, bank nominees and
other institutional holders. Fant Industries has required banks, brokerage
houses and other custodians, nominees and fiduciaries to forward all
solicitation materials to the beneficial owners of the Shares they hold of
record. Fant Industries will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that Beacon
Hill Partners, Inc. will employ approximately 25 persons to solicit the
Company's shareholders for the Special Meeting. Beacon Hill Partners, Inc.
is also acting as Information Agent in connection with the Offer, for which
it will be paid customary compensation in addition to reimbursement of
reasonable out-of-pocket expenses.
R.J. Steichen & Co. is acting as Dealer Manager for the Offer and as the
Fant Group's financial advisor in connection with the Fant Group gaining
control of the Company, including the Offer. Pursuant to the terms of R.J.
Steichen & Co.'s engagement, the Fant Group has agreed to pay R.J. Steichen &
Co., for its services as Dealer Manager and financial advisor, an initial
financial advisory retainer fee or $20,000 and a monthly financial advisory
fee of $10,000. In addition, success fees of up to $50,000 may be earned.
Subject to certain limitations, the Fant Group also has agreed to reimburse
R.J. Steichen & Co. for travel and other out-of pocket expenses, including
legal fees and expenses, and to indemnify R.J. Steichen & Co. against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of its engagement. In the ordinary course of business, R.J.
Steichen & Co. may actively trade or hold the securities of the Company for
its own account or for the account of customers and, accordingly, may at any
time hold a long or short position in such securities. In connection with
R.J. Steichen & Co.'s engagement as financial advisor, the Fant Group
anticipates that employees of R.J. Steichen & Co. may communicate in person,
by telephone or otherwise with a limited number of institutions, brokers, or
other persons who are shareholders of the Company for the purpose of
assisting in the solicitation of proxies for the Special Meeting. R.J.
Steichen will not receive any additional fee for or in connection with such
activities apart from the fees which it is otherwise entitled to receive as
described herein. It is anticipated that R.J. Steichen will employ
approximately ___ persons to solicit the Company's shareholders for the
Special Meeting.
The entire expense of soliciting proxies is being borne by Fant
Industries. Fant Industries intends to seek reimbursement of the costs of
this solicitation from the Company only to the extent permitted by law.
Fant Industries does not intend to seek shareholder approval of such
reimbursement unless such approval is required by law. Costs of this
solicitation of proxies are currently estimated to be approximately
$_________. Fant Industries estimates that through the date hereof, its
expenses in connection with the solicitation are approximately $___________.
INFORMATION ABOUT FANT INDUSTRIES
Fant Industries is a Delaware corporation, the principal executive
offices of which are located at 2154 Highland Avenue, Birmingham, Alabama
35205, telephone number (205) 933-1030. Fant Industries was formed by Mr.
Fant for the sole purpose of acquiring and holding the Company's Shares.
Fant Industries has not conducted any unrelated activities since its
organization on February 23, 1998. Its sole shareholder is Mr. Fant. The
directors of Fant Industries are Mr. Fant, who is also its President and
Chief Executive Officer, and Mr. Steve E. Tondera, Jr., who is also its Vice
President, Treasurer, Secretary and Chief Financial Officer.
As of the date of this Proxy Statement, the Fant Group beneficially owns
734,900 Shares. For more detailed information regarding the directors and
executive officers of Fant Industries and transactions involving Shares by
Fant Industries, see Schedule II of this Proxy Statement.
See "Proposals -- The Fant Nominees."
CERTAIN TRANSACTIONS BETWEEN THE FANT GROUP AND THE COMPANY
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of the Fant Group, or any other participant in this
solicitation or any of their respective associates: (i) directly or
indirectly beneficially owns any Shares or any securities of the Company;
(ii) has had any relationship with the Company in any capacity other than as
a shareholder, or is or has been a party to any transactions, or series of
similar transactions, since September 1, 1996 with respect to any Shares of
the Company; or (iii) knows of any transactions since September 1, 1996,
currently proposed transaction, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any of them or their respective
affiliates had, or will have, a direct or indirect materials interest. In
addition, other than as set forth in Schedule II of this Proxy Statement,
there are no contracts, arrangements or understandings entered into by the
Fant Group, or any other participant in this solicitation or any of their
respective associates within the past year with any person with respect to
any of the Company's securities, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss
or grantees of profit, division of losses or profits, or the giving or
withholding of proxies. In addition, other than as set forth in this Proxy
Statement, none of the Fant Group, or any other participant in this
solicitation or any of their respective associates has been engaged in
contracts, negotiations or transactions with the Company or its affiliates
concerning a merger, consolidation, acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer
of a material amount of assets; or has had any other transaction with the
Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission.
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of the Fant Group, or any other participant in this
solicitation or any of their respective associates, has entered into any
agreement or understanding with any person with respect to (i) any future
employment by the Company or its affiliates or (ii) any future transactions
to which the Company or any of its affiliate will or may be a party.
However, in connection with the Offer, the Fant Group has reviewed, and will
continue to review, on the basis of publicly available information, various
possible business strategies that they might consider in the event that the
Fant Group acquires control of the Company. In addition, if and to the
extent that the Fant Group acquires control of the Company or otherwise
obtains access to the books and records of the Company, the Fant Group
intends to conduct a detailed review of the Company and its assets, financial
projections, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and consider and
determine what, if any, changes would be desirable in light of the
circumstances which then exist.
OTHER MATTERS AND ADDITIONAL INFORMATION
Fant Industries is unaware of any other matters to be considered at the
Special Meeting. However, Fant Industries has notified the Company of its
intention to bring before the Special Meeting such proposals as it believes
to be appropriate. Should other proposals be brought before the Special
Meeting, the persons named as proxies on the enclosed GREEN proxy card will
vote on such matters in their discretion.
Schedule III of this Proxy Statement sets forth certain information, as
made available in public documents, regarding Shares held by the Company's
management. The information concerning the Company contained in this Proxy
Statement and the Schedules attached hereto has been taken from, or is based
upon, publicly available information. Except for the Company's Share
Register, Fant Industries has not had access to the books and records of the
Company.
Shareholders will have no appraisal or similar rights of dissenters with
respect to any of the proposals to be considered and voted upon at the
Special Meeting.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of the Company's shareholders that are intended to be
presented by such shareholders at the Company's 1999 Annual Meeting of
shareholders must be received by the Company no later than August 6, 1998 in
order to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
FANT INDUSTRIES INC.
March 27, 1998
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF FANT INDUSTRIES AND CERTAIN EMPLOYEES AND
OTHER REPRESENTATIVES OF FANT INDUSTRIES
Set forth in the tables below are the present principal occupation or
employment and the name, principal business and address of any corporation or
organization in which such employment is carried on for (1) each of the
directors and officers of Fant Industries and (2) certain employees and other
representatives of Fant Industries who may also solicit proxies from the
shareholders of the Company. Unless otherwise indicated, each person
identified below is employed by Fant Industries. The principal business
address of Fant Industries and, unless otherwise indicated below, the
principal business address for each individual listed below is 2154 Highland
Avenue, Birmingham, Alabama 35205. Directors of Fant Industries are
identified by an asterisk. Unless otherwise indicated, each such person is a
citizen of the United States and each occupation set forth opposite the
individual's name refers to employment with Fant Industries.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND CURRENT BUSINESS MATERIAL POSITIONS HELD DURING THE PAST
ADDRESS YEARS
<S> <C>
Anthony J. Fant* Director, President and Chief Executive Officer of Fant
2154 Highland Avenue Industries. Mr. Fant has been Director, President and
Birmingham, AL 35205 Chief Executive Officer of Fant Broadcasting Company
(including, for these purposes, various affiliated
companies engaged primarily in television and radio
broadcasting) since 1986.
Steve E. Tondera, Jr.* Director, Vice President, Treasurer, Secretary and Chief
2154 Highland Avenue Financial Officer of Fant Industries. Mr. Tondera has
Birmingham, AL 35205 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>
SCHEDULE II
SHARES HELD BY FANT INDUSTRIES, ITS DIRECTORS AND OFFICERS
AND THE FANT NOMINEES
I. Transactions in Shares by Fant Industries
Fant Industries is the beneficial owner of an aggregate of 10,000
Shares. Such Shares represent a capital contribution by Anthony J. Fant.
TRANSACTION DATE SHARES ACQUIRED
02/24/98 10,000
II. Transactions in Shares by Anthony J. Fant
Anthony J. Fant is currently the beneficial owner of 734,900 Shares.
Such shares were purchased by Anthony J. Fant for cash in open market
transactions as follows:
<TABLE>
<CAPTION>
TRANSACTION DATE SHARES ACQUIRED PRICE PER SHARE(1)
<S> <C> <C>
12/2/97 500 4.5000
12/4/97 1,000 4.5000
12/5/97 1,000 4.3750
12/5/97 5,000 4.2500
12/5/97 5,000 4.2500
12/8/97 5,000 4.2500
12/8/97 6,000 4.5000
12/9/97 (1,000) 4.6250
12/10/97 (100) 4.2500
12/10/97 (100) 4.5000
12/10/97 10,000 4.5000
12/10/97 75,000 5.0000
12/11/97 (1,000) 5.0000
12/11/97 1,000 4.7500
12/12/97 (1,000) 4.6250
12/15/97 2,000 4.6250
12/16/97 5,000 4.6250
12/17/97 5,000 4.7500
12/19/97 10,000 4.7500
12/22/97 2,100 4.6250
12/23/97 1,200 4.6875
12/23/97 3,000 4.6875
12/23/97 7,500 4.6875
12/23/97 10,000 4.6875
12/29/97 2,000 4.6250
12/29/97 3,000 4.6250
01/02/98 18,500 4.7500
01/16/98 10,000 5.0000
01/21/98 4,500 4.8750
01/27/98 10,000 4.8750
01/27/98 3,000 4.8750
02/04/98 6,000 4.8750
02/04/98 5,000 4.8750
02/04/98 5,000 4.8750
02/05/98 10,000 5.1875
02/05/98 8,000 5.1875
02/05/98 4,000 5.1250
02/05/98 2,500 5.0000
02/05/98 2,000 5.1875
02/06/98 40,000 5.3750
02/06/98 2,000 5.1875
02/09/98 25,000 5.5625
02/09/98 25,000 5.4375
02/09/98 10,000 5.8750
02/09/98 10,000 5.8125
02/09/98 2,000 5.3750
02/10/98 20,000 5.8750
02/11/98 15,000 5.8125
02/11/98 7,000 5.8125
02/12/98 20,000 6.7500
02/12/98 3,500 6.7500
02/12/98 1,000 6.6875
02/12/98 2,000 6.6875
02/12/98 2,000 6.6250
02/12/98 5,000 6.7500
02/12/98 25,000 6.6875
02/12/98 20,000 6.3125
02/13/98 2,000 6.6250
02/13/98 2,000 6.5000
02/13/98 10,000 6.5625
02/13/98 10,000 6.5625
02/13/98 25,000 7.1250
02/13/98 5,800 7.1250
02/17/98 30,000 7.4375
02/17/98 30,000 7.5625
02/18/98 50,000 7.4375
02/18/98 65,000 7.5000
02/20/98 15,000 6.5000
02/24/98 (10,000)(2)
03/03/98 10,000 6.4375
</TABLE>
- --------------------
(1) All prices are exclusive of commissions.
(2) Represents a capital contribution of 10,000 Shares by Mr. Fant to Fant
Industries.
III. Transactions in Shares by Fant Industries Directors and Executive
Officers and the Fant Nominees
____________, ____________ and _____________ have agreed to serve as
proxies on the GREEN proxy card for the Special Meeting.
Except as disclosed in this Schedule, none of Fant Industries, any of
its directors or executive officers or the Fant Nominees owns any securities
of the Company or any subsidiary of the Company, beneficially or of record,
has purchased or sold any of such securities within the past two years or was
within the past year a party to any contract, arrangement or understanding
with any person with respect to any such securities. Except as disclosed in
this Schedule, to the knowledge of Fant Industries, no associate of Fant
Industries or any of its directors and executive officers or of the Fant
Nominees beneficially owns, directly or indirectly, any securities of the
Company.
To the knowledge of Fant Industries, other than as disclosed in this
Schedule, none of Fant Industries, any of its directors or executive
officers, or the Fant Nominees has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted upon
at the Special Meeting.
None of Messrs. ________, ________ and _________ has, during the last
ten years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
IV. Beneficial Ownership Table of the Fant Nominees
The following table shows, as of March 4, 1998, the beneficial ownership
known to Fant Industries, of Shares held by the Fant Nominees:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
Anthony J. Fant 734,900 18.1%
2154 Highland Avenue
Birmingham, Alabama 35205
SCHEDULE III
SHARE OWNERSHIP OF
MANAGEMENT OF THE COMPANY
Set forth below is information as of November 28, 1997 regarding the
Shares beneficially owned by each director and executive officer of the
Company, and by the directors and executive officers as a group. Except as
otherwise indicated, the persons listed in the table have sole voting and
investment powers with respect to the Shares owned.
<TABLE>
<CAPTION> AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING SHARES
<S> <C> <C>
Eugene W. Courtney 82,740(2) 2.0%
Kenneth A. Schoen 57,108(3) 1.4%
William R. Franta 5,211 *
Robert L. Brueck 2,000 *
Frederick M. Zimmerman 900 *
Jerald H. Mortenson 67,197 1.6%
Dale A. Nordquist 14,564 *
All directors and executive
officers as a group 229,720 5.6%
</TABLE>
* Less than one percent.
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(1) Represents outstanding shares directly owned except as hereinafter
otherwise indicated. Pursuant to regulations of the Commission, shares
receivable by directors and executive officers by options exercisable within
60 days after November 28, 1997 are deemed to be beneficially owned by such
directors and executive officers at said date. Of the number of Shares shown
above, the following represent shares that may be acquired upon exercise of
options for the accounts of: Mr. Courtney, 75,000 Shares; Mr. Schoen, 50,000
Shares; Mr. Franta, 40,000 Shares; Mr. Brueck, 30,000 Shares; Mr. Zimmerman,
30,000 Shares; Mr. Mortenson, 30,000 Shares; Mr. Nordquist, 44,500 Shares;
and all directors and executive officers as a group, 299,500 Shares.
(2) Includes 46,974 shares held jointly with Mr. Courtney's spouse.
(3) Includes 37,108 shares held in the name of Kenneth Schoen Trust and
10,000 shares held in the name of VKS Ltd. Partnership, of which Mr. Schoen
is considered to be an indirect owner.
Except as provided herein, there are no beneficial owners of more than five
percent of the outstanding Shares based on publicly available information as
of the date hereof.
Except as indicated above, the foregoing information and other
information relating to the Company contained in this Proxy Statement has
been taken from the Company's 1997 Annual Report on Form 10-K and other
documents on file with the Commission. Although Fant Industries does not
have any information that would indicate that any information contained in
this Proxy Statement that has been taken from such documents is inaccurate or
incomplete, Fant Industries does not take any responsibility for the accuracy
or completeness of such information.
IMPORTANT
Tell your Board that you want to make your own choice. Tell them what you
think! Your vote is important. No matter how many Shares you own, please
give Fant Industries your proxy FOR the removal of the current members of
the Board, FOR the election of the Fant Nominees and FOR the approval of
the Bylaws Proposal by taking three steps:
1. SIGNING the enclosed GREEN proxy card,
2. DATING the enclosed GREEN proxy card, and
3. MAILING the enclosed GREEN proxy card TODAY in the envelope
provided (no postage is required if mailed in the United States).
Registered holders may FAX BOTH SIDES of the enclosed GREEN proxy
card TODAY to Beacon Hill Partners, Inc. at the number provided
below.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such Shares and only upon
receipt of your specific instructions. Accordingly, please return the GREEN
proxy card in the envelope provided or contact the person responsible for
your account and instruct that person to execute the GREEN proxy card
representing your Shares. Fant Industries urges you to confirm in writing
your instructions to Fant Industries in care of Beacon Hill Partners, Inc. at
the address provided below so that Fant Industries will be aware of all
instructions given and can attempt to ensure that such instructions are
followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact, Beacon Hill Partners, Inc. at the
address set forth below.
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 843-8500
FAX: (212) 843-4384
FAX: (212) 843-4384
HEI, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
_________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF FANT INDUSTRIES INC.
The undersigned appoints _____________, __________ and _________, and
each of them, attorneys and agents with full power of substitution to vote
all shares of common stock of HEI, Inc. which the undersigned would be
entitled to vote if personally present at the Special Meeting of Shareholders
of HEI, Inc., and including at any adjournments or postponements,
continuations or rescheduling thereof, as follows:
FANT INDUSTRIES INC. RECOMMENDS A VOTE
FOR THE REMOVAL OF CURRENT MEMBERS OF THE BOARD,
OTHER THAN EUGENE W. COURTNEY
FOR THE ELECTION OF ALL FANT NOMINEES NAMED BELOW AND
FOR THE APPROVAL OF THE BYLAWS PROPOSAL.
A. DIRECTOR REPLACEMENT PROPOSALS
1. REMOVAL OF DIRECTORS: To remove from the Board of Directors
of the Company (the "Board") all of the following current
Directors: Robert L. Brueck, William R. Franta and Frederick
M. Zimmerman.
FOR REMOVAL OF ABOVE NAMED AGAINST REMOVAL OF ABOVE NAMED
CURRENT DIRECTORS CURRENT DIRECTORS
2. ELECTION OF DIRECTORS: To elect to the Board such number of
the following Fant Nominees that when added to Eugene W.
Courtney equals the size of the Board: Anthony J. Fant, Edwin
W. Finch, III, Steve E. Tondera, Jr. and _________________.
The first three of such individuals will be voted for election
to succeed the current Directors (or any Director named to
fill any vacancy created by the death, retirement, resignation
or removal of any of such four Directors) of the Company,
other than Mr. Courtney. The fourth of such individuals will
be voted to be elected to fill the currently vacant
directorship (or to succeed any Director named to fill such
vacancy). One or more additional individuals will be voted
for election (a) in the event that the Company purports to
increase the number of Directorships pursuant to Section 3.09
of Bylaws, to each additional Directorship created, and/or (b)
in the event any of the first four individuals named above or
Mr. Courtney is unable for any reason to serve as a Director.
FOR ALL FANT NOMINEES WITHHOLD AUTHORITY FOR ALL FANT
NOMINEES
INSTRUCTION: To withhold authority to vote for one or more
individual Fant Nominees, mark FOR ALL Fant Nominees above and
write the (names) of the Fant Nominee with respect to which
you wish to withhold authority here:
.
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B. BYLAWS PROPOSAL
1. To adopt the following resolution:
RESOLVED, that the Bylaws of the Company
are hereby amended, by adding a new section
reading as follows:
"Control Share Act. The provisions of Section
302A.671 of the Minnesota Business Corporation
Act shall not apply to control share
acquisitions of shares of this corporation."
FOR ADOPTION OF BYLAWS WITHHOLD AUTHORITY FOR ADOPTION
PROPOSAL OF BYLAWS PROPOSAL
C. In their discretion with respect to any other matters as may
properly come before the Special Meeting.
The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to the Shares of the Company held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this proxy will be voted as directed
above. If no direction is indicated with respect to the above proposals,
this proxy will be voted FOR the removal of current Directors, FOR the
election of all Fant Nominees and FOR the Bylaws Proposal and in the manner
set forth in Item C above.
This proxy will be valid until the sooner of one year from the date
indicated below and the completion of the Special Meeting.
DATED: , 1998.
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PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
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(Signature)
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(Signature, if held jointly)
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(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC., SHOULD
INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE. REGISTERED HOLDERS MAY FAX BOTH SIDES OF THIS PROXY TO
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BEACON HILLS PARTNERS, INC. AT: (212) 843-4384!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL
BEACON HILLS PARTNERS, INC.
TOLL-FREE (800) 253-3814
CALL COLLECT (212) 843-8500
