-----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, O26QxFpcpRvSxbq1Arupm3rdnJWuhGw4ZeKkcYJgg0WTwPspnSWlXTi5lz9li66I Pf/VfZPK/pCckfYIoh8R6Q== 0001047469-98-026947.txt : 19980714 0001047469-98-026947.hdr.sgml : 19980714 ACCESSION NUMBER: 0001047469-98-026947 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980710 SROS: NASD FILER: 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: DEFA14A SEC ACT: SEC FILE NUMBER: 000-10078 FILM NUMBER: 98664344 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 DEFA14A 1 DEFA14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Proxy Statement /X/ Definitive Additional Materials / / Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12 HEI, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ----------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ----------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ----------------------------------------------------------------------- (5) Total fee paid: ----------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ----------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ----------------------------------------------------------------------- (3) Filing Party: ----------------------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------------------- [HEI LETTERHEAD] July 10, 1998 Dear Fellow Shareholder: Throughout this proxy contest, you have been subjected to Mr. Fant's numerous ads, letters and telephone calls in his quest for control of HEI. These communications have distorted the facts concerning HEI's performance, have presented lofty goals without describing any means to achieve them and have made references to possible future stock prices designed to lead you to conclude that Fant can achieve such prices despite his lack of experience in the industry or in running any public company. All of this rhetoric detracts from the one simple question that you will be deciding by voting your proxy for the special meeting on August 4. Who will produce greater long-term shareholder value-- current management or Fant? We are therefore devoting this letter to a side-by-side comparison of current management and Fant. We hope it will be helpful to you in making your very important voting decision. For your convenience, we have enclosed a WHITE proxy card and postage paid return envelope. We strongly urge you to sign, date and return the WHITE proxy card with a vote AGAINST Fant's Proposals 1 and 3 and FOR the re-election of your current directors, Proposal 2. Even if you have already voted for Fant, you have every right to change your mind. Simply sign, date and return the enclosed WHITE proxy card today. EXPERIENCE YOUR MANAGEMENT FANT Current management is led by Gene Courtney. Fant appears to have no experience with high- He has been a director of HEI since 1989, its technology businesses or in running any CEO since 1990 and served as a vice president publicly held corporation; and apparently of National Computer Systems for eight years none of his nominees for election is prior to joining HEI. Prior to 1980, he was experienced in the design or manufacture of president of Digital Scientific Corporation, ultra-miniature micro-electronic devices or a California-based pioneering minicomputer any related businesses. company, and held senior management positions at Topaz, Inc., DPI and Control Data Corporation. The three outside directors of HEI also have extensive experience in the high-technology sector. Bill Franta has a Ph.D. in computer science and currently serves as technology and business development manager for Centron-DPL. During the period from 1987 to 1996, he served in various key positions with Network Systems Corporation, including senior vice president, and previously served in senior management positions at ADC Telecommuni- cations, Inc. Bob Brueck is an experienced venture capital investor and business consultant, primarily with early stage technology companies. Fred Zimmerman has a Ph.D. in Strategic Management and Organizational Studies and is a professor of manufacturing and manufacturing systems engineering at the University of St. Thomas. He previously spent 25 years as a key employee with IBM, Control Data Corporation, National Computer Systems and other manufacturing companies and has served on numerous corporate boards.
2 PERFORMANCE YOUR MANAGEMENT FANT Contrary to Fant's distortions, your Fant has no performance record in the high- management has been very successful in technology area. We have no idea what his growing HEI. They increased net equity from revenues or earnings were in the radio and $1.1 million in fiscal 1990 to $17.5 million television business. Fant has avoided at May 30, 1998. They increased annual concrete disclosures concerning his past revenues from $8.5 million in 1990 to $31 performance, except to say that he sold the million in 1997. Annual pretax profit, which stations at a substantial profit, without was negative in 1990 and $100,000 in 1991, acknowledging the general increase in the grew to $2.0, $4.0, $2.1, $3.3, $2.8 and $4.0 value of radio and television stations in the million, respectively, from 1992 through United States in recent years. 1997. Astoundingly, Fant, who is obviously aware of these figures, has stated to you that they represent a 22.6% average annual decline during the past five years. TACTICS YOUR MANAGEMENT FANT Your Board has consistently taken the Fant has gone to extreme efforts to try to position that control of the Company is for pressure your Board into giving him control you, the shareholders, to decide and that of your Company without a shareholder vote, your Board should not give it away without including filing frivolous litigation in the approval of the shareholders. We want you Alabama, even though he has always had the to make an informed decision. Compare our right to demand a shareholders meeting to let communications to you with Mr. Fant's the shareholders decide. Finally, when it communications and decide who is telling it became clear that your Board would only act to you straight. in the best interests of the shareholders and would not succumb to his pressures, he continued to pressure your Board to hold a shareholders' meeting on a basis that would not even allow your Board to solicit proxies against his proposals. All the while, Fant implied that your Board was entrenched because it would not take action that it did not believe was in the best interests of all shareholders in response to his coercive tactics. Look at Mr. Fant's communications. Is someone who plays these kinds of games someone you want to run your Company?
3 EXPENSES YOUR MANAGEMENT FANT Your management has carefully controlled We cannot predict HEI's future operating expenses. Despite the substantial increases expenses if Fant takes control. We know that in revenues in recent years, operating he expects that he and his associate, Mr. expenses have remained relatively constant, Tondera, would be senior executive officers. ranging from $2.7 million in 1993 to $3.2 We don't know who the other officers would be million in 1996 and $3.1 million in 1997. or even how many officers there would be. He Contrary to Fant's innuendoes, the has never disclosed what he would pay himself compensation paid to HEI's officers and or the other officers and directors. Instead, directors is extremely reasonable. Only three he has used gimmickry by suggesting that the officers received total cash compensation new directors would not be able to exercise (salaries and bonuses) in fiscal 1997 (A YEAR their options until HEI's stock price equals IN WHICH HEI HAD RECORD REVENUES AND NET $25, without disclosing what other PROFITS) in excess of $100,000--Gene Courtney compensation the directors would receive or ($208,000), Jerald Mortenson, HEI's Chief how many options they would receive. We Financial Officer ($136,000), and Dale believe that the sole purpose of this gimmick Nordquist, HEI's Vice President of Sales is to lead you to conclude, without ($127,000). Gene Courtney receives no demonstrating how, that Fant would increase separate compensation for serving as a your stock price to $25, even though he is director. In 1997 the total amount of cash only offering $8 in his partial tender offer. fees paid to all four outside directors Fant has already increased HEI's expenses (including a director who retired in 1997) substantially and will increase them even was $29,400, plus expenses. The stock option further if he is elected. In the third fiscal grants to the outside directors, which do not quarter of 1998, HEI spent $274,000 to require any cash payments by HEI, are for respond to Fant's tender offer and proxy 10,000 shares per director per year at the solicitation, including related litigation. fair market value of the shares at the time Such expenses in the fourth quarter will also of grant. These options, of course, have no be substantial. MOREOVER, IF FANT IS ELECTED, value unless the stock price of HEI increases HE HAS STATED THAT HE WILL CAUSE HEI, WITHOUT following the grant. As Fant is undoubtedly SHAREHOLDER APPROVAL, TO PAY HIS EXPENSES aware, outside directors benefit from such INCURRED IN THE PROXY CONTEST, WHICH HE stock options only when shareholders benefit EXPECTS WILL EXCEED $500,000. HEI'S CURRENT from higher stock prices. BOARD WILL NOT PERMIT HEI TO PAY THOSE EXPENSES OF MR. FANT IF IT REMAINS IN CONTROL OF HEI.
4 INDEPENDENCE YOUR MANAGEMENT FANT None of your current directors has any family Fant's nominees are hand-picked by Fant. Fant or business relationship with any other and Mr. Tondera have been business associates director except through HEI. Each was elected for several years. Neither HEI nor our by the shareholders in January. Your Board is shareholders ever received enough information not the captive of any single large from Fant to determine whether there are shareholder and makes its decisions in previous relationships between him and the accordance with its fiduciary other directors, among the other directors, responsibilities to the corporation and all or between his financial adviser, R.J. of its shareholders, rather than in Steichen (which will receive a "success fee" accordance with the personal interests of any if Fant takes control), and the other single shareholder. directors. If Fant, as an 18% or 30% shareholder, does take control and his personal tax, estate planning, liquidity, diversification or other personal considerations dictate that an action be taken that is not in the interests of all HEI shareholders, what action will Fant take? MAXIMIZING VALUE OF ALL SHARES OF ALL SHAREHOLDERS YOUR MANAGEMENT FANT Your management is committed to maximizing Fant seems committed to acquiring control of value for all shares of all shareholders. It HEI at the lowest possible price, even though therefore continues to pursue strong that has meant treating shareholders operating growth. At the same time, it has differently and refusing to pay a control engaged Piper Jaffray Inc. to explore premium for all shares. He acquired 14.6% of strategic alternatives that could maximize the stock at varying prices, ranging as low the value of all shares, but will not pursue as $4.25 per share, before even disclosing any alternative involving a change of control that he was a shareholder and then acquired unless it provides a control premium for all an additional 3.5% of the stock at varying shares of all shareholders. prices before making his coercive partial tender offer. His average purchase price for his existing 18% interest was only $6.05. Even if he acquires another 11.5% in his partial tender offer at $8.00 per share, he will own a total of less than 30% of the HEI stock, acquired at an average purchase price of only $6.81 per share and, if successful in his proxy contest, would have acquired control of HEI without any obligation to purchase the remaining 70% of the shares.
5 RIGHTS OF SHAREHOLDERS YOUR MANAGEMENT FANT Your Board strongly supports the Minnesota Fant wants you to amend the Bylaws to give up Control Share Acquisition Statute. It allows your voting right to approve or disapprove of shareholders like you to determine whether to his takeover tactics. He could instead have grant voting rights to shares acquired sought your approval of his acquisition. In through the use of takeover tactics such as that case he could have still acquired full those used by Fant, tactics that would voting rights for all of his shares if you as facilitate the acquisition of control of HEI HEI's shareholders (excluding Fant and HEI's by Fant or another acquiror without offering officers) approved granting such voting the same price to all shareholders for all rights to Fant by a majority vote. He shares. Why would you vote to amend the apparently wanted to avoid seeking your Bylaws to eliminate your voting right to approval for his acquisition or any future approve or disapprove of such tactics? The acquisition by him or any other acquiror, Minnesota legislature gave you this regardless of the price paid, the number of opportunity because it believed you should shares purchased or the tactics used. We want have the right to approve or disapprove of a management that gives more rights, not less such takeovers. Please do not surrender that rights, to the shareholders. right. ENTRENCHMENT YOUR MANAGEMENT FANT Your Board is not interested in remaining in Fant wants to control your Company. He wants control if there is a better alternative for himself and his associate to be senior HEI's shareholders. The pay of the outside executive officers despite their directors is modest. The Board has already inexperience. He wants to run a company that hired Don Reynolds, who the Board believes is has more than $13 million in cash that he did likely to be the successor to Gene Courtney not earn. He has stated that he does not during the next few years. Moreover, the intend to effect, directly or indirectly, a Board has retained Piper Jaffray Inc. to business combination with HEI. Fant would explore alternatives, certain of which could limit HEI's alternatives to serve his own result in the selection of a new Board and a interests. Once you give him control, there new Chief Executive Officer. On the other will be no effective way to remove him or hand, your Board is not willing to abdicate sell the Company even if you and the other its responsibility to you simply because Fant shareholders disagree with his management. has pressured the Board to give HEI to him. Who is entrenched--your current Board or Your Board simply has no evidence or Fant? confidence that Fant can run HEI effectively.
6 RETENTION OF EMPLOYEES YOUR MANAGEMENT FANT Your current Board believes that it has Fant acknowledges that his nominees do not developed high morale among its employees, plan to, nor could they, micro-manage the despite the disruptions caused by Fant's design and manufacture of "microelectronic tactics. We believe that we will be able to devices or any other high technology retain these employees, in large part because products." He admits that they do not have of the strength, expertise and rapport of the the experience to run HEI. He acknowledges senior management with HEI's employees. They that the "Company has plenty of talented, trust and respect your current management. highly skilled people for this purpose as Moreover, because of the strength and well as for other day-to-day operations" and expertise of senior management, we believe we suggests that the existing employees can run can run HEI effectively in the short run even HEI on a day-to-day basis with Fant's long if one or more key employees were to leave. distance "strategic leadership." However, he does not disclose that HEI's employees are highly employable, particularly given present economic and industry conditions. He does not disclose his assessment of how many employees will remain if he acquires control or how his inexperienced board can run HEI by long distance if key employees prefer not to remain to work under Fant. Nor has he disclosed to you that both he and his associate expect to have senior management positions at HEI and the consequences of their assumption of such management positions. Who do you believe is more likely to retain current employees, your current Board or Fant? LITIGATION YOUR MANAGEMENT FANT HEI's management has not been interested in Fant seems to be litigation-prone. An pursuing litigation. It is expensive and examination of court documents shows that takes a substantial amount of time that can EITHER FANT OR ONE OR MORE OF HIS CONTROLLED be better spent operating the company. HEI ENTITIES HAS BEEN INVOLVED IN AT LEAST 20 has generally been able to settle its LAWSUITS IN ALABAMA ALONE, ranging from infrequent disputes with customers, disputes with former employees to suppliers, employees and others without small-claims court litigation over a litigation. IN FACT, SINCE 1991, HEI HAS NOT refrigerator. We obviously are not in a BEEN A PARTY TO ANY LAWSUITS, EXCLUDING position to assess the merits of each of LITIGATION RESULTING FROM FANT'S TACTICS. these many lawsuits. It is clear, however, that Fant has been in the middle of numerous controversies, which he either cannot or does not choose to resolve without litigation. HEI has more than $13 million in cash. How much of it will disappear in litigation by Fant? How much of his time will litigation use up?
7 That is the side-by-side comparison as we see it. Whatever you decide, please make your decision carefully and on an informed basis. We are confident that if you do so, you will vote AGAINST removal of your current Board (Proposal 1) and AGAINST the bylaw amendment to give up your voting rights under the Minnesota Control Share Acquisition Statute (Proposal 3). Please sign, date and return the enclosed white proxy card in the postage paid envelope provided with a vote AGAINST Fant's Proposals 1 and 3. Please show your support for your Board's efforts to maximize the value of all shares by voting FOR the election of the current directors (Proposal 2). As stated above, even if you have already voted for Fant, you have every right to change your mind. Remember, only your latest dated, signed proxy card counts. Moreover, no tendered shares have been purchased by Fant and you have every right to vote any tendered shares for your directors and against the Fant proposals. Thank you for your support. HEI, Inc. Board of Directors Robert L. Brueck Eugene W. Courtney William R. Franta Frederick M. Zimmerman IF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER, ONLY THAT ORGANIZATION CAN VOTE YOUR SHARES. PLEASE DIRECT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT TO EXECUTE ON YOUR BEHALF A WHITE PROXY CARD WITH A VOTE AGAINST PROPOSALS 1 AND 3 AND FOR PROPOSAL 2. IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE, PLEASE CONTACT OUR PROXY SOLICITOR: Innisfree M&A Incorporated Toll Free -- 1-888-750-5834 501 Madison Avenue 20th Floor New York, NY 10022 8 -----END PRIVACY-ENHANCED MESSAGE-----