-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KRJyON8exyNlF+WOBy7VxrA/nOgIK31nAhV+9o50913C0zfVEX99iwtc8apuNcL0 iKzFVCLcebcK0vrJydTAAw== 0000950130-98-003126.txt : 19980616 0000950130-98-003126.hdr.sgml : 19980616 ACCESSION NUMBER: 0000950130-98-003126 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980615 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HEI INC CENTRAL INDEX KEY: 0000351298 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 410944876 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-33908 FILM NUMBER: 98648628 BUSINESS ADDRESS: STREET 1: 1495 STEIGER LAKE LN STREET 2: P O BOX 5000 CITY: VICTORIA STATE: MN ZIP: 55386 BUSINESS PHONE: 6124432500 MAIL ADDRESS: STREET 1: P O BOX 5000 STREET 2: 1495 STEIGER LAKE LANE CITY: VICTORIA STATE: MN ZIP: 55386 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FANT INDUSTRIES INC CENTRAL INDEX KEY: 0001056852 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 2154 HIGHLAND AVE CITY: BIRMINGHAM STATE: AL ZIP: 35205 BUSINESS PHONE: 2059331030 SC 14D1/A 1 TENDER OFFER STATEMENT ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 (Amendment No.19) HEI, Inc. (Name of Subject Company) FANT INDUSTRIES INC. (Bidder) COMMON STOCK, PAR VALUE $0.05 PER SHARE (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) (Title of Class of Securities) 404160103 (CUSIP Number of Class of Securities) ANTHONY J. FANT PRESIDENT AND CHIEF EXECUTIVE OFFICER FANT INDUSTRIES INC. 2154 HIGHLAND AVENUE BIRMINGHAM, AL 35205 TELEPHONE: (205) 933-1030 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Bidder) Copies To: MICHAEL A. KING, ESQ. BROWN & WOOD LLP ONE WORLD TRADE CENTER NEW YORK, NY 10048-0557 TELEPHONE: (212) 839-5546 ================================================================================ Fant Industries Inc. hereby amends and supplements its Tender Offer Statement on Schedule 14D-1 (the "Statement") filed with the Securities and Exchange Commission on March 10, 1998 relating to its offer to purchase 11.5% of the outstanding shares of common stock, par value $0.05 per share, of HEI, Inc., a Minnesota corporation (together with the associated common stock purchase rights), as set forth in this Amendment No.19. On June 15, 1998, Fant Industries Inc. filed a definitive proxy statement, dated June 11, 1998, with the Securities and Exchange Commission in connection with the solicitation of proxies from the shareholders of HEI, Inc. with respect to a special meeting of shareholders. A copy of the definitive proxy statement, dated June 11, 1998, is filed herewith as Exhibit (a) (29) and is incorporated herein by reference. ITEM 5) PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. The definitive proxy statement, dated June 11, 1998, is incorporated herein by reference. ITEM 7) CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The definitive proxy statement, dated June 11, 1998, is incorporated herein by reference. ITEM 8) PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The definitive proxy statement, dated June 11, 1998, is incorporated herein by reference. ITEM 11) MATERIAL TO BE FILED AS EXHIBITS. Item 11 is hereby amended to add the following: (a) (28) Letter to Shareholders, dated June 15, 1998. (a) (29) Definitive Proxy Statement, dated June 11, 1998. (a) (30) Press Release, dated June 15, 1998. (a) (31) Advertisement, published June 15, 1998. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: June 15, 1998 FANT INDUSTRIES INC. By:/s/ Anthony J. Fant ------------------- Anthony J. Fant President and Chief Executive Officer Fant Industries Inc. /s/ Anthony J. Fant ------------------- Anthony J. Fant 2 EX-99.(A)(28) 2 LETTER TO SHAREHOLDERS DATED JUNE 15, 1998 Exhibit (a) (28) FANT INDUSTRIES INC. 2154 Highland Avenue Birmingham, Alabama 35205 June 15, 1998 To the Shareholders of HEI, Inc.: We are pleased to provide you with our proxy statement for the upcoming special meeting of shareholders, and we would like to thank you for your support and consideration. We are delighted with our progress to date. With your continued support, we will deliver to you the cash premium of our $8.00 per share tender offer and an opportunity to participate in the revitalization of HEI. TWO IMPORTANT PROMISES. Toward the end of revitalizing HEI, we would like to make two important promises to you today: . First, this Company will have a new attitude, and it will start at the top. On day one, we will set in motion a fundamental change to the Company's stock option plan for directors. UNDER OUR PLAN, NO DIRECTOR STOCK OPTIONS WILL BE EXERCISABLE UNLESS AND UNTIL HEI'S STOCK PRICE REACHES $25.00 PER SHARE. This is how we believe an incentive plan should work. No longer will HEI directors be able to reward themselves in the face of poor operating performance and poor shareholder return. HEI directors will be rewarded if, and only if, HEI shareholders are rewarded first. . Second, our Board will have a singular focus on earnings growth. We view this as the basic source of shareholder value. Neither asset growth alone nor the volatile, and indeed declining, profitability HEI has experienced in the past will continue to be good enough. HEI can no longer afford a complacent Board that, astonishingly, has boasted about the Company's performance despite a dramatic decline in earnings recently and a lack of earnings growth over the last five years. As outlined in our proxy statement, we see a window of opportunity to initiate growth now, and we believe we have the vision and determination to make it happen. We are excited about the future of HEI under new leadership. We are anxious to start the job. Please sign and mail the enclosed GREEN proxy card today. If you have questions or need assistance in voting your shares, please call Beacon Hill Partners at (800) 253-3814. Anthony Fant Ed Finch David Ortlieb Steve Tondera Mack Traynor THE FANT GROUP EX-99.(A)(29) 3 PROXY STATEMENT EXHIBIT A (29) PROXY STATEMENT OF FANT INDUSTRIES INC. ---------------- SPECIAL MEETING OF SHAREHOLDERS OF HEI, INC. AUGUST 4, 1998 PLEASE SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY CARD This proxy statement (the "Proxy Statement") and the enclosed GREEN proxy card are being furnished to holders of the common stock, par value $0.05 per share (the "Shares"), of HEI, Inc., a Minnesota corporation (the "Company" or "HEI"), by Fant Industries Inc., a Delaware corporation ("Fant Industries") formed by Mr. Anthony J. Fant (together with Fant Industries, the "Fant Group"), in connection with the solicitation of proxies from the Company's shareholders to be used at a special meeting of shareholders of the Company including any adjournments or postponements, continuations or rescheduling thereof (the "Special Meeting"), to take the following actions: (i) remove all members of the Board of Directors of the Company (the "Board") (and any person or persons elected or designated prior to the Special Meeting to fill any vacancy or newly created directorship) other than Eugene W. Courtney, and elect the directors nominated by the Fant Group (the "Fant Nominees") who are committed to completing the Offer (as defined below) and leading changes designed to create new value for all shareholders (the "Director Replacement Proposals"); and (ii) adopt an amendment to the bylaws of the Company (the "Bylaws") to opt out of Section 302A.671 of the Minnesota Business Corporation Act (the "Control Share Act") so that Shares acquired by Fant Industries in the Offer will have voting rights equal to those of all other outstanding Shares (the "Equal Voting Rights Proposal" and, together with the Director Replacement Proposals, the "Proposals"). The principal executive offices of the Company are located at 1495 Steiger Lake Lane, Victoria, Minnesota 55386. This Proxy Statement and the GREEN proxy card were first being furnished to the Company's shareholders on or about April 23, 1998. YOUR VOTE IS IMPORTANT! A VOTE FOR OUR NOMINEES AND THE RELATED PROPOSALS IS A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE RELATED PROPOSALS. The Special Meeting will be held on Tuesday, August 4, 1998 at 10:00 a.m. Central Time, at the University of Minnesota Landscape Arboretum in Carver County, Minnesota. The record date for determining shareholders entitled to notice of and to vote at the Special Meeting (the "Record Date") is June 9, 1998. Shareholders of record at the close of business on the Record Date will be entitled to one vote at the Special Meeting for each Share held by them on the Record Date. The Fant Group beneficially owns 734,900 Shares, which represent approximately 18.0% of the Shares outstanding (based on information publicly disclosed by the Company), and intends to vote such Shares FOR the Proposals. The Special Meeting was demanded by Mr. Fant pursuant to Section 302A.433 of the Minnesota Business Corporation Act and Section 2.03 of the Bylaws. 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 (such number of Shares being the "Maximum Number"), and (ii) unless and until validly redeemed by the Board, the common stock purchase rights (the "Rights") associated therewith and issued pursuant to the Rights Agreement, dated as of May 27, 1988, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agreement"). Upon the terms and subject to the conditions of the Offer, if more than the Maximum Number of Shares shall be validly tendered and not withdrawn prior to the Expiration Date, Fant Industries will, upon the terms and subject to the conditions of the Offer, purchase the Maximum Number of Shares on a pro rata basis. The purpose of the Offer is to increase the equity interest of the Fant Group in the Company and support its efforts to gain control over the management, operations and assets of the Company. The Fant Group wants to provide the strategic leadership needed to make HEI a dynamic, growing company. The Fant Group has invested approximately $4.3 million to acquire 18% of the Company's outstanding common stock and is by far the largest shareholder. As such, its interest in maximizing shareholder value is directly aligned with yours. The Fant Group has absolutely no intention of liquidating the Company's assets, laying off employees, moving operations out of Victoria, Minnesota, or otherwise disrupting operations. Rather, the Fant Group wants to work with, and not against, management to enhance the Company's long-term growth prospects and increase shareholder value through carefully selected acquisitions, long-term investments for expansion, and diversification of its customer base. The Offer is currently scheduled to expire at 12:00 Midnight, New York City time, on Monday, July 20, 1998, unless further extended to a later date and time (the "Expiration Date"). Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. THIS PROXY STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, WHICH YOU SHOULD HAVE ALREADY RECEIVED. IF YOU HAVE NOT ALREADY RECEIVED THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, PLEASE CALL BEACON HILL PARTNERS, INC. AT (800) 253-3814. 2 PROPOSALS The Fant Group is soliciting proxies in support of the following two sets of proposals to be considered and voted upon at the Special Meeting: DIRECTOR REPLACEMENT PROPOSALS 1. To remove all of the current members of the Company's Board of Directors and any person or persons elected or designated by the Board to fill any vacancy or newly created directorship, other than Eugene W. Courtney; and 2. To elect to the Board such number of the following Fant Nominees that when added to Mr. Courtney equals the size of the Board: Anthony J. Fant, Edwin W. Finch, III, David W. Ortlieb and Steve E. Tondera, Jr. The first three of such individuals will be nominated for election to succeed the current Directors (or any Director named to fill any vacancy created by the death, retirement, resignation or removal of any of such four Directors) of the Company, other than Mr. Courtney. The fourth of such individuals will be nominated for election to fill the currently vacant directorship (or to succeed any Director named to fill such vacancy). One or more additional individuals will be nominated for election (a) in the event that the Company purports to increase the number of Directorships pursuant to Section 3.09 of the Bylaws, to each additional Directorship created, and/or (b) in the event any of the four individuals named above or Mr. Courtney is unable for any reason to serve as a Director. Additional nominations made pursuant to the preceding clause are without prejudice to the position of the Fant Group that any attempt to increase the size of the Board constitutes an unlawful manipulation of the Company's corporate machinery to disenfranchise the Company's shareholders. The Fant Group plans to distribute to the shareholders of the Company supplemental materials if the Board amends the Bylaws after the date of this Proxy Statement to increase the number of Directors of the Company. EQUAL VOTING RIGHTS PROPOSAL 1. To adopt the following resolution: RESOLVED, that the Bylaws of the Company are hereby amended, by adding a new section reading as follows: "Control Share Act. The provisions of Section 302A.671 of the Minnesota Business Corporation Act shall not apply to control share acquisitions of shares of this corporation." The adoption of BOTH sets of Proposals is necessary to ensure that shareholders who wish to tender their Shares to Fant Industries pursuant to the Offer will have the opportunity to do so. Abstentions and broker non-votes will have the same effect as votes against the Proposals. The Fant Group is not aware of any other proposals to be brought before the Special Meeting. However, should other proposals be brought before the Special Meeting, the persons named as proxies on the enclosed GREEN proxy card will vote on such matters in their discretion. A VOTE FOR THE FANT NOMINEES AND THE RELATED PROPOSALS IS A VOTE FOR CHANGE. THE FANT NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR THE FANT NOMINEES AND THE RELATED PROPOSALS. 3 YOUR VOTE IS IMPORTANT NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN, WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL (OR FAX BOTH SIDES OF) THE ENCLOSED GREEN PROXY CARD TO VOTE FOR THE PROPOSALS. ELECTION OF THE FANT NOMINEES AND THE ADOPTION OF THE EQUAL VOTING RIGHTS PROPOSAL WILL BE AN IMPORTANT STEP IN REACHING THE GOAL OF CONSUMMATING THE OFFER AND MAXIMIZING SHAREHOLDER VALUE. HOWEVER, YOU MUST TENDER YOUR SHARES PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE OFFER. YOUR VOTE FOR THE PROPOSALS DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT TO THE OFFER, AND YOUR FAILURE TO VOTE FOR THE PROPOSALS DOES NOT PREVENT YOU FROM TENDERING YOUR SHARES PURSUANT TO THE OFFER. IMPORTANT NOTE: If you hold your Shares in the name of one or more brokerage firms, banks or nominees, only they can exercise voting rights with respect to your Shares and only upon receipt of your specific instructions. Accordingly, it is critical that you promptly sign, date and mail the enclosed GREEN proxy card in the envelope provided or contact the person responsible for your account and give instructions to sign, date and mail the GREEN proxy card representing your Shares. Fant Industries urges you to confirm in writing your instructions to the person responsible for your account and to provide a copy of those instructions to Fant Industries in care of Beacon Hill Partners, Inc., who is assisting in this solicitation, at the address and telephone numbers set forth below and on the back cover of this Proxy Statement, so that Fant Industries will be aware of all instructions and can attempt to ensure that such instructions are followed. If you have any questions regarding your proxy, or need assistance in voting your Shares, please call: BEACON HILL PARTNERS, INC. 90 BROAD STREET 20TH FLOOR NEW YORK, NEW YORK 10004 (212) 843-8500 (CALL COLLECT) OR CALL TOLL-FREE (800) 253-3814 FAX (212) 843-4384 4 WHY YOU SHOULD VOTE FOR THE PROPOSALS YOUR VOTE IS IMPORTANT! A VOTE FOR OUR DIRECTOR NOMINEES AND THE RELATED PROPOSALS IS A VOTE FOR CHANGE. OUR NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES, TO DELIVERING TO YOU (1) IMMEDIATE VALUE BY CONSUMMATING THE OFFER AND (2) LONG TERM VALUE BY SETTING THE COMPANY ON THE CORRECT STRATEGIC PATH FOR GROWTH. WE URGE YOU TO JOIN US IN VOTING FOR OUR NOMINEES AND THE RELATED PROPOSALS. The adoption of BOTH sets of Proposals is necessary to ensure that shareholders who wish to tender their Shares to Fant Industries pursuant to the Offer will have the opportunity to do so. . Immediate Cash Premium The value of the Offer at $8.00 per Share is a 28% PREMIUM over the recent stock price and a 78% PREMIUM over the price on the day before Mr. Fant began accumulating the Shares. The Offer is for 11.5% of the Shares, is subject to certain conditions and will not be consummated until those conditions are satisfied or waived. Further information concerning the Offer is contained in the Offer to Purchase and related Letter of Transmittal. . Participation in the Company's Revitalization and Future Growth The Fant Group has many years of experience in identifying, screening and implementing strategic opportunities and enhancing values. They are committed to revitalizing HEI and making it a dynamic, growing company. Upon gaining control of the Board, they will seek to position the Company as an industry leader, increase its visibility, and enhance market liquidity, through initiatives that may include strategic acquisitions and corporate financing activities, although, to date, no specific transactions have been identified or defined. . Reform of Director Stock Compensation The Fant Group will immediately initiate the adoption of a highly incentive-based director stock compensation plan under which no director stock options will be exercisable unless and until HEI's stock price reaches $25.00 per Share within five years. Under our plan, directors will be rewarded if, and only if, the shareholders have been rewarded first. The Fant Group believes that the election of the Fant Nominees to the Board is in the best interests of the Company's shareholders and is necessary for enhancing the Company's long-term growth prospects and maximizing shareholder value. 5 DIRECTOR REPLACEMENT PROPOSALS REMOVAL OF CURRENT DIRECTORS The essential first step toward revitalizing HEI is to change control of the Board. LACK OF STRATEGIC DIRECTION. The Fant Group believes that the most serious, far-reaching failure of the current Board is that it has not set a strategic direction for employing the Company's assets productively. The Company's 1997 Annual Report indicates that as of November 29, 1997, $13.3 million, or about 70% of its total market capitalization at that time, was held in the form of cash and short-term investments. While the Company's senior managers may be satisfied maintaining substantial assets in what they have referred to as a "rainy day fund," the Fant Group believes that this practice reflects a lack of vision and an inability or unwillingness to identify opportunities for participating in the industry's growth. DANGEROUSLY NARROW CUSTOMER BASE. For each of the past five fiscal years, a minimum of 64% of the Company's net sales have come from two or three customers. For fiscal 1997, 82% of the Company's net sales were derived solely from two customers. In the face of such a highly concentrated customer base, the Company has failed to generate repeat business from its largest customers. In fiscal 1996, the Company lost significant business from two of its largest customers accounting for 30% and 27%, respectively, of fiscal 1995 net sales. In fiscal 1997, the Company lost all business from its single largest customer, which had accounted for 55% of fiscal 1997 net sales. In view of the instability of the Company's customer base, the Fant Group questions the wisdom of management's decision to invest in plant expansion in fiscal 1996. VOLATILE OPERATING RESULTS. The Fant Group believes that the Company's recent operating results have been volatile and disappointing. The Company's net sales for the first six months of fiscal 1998 decreased 44% from the same period in fiscal 1997. Yet the Company failed to reduce expenses commensurately, even while acknowledging in the 1997 Annual Report that an "unexpected decline in revenues, without corresponding and timely reductions in expenses, could have a material adverse effect on the Company's business, results of operations, or financial conditions." The result was a decline in the Company's gross profit margin to 18% for the first six months of fiscal 1998 from 26% for the same period in fiscal 1997 and a decline in net income to $100,000 from $1,601,000 over the same periods--a 94% drop in net income. EXCESSIVE MANAGEMENT BONUSES. The Board sets and approves management salary and bonuses, including stock compensation, through the Board's Compensation Committee. DURING CALENDAR YEAR 1997, THE COMPANY'S STOCK PRICE FELL FROM A HIGH OF $12 3/8 ON JANUARY 20, 1997 TO $4 3/4 ON DECEMBER 31, 1997, A DECREASE IN SHAREHOLDER VALUE OF OVER $30 MILLION, OR 62%. Despite this disappointing 1997 year for the shareholders, the Board found it appropriate to reward the top three managers with options to purchase 67,500 Shares (all other employees as a group received 65,000). During the past three fiscal years, in the face of volatile operating results, the Board has approved steadily increasing cash bonuses to these top three managers, including cash bonuses of over $90,000 in fiscal 1997. Over the past nine years, these top three managers have been granted 442,500 options, while all other employees as a group have received options to purchase 420,500 Shares over the same period. IRRATIONAL SYSTEM OF DIRECTOR STOCK COMPENSATION. In the face of what the Fant Group believes to be poor operating performance and a resulting decline in the market value of the Shares, the current directors have continued to reward themselves through the Company's Stock Option Plan for Non-Employee Directors (the "Plan"). Under the Plan, 10,000 Shares are granted annually to each non-employee director, regardless of the Company's operating results and stock price performance. Options to purchase 160,000 Shares, representing approximately 4% of all currently outstanding Shares, have been awarded to Directors in the last four years. In total, options to purchase 400,000 Shares (including the options previously granted for 160,000 Shares), representing approximately 10% of all currently outstanding Shares, have been reserved under the Plan for compensating directors. The Board amended the Plan on November 19, 1997 to extend the term of options received under the Plan from 5 years to 10 years. This amendment was enacted after the Board received options with an exercise price of $11.325 per Share and reflects the Board's lack of faith that the stock price will exceed 6 $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.
PERCENT OF SHARES OUTSTANDING DIRECTORS AND EXECUTIVE OFFICERS DIRECTLY OWNED 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. YOU ARE URGED TO VOTE FOR THE REMOVAL OF THE CURRENT BOARD ON THE ENCLOSED GREEN PROXY CARD. ELECTION OF FANT NOMINEES The Fant Group wants to provide the strategic leadership needed to make HEI a dynamic, growing company. The Fant Group has invested approximately $4.3 million to acquire 18% of the Company's outstanding common stock, and is by far the largest shareholder. As such, its interest in maximizing shareholder value is directly aligned with yours. The Fant Group has absolutely no intention of liquidating the Company's assets, laying off employees, moving operations out of Victoria, Minnesota, or otherwise disrupting the Company's operations. Rather, the Fant Group wants to work with, and not against, management to enhance the Company's long-term growth prospects and increase shareholder value through carefully selected acquisitions, long-term investments for expansion, and diversification of the Company's customer base. In addition, Mr. Fant personally has asked Mr. Courtney to remain as President of the Company following the election of the Fant Nominees. The Fant Group recognizes Mr. Courtney's value to the Company and would like to see him continue to oversee the day-to-day operations. 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. 7 DELIVERY OF IMMEDIATE CASH The value of the Fant Industries Offer at $8.00 per Share is a 28% PREMIUM over the recent stock price and a 78% PREMIUM over the price on the day before Mr. Fant began accumulating Shares. Upon their election, the Fant Nominees are expected, subject to their fiduciary duties to the Company's shareholders, to remove any obstacles to the consummation of the Offer that the current members of the Board have failed to remove. In particular, the Fant Nominees are expected to redeem the Rights (or amend the Rights Agreement to make the Rights inapplicable to the Offer), which would have the effect of satisfying the Board Action Condition (as defined herein) to the Offer. The all cash offer is for 11.5% of the Shares and is not conditioned upon Fant Industries obtaining financing. REFORM OF DIRECTOR STOCK COMPENSATION The Fant Nominees are committed to reforming the current stock compensation arrangements immediately. It is vital that the interests of the Company's directors and management correlate with the interests of shareholders. The Fant Group has designed a specific plan to link stock compensation directly to the Company's operating performance and shareholder value. Under our plan, each director will receive annual stock option grants exercisable at the stock price at the time of the grant, BUT NONE OF THESE OPTIONS WILL BE EXERCISABLE UNLESS AND UNTIL HEI'S STOCK PRICE REACHES $25.00 PER SHARE WITHIN THE FIVE YEAR TERM OF THE OPTIONS. This is how the Fant Group believes an incentive plan should work. Under our plan, directors will be rewarded if, and only if, the shareholders have been rewarded first. 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. 8 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. 9 Following the acquisition of these properties, innovative steps were formulated and taken to enhance and realize their true value. The strategies employed by Mr. Fant to revitalize each station included, among other things, repositioning the transmitting towers to better reach a greater population, affiliating with different or new networks to create brand recognition for the station, forming joint ventures with local broadcasters to increase profitability while reducing risk, increasing cash flow by reducing wasteful spending, and expanding sales and marketing efforts. In 1996, Mr. Fant began to focus on divesting his television and radio assets to capitalize on the sharply escalating station values, new media market conditions and changes in federal ownership rules, among other things. Currently, the Fant Group has sold or has contracts to sell all of the eight broadcasting properties for in excess of $53,000,000, which represents a 400% increase in the value of the stations over the total cost of acquisition and improvements. None of these sales resulted in the liquidation of any station. Each station was sold as a profitable on-going business. Mr. Fant continues to invest in a variety of other businesses using the same approach of identifying and understanding the underlying assets of a business and formulating innovative steps to realize its full potential, and he now owns a number of businesses in diverse industries. In each of his endeavors, Mr. Fant's success was not attributable to his prior knowledge and experience in the specific industry. Rather, it was his strategic insight and desire to identify undervalued businesses and to revitalize each one according to its own specific needs. The Fant Group believes that this strategic leadership is the essential element missing in the Company's formula for success. In HEI, Mr. Fant sees an opportunity to create a dynamic engine of growth and believes that Mr. Fant can provide the necessary leadership toward that end. THE SHAREHOLDERS HAVE THE RIGHT TO DECIDE The Fant Group believes anti-takeover defenses such as the Rights Agreement and the Control Share Act reduce shareholder value over the long run by entrenching management and by reducing the probability that someone, like Fant Industries, will make a bid for Shares at a price above market value. The Fant Group further believes that when an offer is made to acquire Shares, the shareholders, not the Board, should have the final word on whether the offer is accepted. Absent the Rights Agreement, a bidder such as Fant Industries could make an offer to all shareholders to buy their Shares at a fixed price above the market value without prior approval of the Board. Shareholders would have the option to accept the Offer and tender their Shares or reject the Offer if they believe the premium offered is insufficient. With the Rights Agreement in place, a bidder is effectively required to seek Board approval prior to making an offer to shareholders. Absent that approval, the Board can declare the bidder unfriendly and trigger the Rights Agreement. Consequently, the Fant Group believes that the Rights Agreement provides the current members of the Board an entrenchment mechanism to protect and enhance their own welfare prior to approving any bidder's offer, by placing them in a position to persuade the bidder to spend funds that could otherwise go directly to the shareholders. A commonly stated benefit behind measures such as the Rights Agreement is to provide incumbent boards of directors with negotiating leverage to obtain better terms for their shareholders. 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. 10 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.
PRINCIPAL OCCUPATION OR NAME, AGE AND EMPLOYMENT DURING THE BUSINESS ADDRESS LAST FIVE YEARS ---------------- ------------------------------------------------------- Anthony J. Fant (37)........... Director, President and Chief Executive Officer of Fant 2154 Highland Avenue Industries. Mr. Fant has been Director, President and Birmingham, AL 35205 Chief Executive Officer of Fant Broadcasting Company (including, for these purposes, various affiliated companies engaged primarily in television and radio broadcasting) since 1986. Edwin W. Finch, III (52)....... Director and President of FHL Capital Corporation since 600 North 20th Street 1984. FHL Capital is an investment banking and business Birmingham, AL 35203 valuation firm specializing in mergers and acquisitions. Mr. Finch served as President of Pinson Valley Millworks, Inc., a distributor of millworks products, from 1988 through 1996. David W. Ortlieb (67).......... Independent management consultant since 1994. Director, 61 Eleven O'Clock Road President and Chief Executive Officer of Immunomedics, Weston, CT 06883 Inc., a biopharmaceutical company, from 1992 to 1994. Director, President and Chief Executive Officer of Texas Biotechnology Corporation, a pharmaceutical products company, from 1990 to 1992. Director, President and Chief Operating Officer of American Optical Corporation, a diversified business principally involved with optics and opthalmics, from 1987 to 1989. Director, President and Chief Executive Officer of Erbamont N.V., a diversified health care company, from 1983 to 1985. Director of Abbott Laboratories, a diversified health care and consumer products company, from 1975 to 1983, serving as Corporate Executive Vice President and President of Abbott International. Assistant to the Chairman and Chief Executive Officer of American Home Products Company, a diversified package goods company, in 1971. Director, Executive Vice President and Chief Operating Officer of Tyco International, Ltd., a diversified high technology company, from 1969 to 1970. Steve E. Tondera, Jr. (35) .... Director, Vice President, Treasurer, Secretary and 2154 Highland Avenue Chief Financial Officer of Fant Industries. Mr. Tondera Birmingham, AL 35205 has been Senior Vice President and Chief Financial Officer of Fant Broadcasting Company (including, for these purposes, various affiliated companies engaged primarily in television and radio broadcasting) since 1994 and Director since 1995. Prior to such time, Mr. Tondera was a principal of Humphryes & Associates, P.C., a public accounting firm.
- -------- 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. 11 According to the Company's public filings, if elected as Directors of the Company, the Fant Nominees who are not employees of the Company would receive $750 per quarter, plus $700 for each regular meeting of the Board and $300 for each committee or special Board meeting attended. Each committee chairperson would receive an annual retainer of $300. All Directors of the Company would be reimbursed by the Company for expenses incurred in connection with their services as Directors of the Company. The Fant Nominees, if elected, will be indemnified by the Company for service as a Director of the Company to the extent indemnification is provided to Directors of the Company under the Bylaws. In addition, Fant Industries believes that upon election, the Fant Nominees will be covered by the Company's officer and director liability insurance. Fant Industries disclaims any responsibility for the accuracy of the foregoing information, which has been extracted from the Company's public filings. Except as described hereinafter, none of the Fant Nominees is adverse to the Company or any of its subsidiaries in any material pending legal proceedings. See "Background of the Solicitation-Certain Litigation." Fant Industries does not expect that any of the Fant Nominees will be unable to stand for election, but, in the event that any vacancy in the Fant Nominees should occur, the Shares represented by the enclosed GREEN proxy card will be voted in each such case for a substitute nominee selected by Fant Industries. 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. If the Company purports to increase the number of Directorships or if any of the Fant Nominees or Mr. Courtney is unable or unwilling for any reason to serve as a Director, Fant Industries intends to nominate for election Mack V. Traynor, III. Mr. Traynor is 40 years of age and is a resident of the State of Minnesota. Mr. Traynor's principal occupation or employment during the last five years is as follows: Director of Eltrax Systems, Inc., a networking products and services company, since 1995, serving as Chief Financial Officer from 1995 to 1996 and President, Chief Executive Officer and Chief Operating Officer from 1995 to 1997. Director of Telident, Inc., a telecommunications products and services company, since 1998. President and Chief Operating Officer of Military Communications Center, Inc., a company which provided telecommunications services to US Military personnel, from 1988 to 1995. US West, Inc., a telecommunications company, from 1980 to 1988, serving as President of US West Enterprises-Technologies Division. If Mr. Traynor is not nominated for election at the Special Meeting, then upon gaining control of the Board, the Fant Group will seek to increase the size of the Board and elect Mr. Traynor to such newly created directorship. In accordance with applicable regulations of the Securities and Exchange Commission (the "Commission"), the GREEN proxy card affords each shareholder the opportunity to designate the names of any of the Fant Nominees whom he or she does not desire to elect to the Board. Notwithstanding the foregoing, the Fant Group urges shareholders to vote FOR all of the Fant Nominees on the enclosed GREEN proxy card. The persons named as proxies in the enclosed GREEN proxy card will vote, in their discretion, for each of the Fant Nominees who is nominated for election and for whom authority has not been withheld. YOU ARE URGED TO VOTE FOR THE ELECTION OF THE FANT NOMINEES ON THE ENCLOSED GREEN PROXY CARD. 12 EQUAL VOTING RIGHTS PROPOSAL Pursuant to the Control Share Act, substantially all of the Shares acquired by Fant Industries pursuant to the Offer will be denied voting rights, unless voting rights for such Shares are approved by (i) the affirmative vote of the holders of a majority of all outstanding Shares entitled to vote, and (ii) the affirmative vote of a majority of all outstanding Shares entitled to vote, excluding holders of "interested shares" (generally, Shares held by Fant Industries, by officers of the Company and by any employee-directors of the Company). A commonly stated benefit of control share acquisition statutes is to provide shareholders with an opportunity to vote as a group on a proposed acquisition of control. The Control Share Act does not apply if either (i) the Bylaws are amended by the Company's shareholders prior to consummation of the Offer to provide that the Control Share Act shall be inapplicable to control share acquisitions of the Company's Shares, or (ii) the shareholders vote in accordance with the Control Share Act to confer full voting rights to Shares acquired by Fant Industries pursuant to the Offer. The Equal Voting Rights Proposal contemplates the adoption of a bylaw to "opt out" of the Control Share Act, so that all shareholders have the right to vote their Shares, regardless of the number of Shares they own or how such Shares were acquired. Investors, such as Fant Industries, who are otherwise interested in purchasing a significant number of Shares at a premium over the current price may be unwilling to do so if such Shares are subject to the loss of voting rights pursuant to the Control Share Act. Upon shareholder approval of the Equal Voting Rights Proposal, the Company's shareholders will have access to persons interested in acquiring their Shares without the obstruction created by the Control Share Act. The adoption of the Equal Voting Rights Proposal will have the affect of satisfying the Control Share Condition (as defined herein) to consummating the Offer. YOUR VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL IS A VOTE FOR CHANGE. WE URGE YOU TO VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL. The Fant Group believes that all public company shareholders, including the Company's shareholders, should have equal voting rights, regardless of the number of shares owned. The Fant Group further believes that the Control Share Act decreases the attractiveness of the Shares in the public market and may limit the ability of a shareholder to receive a premium for his/her shares, because it is unlikely that any investor will purchase a significant number of Shares unless it is certain to be able to exercise full voting rights for such Shares. The Control Share Act therefore, makes it likely that the shareholders will never have the opportunity to sell their Shares to an investor, such as Fant Industries, who is willing to purchase a significant number of shares at a premium over the recent historical market prices for the Shares. The Fant Group believes that even though the Company's shareholders can grant voting rights for Shares otherwise subject to voting restrictions under the Control Share Act, no significant investor is likely to offer to purchase Shares or offer a premium for the Shares unless it is certain to be able to exercise full voting rights, and that the best way to provide that certainty is for the Company to "opt out" of the Control Share Act. THE FANT GROUP URGES ALL SHAREHOLDERS TO AFFIRM THEIR RIGHTS TO DECIDE FOR THEMSELVES WHETHER TO TAKE ADVANTAGE OF THE OFFER BY VOTING FOR THE EQUAL VOTING RIGHTS PROPOSAL. By voting for the adoption of the Equal Voting Rights Proposal, you will be sending the Board a strong message that the shareholders of the Company, as the true owners of the Company, demand that every shareholder be entitled to equal rights to vote their shares and to decide for themselves whether to accept the Offer. YOU ARE URGED TO VOTE FOR THE ADOPTION OF THE EQUAL VOTING RIGHTS PROPOSAL ON THE ENCLOSED GREEN PROXY CARD. 13 BACKGROUND OF THE SOLICITATION FANT INDUSTRIES' TENDER OFFER The primary purpose of this solicitation of proxies is to replace the current Board with the Fant Nominees who believe that the Company's shareholders should have the opportunity to approve the Offer and to amend the Bylaws to opt out of the Control Share Act. On March 4, 1998, the Fant Group announced the Offer for 11.5% of the Shares and on March 10, 1998, the Fant Group commenced the Offer. The Offer is currently scheduled to expire at 12:00 Midnight, New York City time, on Monday, July 20, 1998, unless further extended. The Offer is subject to the fulfillment of a number of conditions, including, without limitation, the following: Minimum Tender Condition. The Offer is conditioned upon there being validly tendered and not withdrawn prior to the expiration date at least that number of Shares (the "Minimum Number of Shares") which constitute 11.5% of the total number of Shares outstanding on the date Shares are accepted for payment, without giving effect to any dilution that might result from exercise of the rights (the "Minimum Tender Condition"). Fant Industries reserves the right (subject to the applicable rules and regulations of the Commission), which it presently has no intention of exercising, to waive or reduce the Minimum Tender Condition and to elect to purchase, pursuant to the Offer, fewer than the Minimum Number of Shares. According to the Company's Quarterly Report on Form 10-Q for the period ended February 28, 1998, as of April 2, 1998, there were 4,083,576 Shares issued and outstanding. In addition, the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997 states that, as of August 31, 1997 there were 447,000 Shares subject to options outstanding under the Company's stock option plans. The Fant Group currently owns an aggregate of 734,900 Shares which were recently acquired in open market purchases. Based on the foregoing, the Minimum Number of Shares is 469,612. However, the actual Minimum Number of Shares will depend on the facts as they exist on the date of purchase. Change of Control Condition. The Offer is conditioned upon the election, by Board resolution or shareholder vote, of a sufficient number of Fant Nominees to constitute a majority of the Company's Board. The Change of Control Condition can be satisfied either by an election by the existing Board or by a vote of the Company's shareholders. As set forth in the Bylaws, the Board has the ability, without a shareholder vote, to increase the number of members that constitute the Board and to fill the newly-created directorships with Fant Nominees. Likewise, the Board can fill any vacancies caused by resignations of current members by a resolution of the remaining directors. WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER. Board Action Condition. The Offer is conditioned upon Fant Industries being satisfied in its reasonable discretion that the Board has irrevocably taken all actions necessary to redeem the Rights or Fant Industries having determined in its reasonable discretion that the Rights have been invalidated or are otherwise inapplicable to the Offer. Set forth below is a summary description of the Rights Agreement derived from the Company's Form 8 filed on June 27, 1988. On May 27, 1988, the Company's Board declared a dividend distribution of one Right for each outstanding Share. The dividend is payable to the shareholders of record on June 10, 1988. Each Right entitles the registered holder to purchase from the Company one-fourth ( 1/4) of one Share at a price of $6.00 (the "Purchase Price"), subject to adjustment. The Rights will not be exercisable until the earlier of ten business days (subject to deferral by the Board) following a public announcement that (i) an "Acquiring Person" (as defined in the Rights Agreement), which term does not include the Company or an employee benefit plan of the Company, has acquired beneficial 14 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 August 10, 1998 unless earlier redeemed by the Company as described below. Until the Distribution Date the Rights will be evidenced, with respect to any Share certificates outstanding as of June 10, 1987 by such Share certificates with a copy of the Company's Form 8 Summary of Rights attached thereto. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Share certificates. New Share certificates issued after June 10, 1988 (or as soon as practicable thereafter) upon transfer or new issuance of Shares will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date the surrender for transfer of any Share certificates outstanding as of June 10, 1988, even without a copy of the Company's Form 8 Summary of Rights attached thereto, will also constitute the transfer of the Rights associated with the Shares represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of Shares as of the close of business on the Distribution Date and such separate certificates alone will evidence the Rights. The Purchase Price payable, and the number of Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Shares, (ii) upon the grant to holders of the Shares of certain rights or warrants to subscribe for Shares or convertible securities at less than the current market price of the Shares or (iii) upon the distribution to holders of the Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends out of earnings or retained earnings at a rate not in excess of 125% of the rate of the last cash dividend theretofore paid or dividends payable in Shares) or of subscription rights or warrants (other than those referred to above). In the event that the Company is acquired in a merger or other business combination by an Acquiring Person or after an Acquiring Person has acquired more than 40% of the Company's Shares or 50% or more of the Company's assets or earning power is sold in one transaction or a series of transactions to an Acquiring Person, proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price, that number of one-fourths ( 1/4) of full shares of common stock of the Acquiring Person or other acquiring entity which at the time of such transaction would have a market value of two times the Purchase Price. In the event that the Company is the surviving corporation in a merger and the Shares are not changed or exchanged, or in the event that an Acquiring Person engages in one of a number of self-dealing transactions specified in the Rights Agreement, or in the event any person acquires 30% or more of the outstanding Shares without prior approval of the Board of Directors, proper provision shall be made so that each holder of a Right will thereafter have the right to receive upon exercise thereof at the then current Purchase Price that number of one-fourths ( 1/4) of full shares of Shares having a market value of two times the Purchase Price. Upon the occurrence of any of the transactions referred to in this paragraph, any rights that are or were at any time beneficially owned by an Acquiring Person engaging in any of such transactions or receiving the benefits thereof on or after the time the Acquiring Person became such shall become void. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. Fractional shares may not be issued in the discretion of the Company and, in lieu thereof, an adjustment in cash may be made based on the market price of the Shares on the last trading date prior to the date of exercise. At any time prior to ten business days after an announcement that an Acquiring Person (as defined in the Rights Agreement) has acquired, or obtained the right to acquire, 20% or more of the outstanding shares of Common Stock of the Company, subject to extension by the Board of Directors, the Company may redeem all but not some of the Rights at a price of $.05 per Right (the "Redemption Price"). Immediately upon the action 15 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, by Form 8-A filed on March 19, 1998 and by Form 8-A filed on June 3, 1998. Fant Industries presently intends, if necessary, to extend the Offer from time to time until the Board Action Condition is satisfied or it determines, in its reasonable discretion, that such condition is not reasonably likely to be satisfied. WE URGE YOU TO VOTE FOR THE FANT NOMINEES FOR THE OPPORTUNITY TO DECIDE FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER. The Control Share Condition. The Offer is conditioned upon Fant Industries' acquisition of Shares in the Offer having been approved in accordance with the requirements of the Control Share Act and accorded full voting rights, or Fant Industries determination in its reasonable discretion that such Act is inapplicable to the Offer or that it otherwise will not have the effect of denying voting rights to the Shares acquired by Fant Industries in the Offer. WE URGE YOU TO VOTE FOR THE EQUAL VOTING RIGHTS PROPOSAL FOR THE OPPORTUNITY TO DECIDE FOR YOURSELVES WHETHER YOU WISH TO TAKE ADVANTAGE OF THE OFFER. Although Fant Industries will seek to consummate the Offer as soon as practicable after the Expiration Date, satisfaction of the foregoing conditions depends upon a variety of factors and legal requirements that may affect the timing of such consummation. Fant Industries reserves the right (but shall not be obligated) to waive any or all such conditions. CERTAIN LITIGATION On March 27, 1998, the Fant Group filed a complaint against the Company and its directors in the federal district court for the Northern District of Alabama. The complaint alleges violations of the Securities Exchange Act of 1934 (the "Exchange Act"), tortious interference, breach of fiduciary duty, and wantonness by the Company and its directors. The Fant Group alleges that the Company and its directors have violated Sections 14(d)(4) and 14(e) of the Exchange Act in their Schedule 14D-9 filed on March 20, 1998 (including a related letter to shareholders on such date) by making untrue statements of material fact and omitting to state material facts necessary to make the statements, in the light of the circumstances under which they were made, not misleading. Specifically, it is alleged that the Directors omitted to state, among other things, material information relating to HEI's performance, director stock compensation, and insider sales of stock prior to a dramatic decline in its price. The Fant Group asserts that these fraudulent omissions and misstatements by the Company and its directors, if uncorrected, will cause irreparable harm to the Fant Group because a reasonable stockholder may reject an otherwise valid tender offer in reliance on these material omissions and misstatements. The Fant Group seeks an injunctive order for the Company and its directors to issue full curative disclosure including a retraction of the misleading statements. The Fant Group also seeks damages for tortious interference with their business relationships and for breaches of fiduciary duty and for declaratory relief with respect to the Offer. 16 The Company and its directors have filed a motion to dismiss the Fant Group's complaint or, in the alternative, to transfer the Fant Group's law suit from Alabama to Minnesota where the Company has commenced a law suit against the Fant Group (discussed below). The Fant Group has filed papers in opposition to this motion, which is currently pending. On April 20, 1998, the Company filed a complaint against Mr. Fant and Fant Industries in the federal district court of the District of Minnesota. The complaint alleges violations of the Exchange Act. The Company alleges that the Fant Group has violated Sections 14(a), 14(d), 14(e) and 13(d) of the Exchange Act in their Schedule 14D-1 filed on March 10, 1998 and the amendments thereto, their Schedule 13D filed on February 17, 1998 and the amendments thereto, and certain communications with shareholders of the Company. The Company alleges that the Fant Group has omitted and misrepresented material information to the Company's shareholders relating to the Company, the Fant Group, its tender offer, and its plans for the Company. The Company further alleges that the Fant Group has solicited proxies from shareholders of the Company without complying with the federal proxy rules. The Company seeks an injunctive order for the Fant Group to amend its Schedules 13D and 14D-1 and file corrective Schedule 14A proxy materials. The Company further seeks to enjoin the Fant Group from communicating with shareholders, purchasing tendered shares or soliciting any proxies for 45 days after filing corrective disclosures, or making any false or misleading statements or proxy solicitations. The Fant Group believes that all allegations in the complaint are without merit. The Fant Group has filed a motion in the federal District Court for the Northern District of Alabama--the court in which the Fant Group's law suit against the Company and its directors is currently pending--seeking to enjoin the Company's law suit in Minnesota on the grounds that the claims asserted therein should properly be litigated as counter-claims in the Fant Group's law suit which was commenced in Alabama three weeks before the Company filed its complaint in Minnesota. The Company filed papers in opposition to the Fant Group's motion, and the parties are currently awaiting the court's decision. 17 VOTING AND PROXY PROCEDURES Only shareholders of record on the Record Date will be entitled to notice of and to vote at the Special Meeting. Each Share is entitled to one vote upon each matter presented at the Special Meeting. Shareholders who sell Shares before the Record Date (or acquire them without voting rights after the Record Date) may not vote such Shares. Shareholders of record on the Record Date, will retain their voting rights in connection with the Special Meeting even if they sell such Shares after the Record Date. Pursuant to Section 2.04 of the Bylaws, the holders of a majority of the Shares entitled to vote constitutes a quorum for the transaction of any business at the Special Meeting. Based on publicly available information, Fant Industries believes that the only outstanding class of securities of the Company entitled to vote at the Special Meeting are the Shares. According to publicly available information, as of April 2, 1998, there were 4,083,576 Shares issued and outstanding. Shares represented by properly executed GREEN proxy cards will be voted at the Special Meeting as marked and, in the absence of specific instructions, will be voted FOR the removal of current members of the Board, FOR the election of Fant Nominees to the Board, FOR the adoption of the Equal Voting Rights Proposal and in the discretion of the persons named as proxies on all other matters as may properly come before the Special Meeting. Pursuant to Section 3.10 of the Bylaws, any or all of the directors may be removed from the Board at any time, with or without cause, by the affirmative vote of the shareholders holding a majority of the Shares entitled to vote at the Special Meeting. Election of the Fant Nominees requires the affirmative vote of a majority of the Shares represented and entitled to vote at the Special Meeting. For the purpose of adopting the Equal Voting Rights Proposal, Section 10.01 of the Bylaws requires a majority vote of the shareholders present or represented at any special meeting. Abstentions and broker non-votes will have the same effect as votes against all Proposals and will each be included in determining the number of Shares present for purposes of determining the presence of a quorum. Shareholders of the Company may revoke their proxies at any time prior to its exercise by attending the Special Meeting and voting in person (although attendance at the Special Meeting will not in and of itself constitute revocation of a proxy) or by delivering a written notice or revocation. The delivery of a subsequently dated proxy which is properly completed will constitute a revocation of any earlier proxy. The revocation may be delivered either to Fant Industries in care of Beacon Hill Partners, Inc. at the address set forth on the back cover of this Proxy Statement or to the Company at P.O. Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386 or any other address provided by the Company. Although a revocation is effective if delivered to the Company, Fant Industries requests that either the original or photostatic copies of all revocations be mailed to Fant Industries in care of Beacon Hill Partners, Inc. at the address set forth on the back cover of this Proxy Statement so that Fant Industries will be aware of all revocations and can more accurately determine if and when proxies have been received from the holders of record on the Record Date of a majority of the outstanding Shares. IF YOU WISH TO VOTE FOR THE REMOVAL OF THE CURRENT MEMBERS OF THE BOARD, FOR THE ELECTION OF THE FANT NOMINEES TO THE BOARD AND FOR THE ADOPTION OF THE EQUAL VOTING RIGHTS PROPOSAL, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GREEN PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. REGISTERED HOLDERS MAY FAX BOTH SIDES OF THE ENCLOSED GREEN PROXY CARD TO BEACON HILL PARTNERS, INC. AT THE NUMBER SET FORTH ON THE BACK COVER OF THIS PROXY STATEMENT. SOLICITATION OF PROXIES The solicitation of proxies pursuant to this Proxy Statement is being made by Fant Industries. Proxies may be solicited by mail, facsimile, telephone, telegraph, in person and by advertisements. Solicitations may be made by certain directors, officers and employees of Fant Industries, none whom will receive additional compensation for such solicitation. Fant Industries has retained Beacon Hill Partners, Inc. for solicitation and advisory services in connection with this solicitation, for which Beacon Hill Partners, Inc. will receive a fee of up to $30,000 together with 18 reimbursement for its reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses, including certain liabilities under the federal securities laws. Beacon Hill Partners, Inc. will solicit proxies from individuals, brokers, banks, bank nominees and other institutional holders. Fant Industries has required banks, brokerage houses and other custodians, nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the Shares they hold of record. Fant Industries will reimburse these record holders for their reasonable out-of- pocket expenses in so doing. It is anticipated that Beacon Hill Partners, Inc. will employ approximately 25 persons to solicit the Company's shareholders for the Special Meeting. Beacon Hill Partners, Inc. is also acting as Information Agent in connection with the Offer, for which it will be paid customary compensation in addition to reimbursement of reasonable out-of-pocket expenses. R.J. Steichen & Co. is acting as Dealer Manager for the Offer and as the Fant Group's financial advisor in connection with the Fant Group gaining control of the Company, including the Offer. Pursuant to the terms of R.J. Steichen & Co.'s engagement, the Fant Group has agreed to pay R.J. Steichen & Co., for its services as Dealer Manager and financial advisor, an initial financial advisory retainer fee or $20,000 and a monthly financial advisory fee of $10,000. In addition, success fees of up to $50,000 may be earned. Subject to certain limitations, the Fant Group also has agreed to reimburse R.J. Steichen & Co. for travel and other out-of pocket expenses, including legal fees and expenses, and to indemnify R.J. Steichen & Co. against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. In the ordinary course of business, R.J. Steichen & Co. may actively trade or hold the securities of the Company for its own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. In connection with R.J. Steichen & Co.'s engagement as financial advisor, the Fant Group anticipates that employees and representatives of R.J. Steichen & Co. may communicate in person, by telephone or otherwise with a limited number of institutions, brokers, or other persons who are shareholders of the Company for the purpose of assisting in the solicitation of proxies for the Special Meeting. R.J. Steichen will not receive any additional fee for or in connection with such activities apart from the fees which it is otherwise entitled to receive as described herein. It is anticipated that approximately 6 employees and representatives of R.J. Steichen will communicate with the Company's shareholders in connection with the solicitation for the Special Meeting. The entire expense of soliciting proxies is being borne by Fant Industries. Fant Industries intends to seek reimbursement of the costs of this solicitation from the Company only to the extent permitted by law. Fant Industries does not intend to seek shareholder approval of such reimbursement unless such approval is required by law. Costs of this solicitation of proxies are currently estimated to be approximately $510,000. Fant Industries estimates that through the date hereof, its expenses in connection with the solicitation are approximately $330,000. INFORMATION ABOUT FANT INDUSTRIES Fant Industries is a Delaware corporation, the principal executive offices of which are located at 2154 Highland Avenue, Birmingham, Alabama 35205, telephone number (205) 933-1030. Fant Industries was formed by Mr. Fant for the sole purpose of acquiring and holding the Company's Shares. Fant Industries has not conducted any unrelated activities since its organization on February 23, 1998. Its sole shareholder is Mr. Fant. The directors of Fant Industries are Mr. Fant, who is also its President and Chief Executive Officer, and Mr. Steve E. Tondera, Jr., who is also its Vice President, Treasurer, Secretary and Chief Financial Officer. As of the date of this Proxy Statement, the Fant Group beneficially owns 734,900 Shares. For more detailed information regarding the directors and executive officers of Fant Industries and transactions involving Shares by Fant Industries, see Schedule II of this Proxy Statement. See "Proposals -- The Fant Nominees." 19 CERTAIN TRANSACTIONS BETWEEN THE FANT GROUP AND THE COMPANY Except as set forth in this Proxy Statement (including the Schedules hereto), none of the Fant Group, or any other participant in this solicitation or any of their respective associates: (i) directly or indirectly beneficially owns any Shares or any securities of the Company; (ii) has had any relationship with the Company in any capacity other than as a shareholder, or is or has been a party to any transactions, or series of similar transactions, since September 1, 1996 with respect to any Shares of the Company; or (iii) knows of any transactions since September 1, 1996, currently proposed transaction, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $60,000 and in which any of them or their respective affiliates had, or will have, a direct or indirect materials interest. In addition, other than as set forth in Schedule II of this Proxy Statement, there are no contracts, arrangements or understandings entered into by the Fant Group, or any other participant in this solicitation or any of their respective associates within the past year with any person with respect to any of the Company's securities, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or grantees of profit, division of losses or profits, or the giving or withholding of proxies. In addition, other than as set forth in this Proxy Statement, none of the Fant Group, or any other participant in this solicitation or any of their respective associates has been engaged in contracts, negotiations or transactions with the Company or its affiliates concerning a merger, consolidation, acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets; or has had any other transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission. Except as set forth in this Proxy Statement (including the Schedules hereto), none of the Fant Group, or any other participant in this solicitation or any of their respective associates, has entered into any agreement or understanding with any person with respect to (i) any future employment by the Company or its affiliates or (ii) any future transactions to which the Company or any of its affiliate will or may be a party. However, in connection with the Offer, the Fant Group has reviewed, and will continue to review, on the basis of publicly available information, various possible business strategies that they might consider in the event that the Fant Group acquires control of the Company. In addition, if and to the extent that the Fant Group acquires control of the Company or otherwise obtains access to the books and records of the Company, the Fant Group intends to conduct a detailed review of the Company and its assets, financial projections, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. OTHER MATTERS AND ADDITIONAL INFORMATION Fant Industries is unaware of any other matters to be considered at the Special Meeting. However, Fant Industries has notified the Company of its intention to bring before the Special Meeting such proposals as it believes to be appropriate. Should other proposals be brought before the Special Meeting, the persons named as proxies on the enclosed GREEN proxy card will vote on such matters in their discretion. Schedule III of this Proxy Statement sets forth certain information, as made available in public documents, regarding Shares held by the Company's management. The information concerning the Company contained in this Proxy Statement and the Schedules attached hereto has been taken from, or is based upon, publicly available information. Except for the Company's Share Register, Fant Industries has not had access to the books and records of the Company. Shareholders will have no appraisal or similar rights of dissenters with respect to any of the proposals to be considered and voted upon at the Special Meeting. 20 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. June 11, 1998 21 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.
PRESENT PRINCIPAL OCCUPATION OR NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS HELD BUSINESS ADDRESS DURING THE PAST FIVE YEARS ---------------- ------------------------------------------------------- Anthony J. Fant* .............. Director, President and Chief Executive Officer of Fant 2154 Highland Avenue Industries. Mr. Fant has been Director, President and Birmingham, AL 35205 Chief Executive Officer of Fant Broadcasting Company (including, for these purposes, various affiliated companies engaged primarily in television and radio broadcasting) since 1986. Steve E. Tondera, Jr.*......... Director, Vice President, Treasurer, Secretary and 2154 Highland Avenue Chief Financial Officer of Fant Industries. Mr. Tondera Birmingham, AL 35205 has been Senior Vice President and Chief Financial Officer of Fant Broadcasting Company (including, for these purposes, various affiliated companies engaged primarily in television and radio broadcasting) since 1994 and Director since 1995. Prior to such time, Mr. Tondera was a principal of Humphryes & Associates, a public accounting firm.
I-1 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 SHARES DATE 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:
TRANSACTION SHARES PRICE PER DATE ACQUIRED SHARE(1) ----------- -------- --------- 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
II-1
TRANSACTION SHARES PRICE PER DATE ACQUIRED SHARE(1) ----------- -------- --------- 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
- -------- (1) All prices are exclusive of commissions. (2) Represents a capital contribution of 10,000 Shares by Mr. Fant to Fant Industries. III. TRANSACTIONS IN SHARES BY FANT INDUSTRIES DIRECTORS AND EXECUTIVE OFFICERS AND THE FANT NOMINEES Anthony J. Fant and Steve E. Tondera, Jr. have agreed to serve as proxies on the GREEN proxy card for the Special Meeting. Except as disclosed in this Schedule, none of Fant Industries, any of its directors or executive officers or the Fant Nominees owns any securities of the Company or any subsidiary of the Company, beneficially or of record, has purchased or sold any of such securities within the past two years or was within the past year a party to any contract, arrangement or understanding with any person with respect to any such securities. Except as disclosed in this Schedule, to the knowledge of Fant Industries, no associate of Fant Industries or any of its directors and executive officers or of the Fant Nominees beneficially owns, directly or indirectly, any securities of the Company. II-2 To the knowledge of Fant Industries, other than as disclosed in this Schedule, none of Fant Industries, any of its directors or executive officers, or the Fant Nominees has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the Special Meeting. IV. BENEFICIAL OWNERSHIP TABLE OF THE FANT NOMINEES The following table shows, as of June 11, 1998, the beneficial ownership known to Fant Industries, of Shares held by the Fant Nominees:
AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL PERCENT OF BENEFICIAL OWNER OWNERSHIP CLASS ------------------- ---------- ---------- Anthony J. Fant...................................... 734,900 18.0% 2154 Highland Avenue Birmingham, Alabama 35205
II-3 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.
NAME OF AMOUNT AND NATURE PERCENT OF BENEFICIAL OF BENEFICIAL OUTSTANDING OWNER OWNERSHIP(1) SHARES ---------- ----------------- ----------- 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%
- -------- * Less than one percent. (1) Represents outstanding shares directly owned except as hereinafter otherwise indicated. Pursuant to regulations of the Commission, shares receivable by directors and executive officers by options exercisable within 60 days after November 28, 1997 are deemed to be beneficially owned by such directors and executive officers at said date. Of the number of Shares shown above, the following represent shares that may be acquired upon exercise of options for the accounts of: Mr. Courtney, 75,000 Shares; Mr. Schoen, 50,000 Shares; Mr. Franta, 40,000 Shares; Mr. Brueck, 30,000 Shares; Mr. Zimmerman, 30,000 Shares; Mr. Mortenson, 30,000 Shares; Mr. Nordquist, 44,500 Shares; and all directors and executive officers as a group, 299,500 Shares. (2) Includes 46,974 shares held jointly with Mr. Courtney's spouse. (3) Includes 37,108 shares held in the name of Kenneth Schoen Trust and 10,000 shares held in the name of VKS Ltd. Partnership, of which Mr. Schoen is considered to be an indirect owner. Except as provided herein, there are no beneficial owners of more than five percent of the outstanding Shares based on publicly available information as of the date hereof. Except as indicated above, the foregoing information and other information relating to the Company contained in this Proxy Statement has been taken from the Company's 1997 Annual Report on Form 10-K and other documents on file with the Commission. Although Fant Industries does not have any information that would indicate that any information contained in this Proxy Statement that has been taken from such documents is inaccurate or incomplete, Fant Industries does not take any responsibility for the accuracy or completeness of such information. III-1 IMPORTANT Tell your Board that you want to make your own choice. Tell them what you think! Your vote is important. No matter how many Shares you own, please give Fant Industries your proxy FOR the removal of the current members of the Board, FOR the election of the Fant Nominees and FOR the approval of the Equal Voting Rights Proposal by taking three steps: 1. SIGNING the enclosed GREEN proxy card, 2. DATING the enclosed GREEN proxy card, and 3. MAILING the enclosed GREEN proxy card TODAY in the envelope provided (no postage is required if mailed in the United States). Registered holders may FAX BOTH SIDES of the enclosed GREEN proxy card TODAY to Beacon Hill Partners, Inc. at the number provided below. If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please return the GREEN proxy card in the envelope provided or contact the person responsible for your account and instruct that person to execute the GREEN proxy card representing your Shares. Fant Industries urges you to confirm in writing your instructions to Fant Industries in care of Beacon Hill Partners, Inc. at the address provided below so that Fant Industries will be aware of all instructions given and can attempt to ensure that such instructions are followed. If you have any questions or require any additional information concerning this Proxy Statement, please contact, Beacon Hill Partners, Inc. at the address set forth below. BEACON HILL PARTNERS, INC. 90 BROAD STREET 20TH FLOOR NEW YORK, NEW YORK 10004 (212) 843-8500 (CALL COLLECT) OR CALL TOLL-FREE (800) 253-3814 FAX: (212) 843-4384 HEI, INC. PROXY FOR SPECIAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF FANT INDUSTRIES INC. AND ANTHONY J. FANT The undersigned appoints Anthony J. Fant and Steve E. Tondera, Jr., and each of them, attorneys and agents with full power of substitution to vote all shares of common stock of HEI, Inc. which the undersigned would be entitled to vote if personally present at the Special Meeting of Shareholders of HEI, Inc. to be called for the purposes stated hereinbelow, and including at any adjournments or postponements, continuations or rescheduling thereof, as follows: THE FANT GROUP RECOMMENDS A VOTE FOR THE REMOVAL OF CURRENT MEMBERS OF THE BOARD OTHER THAN EUGENE W. COURTNEY, FOR THE ELECTION OF ALL FANT NOMINEES NAMED BELOW, AND FOR THE APPROVAL OF THE EQUAL VOTING RIGHTS PROPOSAL A. DIRECTOR REPLACEMENT PROPOSALS 1. REMOVAL OF DIRECTORS: To remove from the Board of Directors of the Company (the "Board") all of the following current Directors: Robert L. Brueck, William R. Franta and Frederick M. Zimmerman.
FOR REMOVAL OF ABOVE-NAMED CURRENT DIRECTORS [ ] AGAINST REMOVAL OF ABOVE-NAMED CURRENT DIRECTORS [ ] 2. ELECTION OF DIRECTORS: To elect to the Board such number of the following Fant Nominees that when added to Eugene W. Courtney equals the size of the Board: Anthony J. Fant, Edwin W. Finch, III, David W. Ortlieb and Stephen E. Tondera, Jr. The first three such individuals will be voted for election to succeed the current Directors (or any Director named to fill any vacancy created by the death, retirement, resignation or removal of any such four Directors) of the Company, other than Mr. Courtney. The fourth of such individuals will be voted to be elected to fill the currently vacant directorship (or to succeed any Director named to fill such vacancy). One or more additional individuals will be voted for election (a) in the event that the Company purports to increase the number of Directorships pursuant to Section 3.09 of Bylaws, to each additional Directorship created, and/or (b) in the event any of the first four individuals named above or Mr. Courtney is unable for any reason to serve as a Director. FOR ALL FANT NOMINEES [ ] WITHHOLD AUTHORITY FOR ALL FANT NOMINEES [ ] INSTRUCTION: To withhold authority to vote for one or more individual Fant Nominees, mark FOR ALL Fant Nominees above and write the (names) of the Fant Nominee with respect to which you wish to withhold authority here: -----------------------------------------------------------------------------------------------------------------------
B. EQUAL VOTING RIGHTS PROPOSAL To adopt the following resolution: RESOLVED, that the Bylaws of the Company are hereby amended by adding a new section reading as follows: "Control Share Act. The provisions of Section 302A.671 of the Minnesota Business Corporation Act shall not apply to control share acquisitions of shares of this corporation."
FOR ADOPTION OF EQUAL VOTING RIGHTS PROPOSAL [ ] AGAINST ADOPTION OF EQUAL VOTING RIGHTS PROPOSAL [ ] C. In their discretion with respect to any other matters as may properly come before the Special Meeting. The undersigned hereby revokes any other proxy or proxies heretofore given to vote or act with respect to the Shares of the Company held by the undersigned, and hereby ratifies and confirms all action the herein named attorneys and proxies, their substitutes, or any of them lawfully take by virtue hereof. If properly executed, this proxy will be voted as directed above. If no direction is indicated with respect to the above proposals, this proxy will be voted FOR the removal of current Directors, FOR the election of all Fant Nominees and FOR the Equal Voting Rights Proposal and in the manner set forth in Item C above. This proxy will be valid until the sooner of one year from the date indicated below and the completion of the Special Meeting. IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE. REGISTERED HOLDERS MAY FAX BOTH SIDES OF ---------- THIS PROXY TO BEACON HILLS PARTNERS, INC. AT: (212) 843-4384! DATED: ----------------------------------------------------------, 1998 please sign exactly as name appears on this proxy. When shares are held jointly, joint owners should each sign. Executors, administrators, trustees, etc. should indicate the capacity in which signing. ---------------------------------------------------------------------- (Signature) ---------------------------------------------------------------------- (Signature, if held jointly) IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL BEACON HILL PARTNERS, INC. ---------------------------------------------------------------------- (Title) TOLL-FREE (800) 253-3814 OR CALL COLLECT (212) 843-8500
EX-99.(A)(30) 4 PRESS RELEASE DATED JUNE 15, 1998 Exhibit (a) (30) 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 EXTENDS OFFER FOR SHARES OF HEI, INC. - ----------------------------------------------------- NEW YORK, NEW YORK June 15, 1998 -- The Fant Industries Inc. tender offer, proration period, and withdrawal rights have been extended and will expire on Monday, July 20, 1998 at 12:00 midnight New York City Time unless extended further. To date, approximately 1,461,000 shares of the Company's Common Stock have been tendered. R.J. Steichen & Co. is the Dealer Manager, and Beacon Hill Partners, Inc. is the Information Agent. 3 EX-99.(A)(31) 5 ADVERTISEMENT, PUBLISHED JUNE 15, 1998 Exhibit (a) (31) To the Shareholders of HEI, Inc. HEI's Board says that they've "earned" your support. Let's talk about "earnings." In the first six months of fiscal 1998, HEI's earnings dropped 94% from the same period last year. Over the last five years, HEI's earnings have declined at an average rate of -------- 19.5% per year, while earnings growth in the industry has significantly outperformed that of the S&P 500. And, HEI earnings are expected to decline this year, while continued earnings growth is expected for the industry. As a result, HEI's shareholders have "earned" a 50% decrease in the value of -------- their stock since January 1997. Meanwhile, HEI's Board has "earned" 160,000 stock options over the last four years, and management has "earned" increased cash bonuses and stock options each year. Don't you think you've earned the right to demand new leadership? ------ [AREA GRAPH SHOWING THE HEI MONTH-END STOCK PRICES FROM 1/1/97 THROUGH 5/31/98.] Your vote is important! Return the GREEN proxy card today. If you have questions or need assistance voting your shares, please contact Beacon Hill Partners at (800) 253-3814. FANT INDUSTRIES INC. 4 -----END PRIVACY-ENHANCED MESSAGE-----