Filed by Colorado MEDtech, Inc.
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant
to Rules 14a-12 and 14d-9 of the
Securities Exchange Act of 1934
Subject Company: Colorado MEDtech, Inc.
Commission File Number: 000-12471
THE FOLLOWING LETTER IS A PRELIMINARY COMMUNICATION PRIOR
TO THE COMMENCEMENT OF AN EXCHANGE OFFER AND A PROXY SOLICITATION
October 6, 2000
Dear Colorado MEDtech Shareholder:
I'm writing to you today to give you a report on the progress of our business.
At our August 2000 earnings conference call, I told the participants that as
your new CEO I would meet with our institutional shareholders and analysts to
talk about our efforts to position the company for future growth. Over the last
two weeks I have traveled around the country to have these meetings. I have had
the pleasure to discuss our restructuring program and the management changes we
announced on August 22, 2000 with a number of you. Key components of our
corporate restructuring program include:
o The appointment of a new management team.
o Positioning the company for a near-term turnaround and operating margin
improvement.
o Greater focus on strengthening our core businesses in designing,
engineering, and manufacturing value-added medical products to establish
the platform of future growth. These four core businesses are:
-- CMED/RELA
-- Imaging & Power Systems
-- CMED Manufacturing
-- CIVCO
o Cultivation of CIVCO's growth potential.
o Rationalization of the overall company to enhance long-term profitability
and growth as a quality leader in its core businesses.
We believe Colorado MEDtech is currently at an inflection point and is
poised to resume revenue and earnings growth next fiscal year and beyond.
I am pleased to tell you that the announced changes are making a difference
at our company. With our business units now concentrated around our core
strengths, our people are working closer than ever before to improve project
performance and customer service. In addition, we are seeing a renewed sense of
energy and employee morale throughout our organization. I am confident that we
will see the tangible results of these efforts soon.
In the past two weeks, it became clear to me that our institutional
shareholders and analysts support the direction we are taking the company. I am
gratified by that support. I realize that many of you believe that Colorado
MEDtech has not communicated well with its shareholders and the financial
community in the past. I pledge that those days are over. I will communicate and
welcome your feedback.
We have some good progress to report on the sales front. During our first
fiscal quarter ended September 30, 2000, we increased bookings that will put us
on track toward meeting our goals announced in August of improved results in the
second half of fiscal year 2001 and a resumption of growth in fiscal year 2002.
During the first quarter we added many new customers and expanded our
business with General Electric Medical Systems and Hitachi Medical Corporation
for our imaging power systems products. We are excited about the continued
confidence that these important customers have shown in us.
Other important developments which will contribute to our enhanced growth
include:
o the transition from development to manufacturing of a unique oximetry
device;
o the addition of new contracts for development of an imaging system for use
in coronary bypass surgery and a device for the treatment of benign
prostate hyperplasia and enlarged prostate; and
o the expansion of a software development project for an ambulatory drug
delivery system.
A number of you have asked me about the public statements made by HEI,
Inc. and its Chairman, Anthony Fant. As I'm sure you know, on September 11,
2000, HEI announced that it would begin an exchange offer for Colorado
MEDtech stock, in which Colorado MEDtech stock would be exchanged for HEI
stock "having a value of" $12.00 per share, subject to several conditions,
including that HEI would not issue more than 8.5 million shares of its
stock.
HEI recently filed a letter to Colorado MEDtech shareholders with the
Securities and Exchange Commission, and you may soon be receiving that
letter. In the letter, HEI conceded that if it makes the offer it has
discussed in public and if the price of HEI's stock falls below $15.60 per
share during a prescribed measurement term prior to an exchange, the stated
value of the offer would be less than $12.00 per share.
Since HEI announced its intention to make an offer, the closing
price of HEI stock has declined from $23.50 (September 8, the day before
the announcement), to as low as $14.50 on October 6, 2000. HEI's shares
appear to be volatile and not to have much trading volume.
Since September 11 through October 5, Colorado MEDtech shares have
closed as high as $10 and as low as $8.50.
HEI still has not commenced its offer. I do not know if or when they
will do it.
Today HEI announced that it intends to solicit shareholders to call a
special meeting of shareholders to remove the Board of Directors. I do not
know if or when they will do that either. We will resist any effort to
remove the Board.
I met with Mr. Fant on September 22, 2000. At that meeting, Mr. Fant
and other members of HEI management gave us their perspective on why your
company should be acquired by HEI. In my opinion, the reasons Mr. Fant
listed for the acquisition were the type of general statements one could
make about the combination of any two technology companies. Further, one of
HEI's principal rationales for the acquisition was that HEI wanted to
become a larger company. Mr. Fant asked to make a presentation to our
Board.
I reported this back to the Colorado MEDtech Board. The Board considered
the reasons stated by HEI and other information they had. After review, the
Board declined Mr. Fant's request.
Our Board is wel aware of its duties to you as shareholders. We have
fulfilled and will continue to fulfill those duties.
Finally, I want to share with you some nice recognition we've received
recently:
o September 2000--Colorado MEDtech was named to the Fortune magazine 100
Fastest Growing Companies list. In our second year on the list, Colorado
MEDtech was ranked 87th. To be eligible for consideration on the Fortune
list, companies had to have revenues and market capitalization of at least
$50 million, and a 30% annual growth rate in both revenue and earnings per
share for three years, and must have positive earnings in the latest
quarter.
o August 2000-- The Denver Post listed us as one of the 100 Top-Performing
Public Companies.
o October 2000 -- The Denver Business Journal has told us we will be listed
as one of the Top 100 Colorado public companies.
o October 2000 -- The company received a Colorado Technology Fast 50 award
from Deloitte & Touche.
We are proud of thi recognition. We are excited about theopportunity we
have to grow this company and to increase value for all shareholders.
Sincerely,
/s/Stephen K. Onody
Stephen K. Onody
President and
Chief Executive Officer
Additional Information
The statements in this letter that are not historical facts are forward-looking
statements that represent management's beliefs and assumptions based on
currently available information. Forward-looking statements can be identified by
the use of words such as "believes," "intends," "may," "will" "should,"
"anticipated" or comparable terminology or by discussions of strategy. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it cannot assure that these expectations will prove
to be correct. Such statements involve risks and uncertainties including, but
not limited to, the risk that the Company's existing level of orders may not be
indicative of the level or trend of future orders, the risk that the Company may
not successfully complete the work encompassed by current or future orders, the
risk that unforeseen technical or production difficulties may adversely impact
project timing and financial performance, the risk that the management changes
will not produce the desired results, the risk that acquired companies cannot be
successfully integrated with the Company's existing operations, the risk that a
downturn in general economic conditions or customer budgets may adversely affect
research and development and capital expenditure budgets of potential customers
upon which the Company is dependent, and developments that may occur regarding
Mr. Fant and HEI, Inc. Should one or more of these risks materialize (or the
consequences of such a development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those forecasted or
expected. These factors are more fully described in the Company's documents
filed from time to time with the Securities and Exchange Commission. The Company
assumes no duty to update any forward-looking statements.
If an exchange offer commences, the Company will file a
solicitation/recommendation statement regarding the exchange offer. If a proxy
solicitation commences, the Company and certain of its officers and directors
may be deemed to be participants in the solicitation of proxies from the
Company's shareholders with respect to the transactions contemplated above, and
a proxy statement to solicit proxies from the Company's security holders may be
required to be filed.
Information regarding such officers and directors is included in the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1999, in its proxy
statement for its 1999 annual meeting and in its filing with the SEC on
September 21, 2000 filed pursuant to Rule 425 under the Securities Act of 1933,
as amended. These documents are available free of charge at the Securities and
Exchange Commission web site and from the Company's contact, each listed below.
The Company has retained Wasserstein Perella & Co. ("Wasserstein Perella") to
assist the Company in evaluating its response to HEI's proposal, for which they
received and may receive substantial fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, the Company has agreed to
indemnify Wasserstein Perella and certain persons related to them against
certain liabilities, including certain liabilities under the federal securities
laws, arising out of their engagement. Wasserstein Perella is an investment
banking firm that provides a full range of financial services for institutional
and individual clients. Wasserstein Perella does not admit that it or any of its
directors, officers or employees is a "participant" as defined in Schedule 14A
promulgated under the Securities Exchange Act of 1934, as amended, in any
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning Wasserstein Perella.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ ANY SOLICITATION/
RECOMMENDATION STATEMENT, PROXY SOLICITATION STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS TO BE FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
WHEN THEY BECOME AVAILABLE, BECAUSE EACH OF THESE DOCUMENTS WILL CONTAIN
IMPORTANT INFORMATION. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF
THESE DOCUMENTS WHEN AVAILABLE AND OTHER DOCUMENTS FILED BY THE COMPANY WITH THE
SEC AT THE SEC'S INTERNET WEB SITE AT WWW.SEC.GOV. THESE DOCUMENTS MAY ALSO BE
OBTAINED FREE FROM THE COMPANY BY DIRECTING SUCH REQUESTS TO: PETER J. JENSEN,
SECRETARY, COLORADO MEDTECH, INC., 6175 LONGBOW DRIVE, BOULDER, CO 80301,
TELEPHONE: (303) 530-2660.
Contact: Joele Frank, Wilkinson Brimmer Katcher
Matt Sherman
Dan Katcher
Telephone: 212-355-4449
