FORM OF OFFER TO PURCHASE, DATED OCTOBER 30, 2000
EXHIBIT (A)(1)-1
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HIA, INC.
4275 Forest Street
Denver, Colorado 80216
(303) 394-6040
Offer to Purchase for Cash
Up to 3,000,000 Shares of its
Common Stock, Par Value $0.01 Per Share
At a Purchase Price of $.25 Per Share
October 30, 2000
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THE OFFER TO PURCHASE, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., MOUNTAIN STANDARD TIME, ON DECEMBER 15, 2000,
UNLESS THE OFFER TO PURCHASE IS EXTENDED
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To the Holders of Shares of Common Stock of
HIA, Inc.
SUMMARY
HIA, Inc. (the "Company") is inviting its shareholders to sell up
to 3,000,000 shares of its common stock back to the Company for cash.
Set forth below is a summary of the terms of this offer in question
And answer format. The summary does not describe all of the details of
theoffer. We have included in the summary references to the sections
of this document where you will find a more complete discussion of each
of the topics mentioned in the summary.
Who is offering to buy my securities?
HIA, Inc. See "Section 10. Information Concerning HIA, Inc." for
more detailed information.
What is the class and amount of securities sought in the offer?
We are offering to purchase 3,000,000 shares of our common stock,
par value $0.01, or any lesser number of shares that shareholders
properly tender in the offer. See "Section 1. Number of Shares;
Proration" for a more detailed discussion of the offer.
How much is the company offering to pay for my securities and what is
the form of payment?
We are offering to purchase the shares for a purchase price of
$.25 per share.
Shareholders whose shares are purchased in the offer will be paid
the purchase price, in cash, as soon as practicable after the
expiration of the offer period. No interest will be payable on the
purchase price. See "Section 1. Number of Shares; Proration" for a more
detaileddiscussion of the purchase price.
Does the company have the financial resources to make payment?
Yes. We have received a commitment from Wells Fargo Bank West,
N.A. to loan us the money necessary to fund the purchase of the shares.
See "Section 9. Source and Amount of Funds" for a more detailed
discussion of the source and amount of funds for the transaction.
How long do I have to tender in the offer?
You have until 5:00 P.M. Mountain Standard Time on December 15,
2000. See "Section 1. Number of Shares; Proration" and "Section 2.
Procedure for Tendering Shares" for a more detailed discussion of the
expiration of the offer. Can the offer be extended, amended or
terminated, and under what circumstances?
We can extend or amend the offer in our discretion. If we extend
the offer, we may delay the acceptance of any shares that have been
tendered. See "Section 15. Extension of Tender Period; Termination;
Amendments" for a more detailed discussion of extension and amendment
Of the offer.
We can terminate the offer under certain circumstances. See
"Section 6. Conditions of the Offer" for a description of those
circumstances.
How will I be notified if the offer is extended?
We will announce any extension either through a press release or
other public announcement or a subsequent mailing to the shareholders.
We may also communicate the extension of the offer through other
means. See "Section 15. Extension of Tender Period; Termination;
Amendments" for a more detailed discussion of the notification
procedure.
Are there any conditions to the offer?
The offer is not subject to a condition that any minimum number of
shares are tendered.
However, our obligation to purchase any shares tendered is subject
to the following conditions:
* The purchase of shares in the offer must not result in our
shares being held of record by fewer than 300 persons.
* No legal action shall be pending or have been threatened
that might adversely affect the offer.
* No material change in the business, condition (financial or
otherwise), income, operations or prospects of the Company
shall have occurred during the offer.
* The closing of the loan from Wells Fargo Bank West, N.A. to
fund the transaction.
* The offer is subject to other conditions.
See "Section 6. Conditions of the Offer" for a more detailed
discussion of conditions of the offer.
How do I tender my shares?
If the share certificates are registered in your name, you should
send the certificates together with a properly completed letter of
transmittal to Computershare Trust Company, Inc., which is acting as
the depositary for the offer, at the address on the letter of
transmittal that accompanies this offer.
If your shares are registered in the name of a broker or other
nominee, you should instruct your broker or other nominee to tender the
shares on your behalf. Your broker or other nominee will execute a
letter of transmittal on your behalf.
Under some conditions, you may need to obtain a signature
guarantee or provide other documentation. See "Section 2. Procedure
for Tendering Shares" for a more detailed discussion of the procedure
for tendering shares, including instructions regarding book-entry
transfer.
In what order will tendered shares be purchased? Will tendered shares
be prorated?
First, we will purchase shares from all holders of "odd lots" of
less than 100 shares who properly tender all of their shares.
Second, after purchasing all odd lots, we will purchase shares on
a pro rata basis from all other shareholders who properly and
unconditionally tender shares and from shareholders who conditionally
tendered shares for which the condition can be satisfied. A
"conditional tender" means that the shareholder has tendered shares
subject to the condition that all (or some specified minimum number) of
the shares tendered be purchased.
Third, if the number of shares acquired under the first two steps
is less than 3,000,000, we will purchase additional shares to total
3,000,000, selected by lot from shareholders selected by us in our sole
discretion who conditionally tendered their shares and for which the
condition could not be met in the second step described above. The
number of shares purchased from each such shareholder will equal the
minimum number of shares established by such shareholder in the
conditional tender.
Consequently, all of the shares that you tender in the offer may
not be purchased. If you tender subject to a condition that all or
some other minimum number of shares be purchased, none of your shares
will be purchased if that condition cannot be met.
See "Section 1. Number of Shares; Proration" for a more detailed
discussion of proration.
Until what time can I withdraw previously tendered shares?
You can withdraw shares previously tendered until 5:00 P.M.,
Mountain Standard Time on December 15, 2000. If the offer is extended
beyond that time, you may withdraw your tendered shares at any time
until the expiration of the offer.
In addition, if we have not yet accepted your shares for payment,
you may withdraw shares you previously tendered after the expiration of
40 business days from the commencement of the offer. See "Section 3.
Withdrawal Rights" for a more detailed discussion of withdrawal rights.
How do I withdraw previously tendered shares?
You must send a notice containing your name, the number of shares
tendered, the number of shares you wish to withdraw and the name of the
registered holder to the depositary and the depositary must receive the
notice before the time to withdraw shares has expired.
If you delivered or otherwise identified the certificates to the
depositary, you will need to provide the serial numbers on those
certificates and your signature on your withdrawal notice must be
guaranteed by an eligible institution, which means a bank, broker,
dealer or other firm or entity that is a member in good standing of an
approved signature guarantee medallion program.
If your shares were to be tendered by book-entry transfer, the
notice must identify the relevant account number. See "Section 3.
Withdrawal Rights" for a more detailed discussion of withdrawal
procedures.
Is this the first step in a going-private transaction?
No.
If I decide not to tender, how will the offer affect my shares?
You will increase your percentage ownership interest in the
Company.
You will increase your percentage interest in our future
earnings. See "Section 8. Purpose of the Offer; Certain Effects of the
Offer" for a more detailed discussion of the effects of the offer.
Do company insiders or affiliates have any material interest in the
transaction?
The Company has been advised that no affiliates, directors or
executive officers intend to tender their shares in connection with the
offer.
The percentage of shares owned by executive officers and
Directors of the Company will increase after the offer has been
completed. See "Section 8. Purpose of the Offer; Certain Effects of
the Offer" for a more detailed discussion of the effects of the offer.
Does the company recommend that I tender in the offer?
The Board of Directors has approved the offer, but is not making
any recommendation whether shareholders should tender.
How will I be paid for my shares?
Checks for all accepted tenders will be issued by the depositary.
See "Section 4. Acceptance For Payment of shares and Payment of
Purchase Price" for additional information on payment of shares.
Will I have to pay taxes if I sell my shares?
Generally, shareholders will recognize gain or loss on the
tendered shares equal to the difference between the price paid in the
offer and the shareholder's basis. See "Section 14. Federal Income Tax
Consequences" for additional federal income tax consequences of this
offer to purchase.
Who can I talk to if I have questions about the tender offer?
Questions or requests for assistance or for additional copies of
this offer to purchase, the letter of transmittal or other tender offer
materials may be directed to the Company at the address and telephone
number set forth above. Copies of such materials will be furnished
promptly at the Company's expense. Questions regarding the procedures
for tendering your shares can be directed to the depositary for this
offer at the address and telephone number set forth in the letter of
transmittal. Shareholders may also contact their local broker, dealer,
commercial bank or trust company for assistance concerning the offer.
The date of this offer to purchase is October 30, 2000.
TABLE OF CONTENTS
Section Page
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SUMMARY 2
FORWARD-LOOKING STATEMENTS 8
SECTION 1. NUMBER OF SHARES; PRORATION 9
SECTION 2. PROCEDURE FOR TENDERING SHARES 10
SECTION 3. WITHDRAWAL RIGHTS 12
SECTION 4. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT
OF PURCHASE PRICE 13
SECTION 5. CONDITIONAL TENDER OF SHARES 14
SECTION 6. CONDITIONS OF THE OFFER 15
SECTION 7. PRICE RANGE OF SHARES 17
SECTION 8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER 17
SECTION 9. SOURCE AND AMOUNT OF FUNDS 19
SECTION 10. INFORMATION CONCERNING HIA, INC. 20
SECTION 11. INTEREST OF DIRECTORS AND OFFICERS;
TRANSACTIONS AND ARRANGEMENTS CONCERNING SHARES 21
SECTION 12. SELECTED FINANCIAL INFORMATION 23
SECTION 13. LEGAL MATTERS; REGULATORY APPROVALS 24
SECTION 14. FEDERAL INCOME TAX CONSEQUENCES 24
SECTION 15. EXTENSION OF TENDER PERIOD; TERMINATION;
AMENDMENTS 27
SECTION 16. SOLICITATION FEES AND EXPENSES 28
SECTION 17. WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION 28
SECTION 18. MISCELLANEOUS 29
FORWARD-LOOKING STATEMENTS
This offer to purchase contains statements that are not historical
facts and constitute projections, forecasts or forward-looking
statements. When we use words like "believes," "expects,"
"anticipates," "intends," "plans," "estimates," "may," "should" or
similar expressions, or when we discuss our strategy or plans, we are
making projections, forecasts or forward-looking statements. These
statements are not guarantees of performance. They involve risks,
uncertainties and assumptions that could cause our future results and
shareholder value to differ materially from those expressed in these
statements. Many of the factors that will determine these results and
value are beyond our ability to control or predict. These statements
are necessarily based upon various assumptions involving judgments with
respect to the future. These risks and uncertainties include, among
others:
- supply and demand for products and services sold by the Company and
its subsidiaries;
- national, regional and local economic, competitive and regulatory
conditions and developments;
- competitive pricing pressures;
- fluctuation in commercial finance rates and availability of
commercial
financing;
- the timing and success of business development efforts; and
- other uncertainties, all of which are difficult to predict and many
of
which are beyond our control.
SECTION 1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions described herein and
in the letter of transmittal, we will purchase up to 3,000,000 shares
of our common stock that are validly tendered on or prior to the
expiration date of the offer, and not properly withdrawn in accordance
with Section 3, at a price of $.25 per share. The offer will expire on
the later of 5:00 p.m., Mountain Standard Time, on December 15, 2000,
or the latest time and date to which the offer is extended pursuant to
Section 15 (the "expiration date"). The proration period also expires
on the expiration date.
We reserve the right, in our discretion, to purchase more than
3,000,000 shares pursuant to the offer. See Section 15. In accordance
with applicable regulations of the Securities and Exchange Commission
(the "SEC"), we may purchase an additional number of shares not to
exceed 2% of the outstanding shares without amending or extending the
offer. On October 1, 2000 there were 10,360,231 shares issued and
outstanding and 600,000 shares reserved for issuance upon exercise of
outstanding stock options. If (i) we increase or decrease the price to
be paid for the shares, increase the number of shares being sought by
more than 2% of the outstanding shares, or decrease the number of
shares being sought; and (ii) the offer is scheduled to expire earlier
than the tenth business day from, and including, the date that notice
of such increase or decrease is first published, sent or given in the
manner specified in Section 15, the offer will be extended until that
tenth business day. THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM
NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO
CERTAIN OTHER CONDITIONS. SEE SECTION 6.
All shares not purchased pursuant to this offer, including shares
not purchased because of proration or because they were conditionally
tendered and not accepted for purchase, will be returned to the
tendering shareholders at our expense as promptly as practicable
following the expiration date.
Upon the terms and subject to the conditions of this offer, if
3,000,000 (or such greater number of shares as we may elect to
purchase) or fewer shares have been validly tendered and not withdrawn
on or prior to the expiration date, we will purchase all the shares.
Upon the terms and subject to the conditions of this offer, if more
than 3,000,000 shares (or such greater number of shares as we may elect
to purchase) have been validly tendered and not withdrawn on or prior
to the expiration date, we will purchase shares in the following order
ofpriority:
(i) all shares validly tendered and not withdrawn on or prior to
the expiration date by or on behalf of any shareholder who owned
beneficially, as of October 30, 2000 and continues to own
beneficially as of the expiration date, an aggregate of fewer
than 100 shares and who tenders all of such shares (partial
tenders will not qualify for this preference) and completes the
box captioned "Odd Lot" in the letter of transmittal;
(ii) on a pro rata basis, all of the shares properly and
unconditionally tendered, and all of the shares properly and
conditionally tendered for which the condition can be satisfied
in such proration; and
(iii) if the number of shares acquired under (i) and (ii) is
less than 3,000,000 (or such greater number of shares as we may
elect to purchase), additional shares to total 3,000,000 (or
such greater number of shares as we may elect to purchase), by
lot from shareholders selected by us in our sole discretion who
conditionally tendered their shares for which the condition
could not be met under (ii) and in the respective amounts that
each such shareholder indicated as the minimum number of shares
to be purchased by the Company.
If proration of tendered shares is required, we do not expect
thatwe will be able to commence payment for any shares purchased
pursuant to this offer until approximately seven business days after
the expiration date. We will advise you of the results of the
proration at the time that payment for your shares is sent or your
shares that were not purchased are returned to you.
We expressly reserve the right, in our sole discretion, at any
time or from time to time, to extend the period of time during which
the offer is open by giving oral or written notice of such extension to
the depositary and making a public announcement thereof or mailing a
written notice of extension to you. See Section 15. We have no
present intent to exercise our right to extend the offer.
For purposes of the offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time.
Copies of this offer to purchase and the related letter of
transmittal are being mailed to record holders of shares and will be
furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on our shareholder list or, if
applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial
owners of shares.
SECTION 2. PROCEDURE FOR TENDERING SHARES
To tender shares pursuant to the offer, a properly completed and
duly executed letter of transmittal or facsimile thereof, together with
any required signature guarantees and any other documents required by
the letter of transmittal, must be received by the depositary at its
address set forth in the letter of transmittal and either (i)
certificates for the shares to be tendered must be received by the
depositary at such address or (ii) the shares must be delivered
pursuant to the procedures for book-entry transfer described below, and
a confirmation of the delivery received by the depositary, in each case
on or prior to the expiration date.
The depositary will establish an account with respect to the
Shares at the Depositary Trust Company, which is a book-entry transfer
facility, for purposes of the offer within two business days after the
date of this offer, and any financial institution that is a participant
in the system of the book-entry transfer facility may make delivery of
shares by causing the book-entry transfer facility to transfer such
shares into the depositary's account in accordance with the procedures
of the book-entry transfer facility. Although delivery of shares may
be effected through book-entry transfer, a properly completed and duly
executed letter of transmittal or a manually signed copy thereof, or an
agent's message, as defined below, together with any required signature
guarantees and any other required documents, must, in any case, be
transmitted to and received by the depositary at its address set forth
in the letter of transmittal on or prior to the expiration date.
Delivery of required documents to the book-entry transfer facility in
accordance with its procedures does not constitute delivery to the
depositary and will not constitute a valid tender.
The term "agent's message" means a message transmitted by the
book-entry transfer facility to, and received by, the depositary and
forming a part of a book-entry confirmation, which states that the
book-entry transfer facility has received an express acknowledgment
from the participant in the book-entry transfer facility tendering the
shares, that the participant has received and agrees to be bound by the
terms of the letter of transmittal and that we may enforce the
agreement against the participant.
Except as set forth below, all signatures on a letter of
transmittal must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc., or by a commercial bank, a trust company, a
savings bank, a savings and loan association or a credit union which
has membership in an approved signature guarantee medallion program,
each of the foregoing being referred to as an "eligible institution."
Signatures on a letter of transmittal need not be guaranteed if (a) the
letter of transmittal is signed by the registered holder of the shares,
which term, for the purposes of this section, includes a participant in
the book-entry transfer facility whose name appears on a security
position listing as the holder of the shares, tendered therewith and
the holder has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on
the letter of transmittal or (b) the shares are tendered for the
account of an eligible institution. See instructions 1 and 5 of the
letter of transmittal.
If a shareholder desires to tender shares pursuant to the offer
and the shareholder's share certificates are not immediately available
or cannot be delivered to the depositary prior to the expiration date
(or the procedure for book-entry transfer cannot be completed on a
timely basis) or if time will not permit all required documents to
reach the depositary prior to the expiration date, the shares may
nevertheless be tendered, provided that all of the following conditions
are satisfied:
(a) the tender is made by or through an eligible
institution (as defined above);
(b) the depositary receives by hand, mail, overnight
courier, telegram or facsimile transmission, on or
prior to the expiration date, a properly completed and
duly executed Notice of Guaranteed Delivery in the
form the Company has provided with this offer to
purchase, including (where required) a signature
guarantee by an eligible institution in the form set
forth in such Notice of Guaranteed Delivery; and
(c) the certificates for all tendered shares, in proper
form for transfer (or confirmation of book-entry
transfer of the shares into the depositary's account
at the book-entry transfer facility), together with a
properly completed and duly executed letter of
transmittal (or a manually signed facsimile) and any
required signature guarantees or other documents
required by the letter of transmittal, are received by
the depositary within three business days after the
date of receipt by the depositary of the Notice of
Guaranteed Delivery.
The method of delivery of shares and all other required documents
is at the option and risk of the tendering shareholder. If delivery is
by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases sufficient time should be
allowed to assure timely delivery.
To prevent United States federal income tax backup withholding
equal to 31% of the gross payments made pursuant to the offer, each
tendering shareholder must provide the depositary with the
shareholder's correct taxpayer identification number and certain other
information by properly completing the substitute Form W-9 included in
the letter of transmittal. Foreign shareholders, as defined in Section
14, must submit a properly completed Form W-8, which may be obtained
from the depositary, in order to prevent backup withholding. In
general, backup withholding does not apply to corporations or to
foreign shareholders subject to 30%, or lower treaty rate, withholding
on gross payments received pursuant to the offer, as discussed in
Section 14. For a discussion of certain federal income tax
consequences to tendering shareholders, see Section 14. Each
shareholder is urged to consult with his, her or its own tax advisor
regarding his, her or its qualification for exemption from backup
withholding and the procedure for obtaining any applicable exemption.
It is a violation of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for a person to
tender shares for his or her own account unless the person so tendering
(i) has a net long position equal to or greater than the amount
tendered in either (x) common stock or (y) other securities immediately
convertible into or exercisable or exchangeable for common stock and
will acquire such common stock for tender by conversion, exercise or
exchange of such other securities and (ii) will cause such shares to be
delivered in accordance with the terms of the offer. Rule 14e-4
provides a similar restriction applicable to the tender on behalf of
another person. The tender of shares pursuant to any one of the
procedures described above will constitute the tendering shareholder's
representation and warranty that (i) the shareholder has a net long
position in the shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act, and (ii) the tender of such shares
complies with Rule 14e-4. Our acceptance for payment of shares
tendered pursuant to the offer will constitute a binding agreement
between the tendering shareholder and us upon the terms and subject to
theconditions of the offer.
All questions as to the form of documents, the number of shares
To be accepted and the validity, eligibility, including time of
receipt, and acceptance for payment of any tender of shares will be
determined by us, in our sole discretion, which determination shall be
final and binding on all parties. We reserve the absolute right to
reject any or all tenders of shares that we determine are not in proper
form or the acceptance for payment of or payment for shares that may,
in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any defect or irregularity in any tender of any
particular shares. None of the Company, the depositary or any other
person is or will be under any duty to give notice of any defect or
irregularity in tenders, nor shall any of them incur any liability for
failure to give any such notice.
Certificates for shares, together with a properly completed
Letter of transmittal, or, in the case of a book-entry transfer, an
agent's message, and any other documents required by the letter of
transmittal, must be delivered to the depositary and not to the
Company. Any such documents delivered to us will not be forwarded to
the depositary and therefore will not be deemed to be properly
tendered.
SECTION 3. WITHDRAWAL RIGHTS
Tenders of shares made pursuant to the offer may be withdrawn at
any time prior to the expiration date. Thereafter, tenders are
irrevocable, except that they may be withdrawn after the expiration of
40 business days from the commencement of the offer, unless previously
accepted for payment by us as provided in this offer to purchase. If
we extend the period of time during which the offer is open, are
delayed in purchasing shares or are unable to purchase shares pursuant
to the offer for any reason, then, without prejudice to our rights
under the offer, the depositary may, on behalf of us, retain all shares
tendered, and the shares may not be withdrawn except as otherwise
provided in this Section 3, subject to Rule 13e-4(f)(5) under the
Exchange Act, which provides that the issuer making the tender offer
shall either pay the consideration offered or return the tendered
securities promptly after the termination or withdrawal of the tender
offer.
Withdrawal of Shares Held in Physical Form. Tenders of shares
Made pursuant to the offer may not be withdrawn after the expiration
date, except that they may be withdrawn after the expiration of 40
business days from the commencement of the offer, unless accepted for
payment by us as provided in this offer. For a withdrawal to be
effective prior to that time, a shareholder of shares held in physical
form must provide a written, telegraphic or facsimile transmission
notice of withdrawal to the depositary at its address set forth in the
letter of transmittal before the expiration date, which notice must
contain: (A) the name of the person who tendered the shares; (B) a
description of the shares to be withdrawn; (C) the certificate numbers
shown on the particular certificates evidencing the shares; (D) the
signature of the shareholder executed in the same manner as the
original signature on the letter of transmittal, including any
signature guarantee, if such original signature was guaranteed; and (E)
if the shares are held by a new beneficial owner, evidence satisfactory
to the Company that the person withdrawing the tender has succeeded to
the beneficial ownership of the shares. A purported notice of
withdrawal which lacks any of the required information will not be an
effective withdrawal of a tender previously made.
Withdrawal of Shares Held with the Book-entry Transfer Facility.
Tenders of shares made pursuant to the offer may not be withdrawn
After the expiration date, except that they may be withdrawn after the
expiration of 40 business days from the commencement of the offer,
unless accepted for payment by us as provided in this offer. For a
withdrawal to be effective prior to that time, a shareholder of shares
held with the book-entry transfer facility must (i) call his or her
broker and instruct the broker to withdraw the tender of shares by
debiting the depositary's account at the book-entry transfer facility
for all shares to be withdrawn; and (ii) instruct the broker to provide
a written, telegraphic or facsimile transmission notice of withdrawal
to the depositary on or before the expiration date. The notice of
withdrawal shall contain (A) the name of the person who tendered the
shares; (B) a description of the shares to be withdrawn; and (C) if the
shares are held by a new beneficial owner, evidence satisfactory to us
that the person withdrawing the tender has succeeded to the beneficial
ownership of the shares. A purported notice of withdrawal which lacks
any of the required information will not be an effective withdrawal of
a tender previously made.
Any permitted withdrawals of tenders of shares may not be
rescinded, and any shares so withdrawn will thereafter be deemed not
validly tendered for purposes of the offer; provided, however, that
withdrawn shares may be re-tendered by following the procedures for
tendering prior to the expiration date.
All questions as to the form and validity, including time of
receipt, of any notice of withdrawal will be determined by us, in our
sole discretion, which determination shall be final and binding on all
parties. None of the Company, the depositary or any other person is or
will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for
failure to give any such notification.
SECTION 4. ACCEPTANCE FOR PAYMENT OF SHARES
AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the offer and as
promptly as practicable after the expiration date, we will, subject to
the proration and conditional tender provisions of the offer, accept
for payment and pay the purchase price for shares validly tendered and
not withdrawn. Thereafter, payment for all shares validly tendered on
or prior to the expiration date and accepted for payment pursuant to
the offer will be made by the depositary by check as promptly as
practicable. In all cases, payment for shares accepted for payment
pursuant to the offer will be made only after timely receipt by the
depositary of certificates for such shares, or of a timely confirmation
of a book-entry transfer of such shares into the depositary's account
at the book-entry transfer facility, a properly completed and duly
executed letter of transmittal or a manually signed copy thereof, with
any required signature guarantees, or in the case of a book-entry
delivery an agent's message, and any other required documents.
For purposes of the offer, we shall be deemed to have accepted for
payment, and thereby purchased, subject to proration and conditional
tenders, shares that are validly tendered and not withdrawn, if and
whenwe give oral or written notice to the depositary of our acceptance
for payment of the shares. In the event of proration, we will
determine the proration factor and pay for those tendered shares
accepted for payment as soon as practicable after the expiration date.
However, if proration is necessary, we do not expect to be able to
commence payment for the shares purchased as a result of such proration
until approximately seven business days after the expiration date. We
will pay for shares that we have purchased pursuant to the offer by
depositing the aggregate purchase price therefor with the depositary.
The depositary will act as agent for tendering shareholders for the
purpose of receiving payment from us and transmitting payment to
tendering shareholders. Under no circumstances will interest be paid
on amounts to be paid to tendering shareholders, regardless of any
delay in making such payment.
Certificates for all shares not purchased, including shares not
purchased because of proration and shares that were conditionally
tendered and not accepted, will be returned, or, in the case of shares
tendered by book-entry transfer, the shares will be credited to an
account maintained with the book-entry transfer facility by the
participant therein who so delivered the shares, as promptly as
practicable following the expiration date without expense to the
tendering shareholder.
Payment for shares may be delayed in the event of difficulty in
determining the number of shares properly tendered or if proration is
required. See Section 1. In addition, if certain events occur, we may
not be obligated to purchase shares pursuant to the offer. See Section
6.
We will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any shares to us or our order
pursuant to the offer. If, however, payment of the purchase price is
to be made to, or a portion of the shares delivered, whether in
certificated form or by book entry, but not tendered or not purchased
are to be registered in the name of, any person other than the
registered holder, or if tendered shares are registered in the name of
any person other than the person signing the letter of transmittal,
unless the person is signing in a representative or fiduciary capacity,
the amount of any stock transfer taxes, whether imposed on the
registered holder, such other person or otherwise, payable on account
of the transfer to the person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted. See instruction 6 to the letter of
transmittal.
Any tendering shareholder or other payee who fails to complete
fully and sign the substitute Form W-9 included in the letter of
transmittal, or, in the case of a foreign individual, a Form W-8, may
be subject to required federal income tax withholding of 31% of the
gross proceeds paid to such shareholder or other payee pursuant to the
offer. See Section 2.
SECTION 5. CONDITIONAL TENDER OF SHARES
Under certain circumstances and subject to the exceptions set
forth in Section 1, we may prorate the number of shares purchased
pursuant to the offer. As discussed in Section 14, the number of
shares to be purchased from a particular shareholder might affect the
tax treatment of the purchase for the shareholder and the shareholder's
decision whether to tender. Each shareholder is urged to consult with
his or her own tax advisor. Accordingly, a shareholder may tender
shares subject to the condition that a specified minimum number of the
shareholder's shares tendered pursuant to a letter of transmittal must
be purchased if any shares so tendered are purchased. Any shareholder
desiring to make a conditional tender must so indicate in the box
captioned "Conditional Tender" in the letter of transmittal.
Any tendering shareholders wishing to make a conditional tender
must calculate and appropriately indicate the minimum number of shares
to be tendered. If the effect of accepting tenders on a pro rata basis
would be to reduce the number of shares to be purchased from any
shareholder below the minimum number so specified, the tender will
automatically be regarded as withdrawn, except as provided in the next
paragraph, and all shares tendered by the shareholder pursuant to the
applicable letter of transmittal will be returned as promptly as
practicable thereafter.
If conditional tenders that would otherwise be regarded as
withdrawn would cause the total number of shares to be purchased to
fall below 3,000,000 (or such greater number of shares as we may elect
to purchase), then, to the extent feasible, we will select enough
conditional tenders that would otherwise have been so withdrawn to
permit us to purchase 3,000,000 shares (or such greater number of
shares). In selecting among these conditional tenders, we will select
by lot and will limit our purchase in each case to the minimum number
of shares designated by the shareholder in the applicable letter of
transmittal as a condition to his or her tender.
SECTION 6. CONDITIONS OF THE OFFER
Notwithstanding any other provision of the offer, we will not be
required to accept for payment or pay for any shares tendered, and may
terminate or amend and may postpone, subject to the requirements of the
Exchange Act for prompt payment for or return of shares tendered, the
acceptance for payment of shares tendered, if at any time after October
30, 2000 and at or before the time when we have accepted for payment
all shares validly tendered, any of the following shall have occurred:
(a) there shall have been threatened, instituted or
pending any action or proceeding by any government or
governmental, regulatory or administrative agency or authority
or tribunal or any other person, domestic or foreign, or
before any court, authority, agency or tribunal that (i)
challenges the acquisition of shares pursuant to the offer or
otherwise in any manner relates to or affects the offer or (ii)
in our reasonable judgment, could materially and adversely affect
the business, condition, financial or other, income, operations
or prospects of the Company and our subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of our
subsidiaries or materially impair the offer's contemplated
benefits to us;
(b) there shall have been any action threatened, pending
or taken, or approval withheld, or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the offer or the Company or any of our
subsidiaries, by any legislative body, court, authority, agency
or tribunal which, in our sole judgment, would or might directly
or indirectly (i) make the acceptance for payment of, or payment
for, some or all of the shares illegal or otherwise restrict or
prohibit consummation of the offer, (ii) delay or restrict our
ability or render us unable to accept for payment or pay for some
or all of the shares, (iii) materially impair the contemplated
benefits of the offer to us or (iv) materially affect the
business, condition, financial or other, income, operations or
prospects of the Company and our subsidiaries, taken as a whole,
or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of our
subsidiaries;
(c) it shall have been publicly disclosed or we shall
have learned that (i) any person or "group," within the meaning
of Section 13(d)(3) of the Exchange Act, has acquired or proposes
to acquire beneficial ownership of more than 5% of the
outstanding shares whether through the acquisition of stock, the
formation of a group, the grant of any option or right, or
otherwise, other than as disclosed in a Schedule 13D or 13G on
file with the SEC on October 30, 2000, or (ii) any person or
group that on or prior to October 30, 2000 had filed a Schedule
13D or 13G with the SEC thereafter shall have acquired or shall
propose to acquire, whether through the acquisition of stock, the
formation of a group, the grant of any option or right, or
otherwise, beneficial ownership of additional shares representing
2% or more of the outstanding shares;
(d) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market,
(ii) any significant decline in the market price of the shares or
in the general level of market prices of equity securities in the
United States or abroad, (iii) any change in the general
political, market, economic or financial condition in the United
States or abroad that could have a material adverse effect on our
business, condition, financial or otherwise, income, operations,
prospects or ability to obtain financing generally or the trading
in the shares, (iv) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United
States or any limitation on, or any event which, in our
reasonable judgment, might affect the extension of credit by
lending institutions in the United States, (v) the commencement
of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or
(vi) in the case of any of the foregoing existing at the time of
the commencement of the offer, in our reasonable judgment, a
material acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or
all of the shares, other than the offer, or a merger, acquisition
or other business combination proposal for the Company, shall
have been proposed, announced or made by another person or group,
within the meaning of Section 13(d) (3) of the Exchange Act;
(f) there shall have occurred any event or events that
has resulted, or may in our reasonable judgment result, directly
or indirectly, in an actual or threatened change in the business,
condition, financial or other, income, operations, stock
ownership or prospects of the Company and our subsidiaries;
(g) we shall not have procured the financing for the
purchase described in Section 9 and shall not have procured
alternative financing on the same or similar terms;
and, in our reasonable judgment, such event or events make it
undesirable or inadvisable to proceed with the offer or with such
acceptance for payment.
The foregoing conditions are for the reasonable benefit of the
Company and may be asserted by us regardless of the circumstances,
including any action or inaction by us, giving rise to any of these
conditions, and any such condition may be waived by us, in whole or in
part, at any time and from time to time in our reasonable discretion.
The failure by the Company at any time to exercise any of the
foregoing rights shall not be deemed a waiver of the right and each of
these rights shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by us concerning the
events described above will be final and binding on all parties.
Acceptance of shares validly tendered in the offer is subject to
the condition that, as of the expiration date, and after giving pro
forma effect to the acceptance of shares validly tendered, the Company
would continue to have at least 300 record shareholders, determined as
provided in Exchange Act Rule 12g5-1. This condition may not be
waived.
The Exchange Act requires that all conditions to the offer must be
satisfied or waived before the expiration date.
SECTION 7. PRICE RANGE OF SHARES
Quotations for our common stock are entered on the OTC Bulletin
Board under the symbol, "HIAI." As of October 19, 2000, nine market
makers had registered to enter quotes for our common stock on the OTC
Bulletin Board. The following table sets forth the high and low sales
prices for the shares as reported on the OTC Bulletin Board for the
periods indicated. Our fiscal year end is November 30.
<TABLE>
High Low Trading Volume Number of Trades
<S> <C> <C> <C> <C>
Fiscal 1998
4th Quarter .135 .08 343,400 29
Fiscal 1999
1st Quarter .21 .12 236,600 47
2nd Quarter .21 .12 82,900 18
3rd Quarter .18 .12 124,100 20
4th Quarter .25 .13 54,100 18
Fiscal 2000
1st Quarter .30 .25 329,400 48
2nd Quarter .40 .15625 157,500 25
3rd Quarter .21 .15625 48,300 14
</TABLE>
On October 19, 2000, the closing price of the shares on the OTC
Bulletin Board was $.13 per share. Shareholders are urged to obtain
current market quotations for the shares.
Although quotations for our stock are carried on the OTC Bulletin
Board, as indicated by the trading volumes given above, the market for
our stock has historically been very thin and trading has been
sporadic. Management of the Company does not believe that the prices
at which our stock has traded in recent years are representative of the
intrinsic value of the Company taken as a whole. Rather, management
believes that the lack of an active trading market, together with the
consequent lack of liquidity, result in depressed trading prices.
SECTION 8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
We are making the offer for two reasons. First, we want to offer
our shareholders the opportunity to sell some or all of their shares on
a basis that is more favorable than could probably be achieved in the
public market. As indicated in Section 7 above, the number of shares
we are offering to purchase is approximately 5.5 times the number of
shares traded on the OTC Bulletin Board in the public market during the
12 months ended August 31, 2000, and 62 times the number of shares
traded in the three months ended August 31, 2000, and the price we are
offering to pay represents a premium of 92% to the closing price on
October 19, 2000. We do not believe that the public market could
absorb nearly the quantity of shares that we are offering to purchase.
Even if buyers could be found for such a large number of shares, the
prevailing market prices would in all likelihood decline significantly.
We believe that the offer allows our shareholders to achieve liquidity
that would not otherwise be available. It also allows them to effect a
sale of their shares without incurring the usual commission and other
transaction costs associated with open-market sales.
Second, we believe that the offer represents a good investment
opportunity for the Company and its continuing shareholders. If the
Company had repurchased 3,000,000 shares for the price we are offering
as of December 1, 1998, and had financed this purchase on the terms
contemplated by the loan commitments we have received for the offer,
our pro forma earnings per share for the fiscal year ended November 30,
1999 would have been $.06 per share, as compared to the $.05 per share
actually reported for that year. Management does not believe that a
similar increase in earnings per share could be achieved by spending
the estimated $850,000 aggregate purchase price and transaction costs
in the offer for acquisitions or other expansion measures.
Accordingly, we believe that the offer represents the best use of the
Company's borrowing capacity to increase earnings per share and overall
value for our continuing shareholders.
Each shareholder must make his or her own decision as to the
value of the shares and relative benefits in light of his or her own
financial position and investment objectives of tendering in the offer
or retaining the shares for the possibility of increased value in the
future. The Board of Directors desires to make this opportunity to
achieve liquidity available to the shareholders, but makes no
recommendation as to whether any shareholder should tender his or her
shares. Directors, officers and employees of the Company who own
shares may participate in the offer on the same basis as our other
shareholders. However, we have been advised that none of the directors
or officers of the Company intend to tender shares pursuant to the
offer.
Shareholders who do not tender their shares pursuant to the offer
and shareholders who otherwise retain an equity interest in the Company
as a result of a partial tender of shares or a proration pursuant to
Section 1 of the offer to purchase will continue to be owners of the
Company with the attendant risks and rewards associated with owning the
equity securities of the Company. Shareholders who determine not to
accept the offer will realize a proportionate increase in their
relative equity interest in the Company and, thus, in the Company's
earnings and assets, subject to any risks resulting from our purchase
of shares and our ability to issue additional equity securities in the
future. In addition, to the extent the purchase of shares pursuant to
the offer results in a reduction of the number of shareholders of
record, our costs for services to shareholders may be reduced.
If fewer than 3,000,000 shares are purchased pursuant to the
offer, we may repurchase the remainder of the shares on the open
market, in privately negotiated transactions or otherwise. In the
future, we may determine to purchase additional shares on the open
market, in privately negotiated transactions, through one or more
tender offers or otherwise. Any purchases may be on the same terms as,
or on terms which are more or less favorable to shareholders than, the
terms of the offer. However, Rule 13e-4 under the Exchange Act
prohibits us and our affiliates from purchasing any shares, other than
pursuant to the offer, until at least ten business days after the
expiration date. Any future purchases of shares by the Company would
depend on many factors, including the market price of the shares, our
business and financial position, and general economic and market
conditions.
Shares we acquire pursuant to the offer will be restored to the
status of authorized and unissued shares and will be available for us
to issue without further shareholder action, except as required by
applicable law, for purposes including, but not limited to, the
acquisition of other businesses, the raising of additional capital for
use in our business and the satisfaction of obligations under existing
or future employee benefit plans. We have no current plans for
reissuance of the shares repurchased pursuant to the offer.
SECTION 9. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 3,000,000 shares pursuant to
the offer at a purchase price of $.25 per share, net to the sellers in
cash, the Company expects the maximum aggregate cost, including all
fees and expenses applicable to the offer, to be approximately
$850,000. The Company anticipates that the funds necessary to pay
those costs will be borrowed from Wells Fargo Bank West, N.A. (the
"Bank"). We have received a commitment from the Bank to provide a new
loan in the amount of $500,000 and to amend our existing line of credit
to permit the proceeds to be used for the repurchase of shares under
this offer.
Under the terms of the new loan, we will make monthly principal
payments of $8,333.33, together with accrued interest thereon,
commencing on January 31, 2001. A final payment of all remaining
principal and accrued interest will be due on December 31, 2005. The
new loan will bear interest at a rate of 1/8% below the Bank's prime
rate. The new loan will be secured by all inventory, accounts, and
unencumbered equipment and general intangibles of the Company. We
intend to apply the full amount of the new loan to the costs of the
offer and to draw the remaining funds needed from the amended line of
credit.
Under the amended line of credit, which will expire on December
31, 2002, the available loan amount will be the lesser of $5,000,000
(up from $4,500,000 on our existing line) or a borrowing base tied to
the Company's receivables and inventory. As of October 18, 2000,
substantially all of the $5,000,000, less outstanding borrowings on the
current line of $3,078,500, would have been available to the Company.
The amended line of credit agreement will provide for interest at the
Bank's prime rate, which will be payable monthly. The amended line of
credit will be collateralized by all of our inventory, accounts
receivable and unencumbered equipment and general intangibles. The
amended line of credit is payable in full on December 31, 2002.
The Bank's commitment with respect to the new loan and the amended
line of credit are conditional upon: (i) the absence of any default of
the Company to the Bank on any existing credit facilities; and (ii)
the negotiation and execution of final agreements.
If we are unable to close the new loan and the amended line of
credit, then we will attempt to procure alternative financing for the
purchase of the shares. There can be no assurance that we will be able
to find alternative financing on acceptable terms or at all.
We intend to repay the new loan and the amended line of credit
through cash flow from operations.
It is estimated that we will incur approximately $100,000 in
financing, legal and other one-time charges associated with the tender
offer.
SECTION 10. INFORMATION CONCERNING HIA, INC.
The Company was incorporated in 1974. The Company is a holding
company with all of its business conducted through its wholly-owned
subsidiary, CPS Distributors, Inc. ("CPS"). Through CPS, the Company
distributes turf irrigation equipment and commercial, industrial and
residential well pumps and equipment on a wholesale basis. The
principal executive offices of the Company are located at 4275 Forest
Street, Denver, Colorado 80216, telephone (303) 394-6040.
The Company acquired CPS, a one hundred-year-old company based in
Denver, Colorado, in February 1984. CPS serves customers in the Rocky
Mountain region in five states consisting of Colorado, Wyoming, New
Mexico, Kansas and Nebraska. CPS carries a variety of brand name
products, including pumps and water systems, water conditioning
equipment, pump and well accessories, pipe valves and fittings and
sprinkler system equipment. The Company's net sales for fiscal 1999
were attributable approximately 12% to industrial, commercial and
residential pump sales and approximately 88% to sales of turf
irrigation equipment. For fiscal 1998, the comparable percentages were
approximately 16% and 84%.
During 1999, the Company's directors investigated the best means
to expand its business operations. Traditionally, the Company has grown
the business by establishing branch operations as start-up enterprises.
This strategy has been successful over the past ten years with each
branch operating at a profit after its first full year of operations.
At the end of 1998, the Company had nine branch operations in Colorado
and two branch operations in Wyoming. The majority of the branches
were located in metropolitan Denver. In order to expand operations
further, the choices were to continue to set up branches (start-ups) or
acquire a company in the same or similar type of business. Since the
Company had an internally calculated estimated market share for its
turf and irrigation products of over 38% at the end of 1999, it was
determined by the directors of the Company that present market
territories were adequately represented by its existing branches and
further expansion of the present product lines would probably be best
served by acquisition into a local market in which the Company was not
adequately represented. The directors identified a short list of these
local market territories and consulted its financial advisors in
determining the size of business the Company could purchase without
adversely affecting its liquidity.
On May 25th, 1999, the Company acquired all of the issued and
outstanding common stock of Western Pipe Supply, Inc. ("WPS") for a
purchase price of $2,746,739 including $84,244 in acquisition costs.
Of the total purchase price, $1,485,385 was paid in cash directly to
the seller and $1,177,110 was in the form of a subordinated promissory
note issued to the seller. The cash paid to the seller was financed in
part by additional borrowings on the Company's existing line of credit
and in part by a new $1,000,000 five-year term loan.
The Company is currently considering the possibility of acquiring
a plumbing supply business. The Company believes that such an
acquisition would provide synergistic benefits with its existing
products and customer base. In furtherance of this pursuit, the
Company has engaged an investment banking firm to identify suitable
acquisition candidates. There is no guarantee that a suitable
acquisition candidate can be identified or that a transaction will be
consummated.
The Company files annual, quarterly and current reports, and other
information with the SEC. You may read and copy any reports,
statements or other information that the Company files at the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Information concerning the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. The
Company's public filings are also available from commercial document
retrieval services and at the Internet web site maintained by the SEC
at http://www.sec.gov.
SECTION 11. INTEREST OF DIRECTORS AND OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING SHARES
As of October 1, 2000, the Company had 10,360,231 shares of common
stock issued and outstanding and had reserved 600,000 shares for
issuance upon exercise of outstanding stock options. The 3,000,000
shares that we are offering to purchase represent approximately 29% of
the outstanding shares. As of October 30, 2000, our directors and
executive officers as a group, consisting of 3 persons, beneficially
owned an aggregate of 6,308,596 shares, including 600,000 shares
covered by currently exercisable options granted under our stock option
plan, representing approximately 58% of the outstanding shares,
assuming the exercise by such persons of their currently exercisable
options. Directors, officers and employees of the Company who own
shares may participate in the offer on the same basis as our other
shareholders. We have been advised that none of our directors or
executive officers intend to tender shares pursuant to the offer.
The following table sets forth as of October 1, 2000, the
beneficial ownership of shares of all persons who are executive
officers, directors or affiliates of the Company:
<TABLE>
Number of
Shares Percent of
Title of Class Name and Address of Beneficially Class Before
Beneficial Owner Owned Offer
<S> <C> <C> <C>
Common Stock Alan C. Bergold 2,402,646(1) 22.8%
(par value $.01 4275 Forest St.
per share) Denver, CO 80216
Carl J. Bentley 1,916,153(1) 18.1%
4275 Forest St.
Denver, CO 80216
Donald L. Champlin 1,989,797(1) 18.8%
4275 Forest St.
Denver, CO 80216
<CAPTION>
(1) Includes, in each case, 200,000 shares which may be acquired
pursuant to the exercise of stock options exercisable on or before
December 1, 2000.
</CAPTION>
</TABLE>
Assuming we purchase 3,000,000 shares pursuant to the offer, and
none of our directors or executive officers tender any shares pursuant
to the offer, then after the purchase of shares pursuant to the offer,
our executive officers and directors as a group would own beneficially
approximately 79% of the outstanding shares, assuming the exercise by
these persons of their currently exercisable options.
During the past 60 days, there have not been any transactions in
the Company's securities by the Company or by any of the Company's
officers, directors or affiliates.
Each of the executive officers of the Company has an Employment
Agreement with the Company, pursuant to which the Company is obligated
to purchase any stock held by the officer in the event that such
officer's Employment Agreement is terminated for any reason. The
purchase price for any such purchase is the greater of the book value
of such shares, plus the per share net profit average over the last
three years prior to termination, or the fair market value of such
shares determined by the officer and the Company, or if agreement
cannot be reached, by arbitration. One-third of the purchase price is
payable at the time of purchase and the remainder of the purchase price
is payable in eight consecutive quarterly installments, with interest
accruing on the unpaid balance at 10% per year.
Except as described in this offer and except for outstanding
options to purchase shares granted from to time to time over recent
years to certain directors and employees, including executive officers,
of the Company pursuant to our stock option plan, and except as set
forth below and otherwise described herein, neither the Company nor, to
the best of our knowledge, any of our affiliates, directors or
executive officers, or any of the directors or executive officers of
any of its affiliates, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly
or indirectly, to any securities of the Company including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies,
consents or authorizations.
Except as disclosed in this offer, the Company, its directors and
executive officers have no current plans or proposals which relate to
or would result in:
* an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or
any of its subsidiaries;
* a purchase, sale or transfer of a material amount of assets
of the Company or any of our subsidiaries;
* any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company;
* any change in the present board of directors or management
of the Company;
* any other material change in the Company's corporate
structure or business;
* a class of equity security of the Company ceasing to
be authorized for quotation on an automated quotation system
operated by a national securities association;
* a class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act;
* the suspension of the Company's obligation to file reports
pursuant to Section 15(d) of the Exchange Act;
* the acquisition by any person of additional securities of
the Company or the disposition of securities of the Company;
or
* any change in our certificate of incorporation or bylaws or
any actions which may impede the acquisition of control of
the Company by any person.
SECTION 12. SELECTED FINANCIAL INFORMATION
Summary Selected Consolidated Financial Data.
The selected data presented below as of and for the years ended
November 30, 1999 and 1998 have been audited by BDO Seidman LLP,
independent certified public accountants. The selected data as of and
for the nine months ended August 31, 2000 and 1999 are derived from the
unaudited condensed consolidated financial statements of the Company.
In the opinion of management, such unaudited data reflect all
adjustments, consisting only of normally recurring adjustments,
necessary to fairly present the Company's financial position and
results of operations for the periods presented. The table also shows
the pro forma effects the offer would have had on the adjusted results
of operations of the Company for the year ended November 30, 1999 and
the adjusted financial condition and results of operations for the nine
months ended August 31, 2000, assuming the maximum number of shares of
common stock had been exchanged on the first day of the respective
periods and are valued at $.25 per share.
<TABLE>
Unaudited
Nine Months Ended
August 31,
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Consolidated Statements of Income Data
Revenues $25,242,939 $18,960,478
Net Income 503,451 739,754
Ratio of Earning to Fixed Charges 2.32 8.60
Basic Income Per Shares 0.05 0.08
Diluted Income Per Share 0.05 0.08
Basic Weighted Average Shares
Outstanding 10,292,594 9,753,261
Diluted Weighted Average Shares
Outstanding 10,307,104 9,753,261
Consolidated Balance Sheet Data
Working Capital $ 3,782,368 $ 3,534,861
Total Assets 13,500,669 11,183,848
Stockholder's Equity 4,337,469 3,984,475
Book Value Per Shares 0.42 0.41
Years Ended
November 30,
---------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Consolidated Statements of Income Data
Revenues $26,139,848 $18,786,235
Net Income 487,946 417,939
Ratio of Earning to Fixed Charges 4.27 4.90
Basic Income Per Shares 0.05 0.04
Diluted Income Per Share 0.05 0.04
Basic Weighted Average Shares
Outstanding 9,774,376 9,442,729
Diluted Weighted Average Shares
Outstanding 9,812,836 9,442,729
Consolidated Balance Sheet Data
Working Capital $ 3,333,106 $ 2,793,585
Total Assets 9,304,672 4,609,274
Stockholder's Equity 3,722,508 3,160,060
Book Value Per Shares 0.38 0.34
Pro Forma
Offer
August 31, November 30,
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Consolidated Statements of Income Data
Revenues $25,242,939 $26,139,848
Net Income 443,357(1) 407,821(1)
Ratio of Earning to Fixed Charges 1.82 2.77
Basic Income Per Shares 0.06 0.06
Diluted Income Per Share 0.06 0.06
Basic Weighted Average Shares
Outstanding 7,292,594(2)
6,774,376(2)
Diluted Weighted Average Shares
Outstanding 7,307,104(2)
6,812,836(2)
Consolidated Balance Sheet Data
Working Capital $ 3,340,701(3)
Total Assets 13,500,669
Stockholder's Equity 3,487,469(4)
Book Value Per Shares 0.47(5)
<CAPTION>
(1) Assumes the Company obtains loan financing of $850,000 at
interest rates of 9.4% to 9.5%.
(2) The weighted average shares outstanding has been adjusted
assuming the acquisition of 3,000,000 shares of common stock pursuant
to the offer.
(3) Assumes the Company obtains loan financing of $850,000 at
interest rates of 9.4% to 9.5%. The financing consists of an increase
of $350,000 on the line of credit bearing interest at 9.5% and
$500,000 in a five year fixed rate loan bearing interest at 9.4% of
which $91,667 is included in current liabilities.
(4) Assumes that the Company acquires 3,000,000 shares of common
stock pursuant to the Offer at $.25 per share. The total cost of
$850,000 includes an estimated $100,000 in transaction costs required
to effect the offer.
(5) Book value per share outstanding has been calculated by dividing
the adjusted stockholders' equity by the number of shares to be
outstanding assuming tender of the maximum of 3,000,000 shares of
common stock.
</CAPTION>
</TABLE>
For more complete financial information, please see Item 7 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
November 30, 1999 filed with the Securities and Exchange Commission as
of February 28, 2000, and Part I of the Company's Quarterly Report on
Form 10-QSB for the quarterly fiscal period ended August 31, 2000 filed
with the Securities and Exchange Commission as of October 16, 2000,
each of which is incorporated herein by reference. For information on
how to retrieve these filings, please see Section 10.
SECTION 13. LEGAL MATTERS; REGULATORY APPROVALS
We are not aware of any license or regulatory permit that appears
to be material to our business that might be adversely affected by our
acquisition of shares as contemplated herein or of any approval or
other action by, or any filing with, any government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
that would be required for the acquisition or ownership of shares by us
as contemplated herein. Should any approval or other action be
required, we presently contemplate that the approval or other action
will be sought. We are unable to predict whether we may determine that
we are required to delay the acceptance for payment of or payment for
shares tendered pursuant to this offer pending the outcome of any such
matter. There can be no assurance that any approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that the failure to obtain any approval or other action
might not result in adverse consequences to our business. Our
obligations under the offer to accept for payment and pay for shares is
subject to certain conditions. See Section 6.
SECTION 14. FEDERAL INCOME TAX CONSEQUENCES
General.
The following is a discussion of the material United States
federal income tax consequences to shareholders with respect to a sale
of shares pursuant to the offer. The discussion is based upon the
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations, Internal Revenue Service rulings and judicial decisions,
all in effect as of the date hereof and all of which are subject to
change, possibly with retroactive effect, by subsequent legislative,
judicial or administrative action. The discussion does not address all
aspects of United States federal income taxation that may be relevant
to a particular shareholder in light of the shareholder's particular
circumstances or to certain types of holders subject to special
treatment under the United States federal income tax laws, such as
certain financial institutions, tax-exempt organizations, life
insurance companies, dealers in securities or currencies, employee
benefit plans or shareholders holding the shares as part of a
conversion transaction, as part of a hedge or hedging transaction, or
as a position in a straddle for tax purposes. In addition, the
discussion below does not consider the effect of any foreign, state,
local or other tax laws that may be applicable to particular
shareholders. The discussion assumes that the shares are held as
"capital assets" within the meaning of Section 1221 of the Internal
Revenue Code. We have neither requested nor obtained a written opinion
of counsel or a ruling from the IRS with respect to the tax matters
discussed below.
Each shareholder should consult his or her own tax advisor as to
the particular United States federal income tax consequences to that
shareholder of tendering shares pursuant to the offer and the
applicability and effect of any state, local or foreign tax laws and
recent changes in applicable tax laws.
Characterization of the Surrender of Shares Pursuant to the Offer.
The surrender of shares by a shareholder to the Company pursuant
to the offer will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under
applicable state, local and foreign tax laws. The United States
federal income tax consequences to a shareholder may vary depending
upon the shareholder's particular facts and circumstances. Under
Section 302 of the Internal Revenue Code, the surrender of shares by a
shareholder to the Company pursuant to the offer will be treated as a
"sale or exchange" of shares for United States federal income tax
purposes, rather than as a distribution by the Company with respect to
the shares held by the tendering shareholder, if the receipt of cash
upon surrender (i) is "substantially disproportionate" with respect to
the shareholder, (ii) results in a "complete redemption" of the
shareholder's interest in the Company, or (iii) is "not essentially
equivalent to a dividend" with respect to the shareholder, each as
described below.
If any of the above three tests is satisfied, and the surrender of
the shares is therefore treated as a "sale or exchange" of shares for
United States federal income tax purposes, the tendering shareholder
will recognize gain or loss equal to the difference between the amount
of cash received by the shareholder and the shareholder's tax basis in
the shares surrendered pursuant to the offer. Any gain or loss will be
capital gain or loss, and will be long term capital gain or loss if the
shares have been held for more than one year.
If none of the above three tests is satisfied, the tendering
shareholder will be treated as having received a distribution by the
Company with respect to the shareholder's shares in an amount equal to
the cash received by the shareholder pursuant to the offer. The
distribution will be treated as a dividend taxable as ordinary income
to the extent of the Company's current or accumulated earnings and
profits for tax purposes. The amount of the distribution in excess of
the Company's current or accumulated earnings and profits will be
treated as a return of the shareholder's tax basis in the shares, and
then as gain from the sale or exchange of the shares. If a shareholder
is treated as having received a distribution by the Company with
respect to his or her shares, the shareholder's tax basis in his or her
remaining shares will generally be adjusted to take into account the
shareholder's return of basis in the shares tendered.
Constructive Ownership.
In determining whether any of the three tests under Section 302
of the Internal Revenue Code is satisfied, shareholders must take into
account not only the shares that are actually owned by the shareholder,
but also shares that are constructively owned by the shareholder within
the meaning of Section 318 of the Internal Revenue Code. Under Section
318 of the Code, a shareholder may constructively own shares actually
owned, and in some cases constructively owned, by certain related
individuals or entities and shares that the shareholder has the right
to acquire by exercise of an option or by conversion.
Proration.
Contemporaneous dispositions or acquisitions of shares by a
shareholder or related individuals or entities may be deemed to be part
of a single integrated transaction and may be taken into account in
determining whether any of the three tests under Section 302 of the
Internal Revenue Code has been satisfied. Each shareholder should be
aware that because proration may occur in the offer, even if all the
shares actually and constructively owned by a shareholder are tendered
pursuant to the offer, fewer than all of these shares may be purchased
by the Company. Thus, proration may affect whether the surrender by a
shareholder pursuant to the offer will meet any of the three tests
under Section 302 of the Code. See Section 5 for information regarding
each shareholder's option to make a conditional tender of a minimum
number of shares. A shareholder should consult his or her own tax
advisor regarding whether to make a conditional tender of a minimum
number of shares, and the appropriate calculation thereof.
Section 302 Tests.
The receipt of cash by a shareholder will be "substantially
disproportionate" if the percentage of the outstanding shares in the
Company actually and constructively owned by the shareholder
immediately following the surrender of shares pursuant to the offer is
less than 80% of the percentage of the outstanding shares actually and
constructively owned by the shareholder immediately before the sale of
shares pursuant to the offer. Shareholders should consult their tax
advisors with respect to the application of the "substantially
disproportionate" test to their particular situation.
The receipt of cash by a shareholder will be a "complete
redemption" if either (i) the shareholder owns no shares in the Company
either actually or constructively immediately after the shares are
surrendered pursuant to the offer, or (ii) the shareholder actually
owns no shares in the Company immediately after the surrender of shares
pursuant to the offer and, with respect to shares constructively owned
by the shareholder immediately after the offer, the shareholder is
eligible to waive, and effectively waives, constructive ownership of
all such shares under procedures described in Section 302(c) of the
Internal Revenue Code. A director, officer or employee of the Company
is not eligible to waive constructive ownership under the procedures
described in Section 302(c) of the Internal Revenue Code.
Even if the receipt of cash by a shareholder fails to satisfy the
"substantially disproportionate" test or the "complete redemption"
test, a shareholder may nevertheless satisfy the "not essentially
equivalent to a dividend" test if the shareholder's surrender of shares
pursuant to the offer results in a "meaningful reduction" in the
shareholder's interest in the Company. Whether the receipt of cash by
a shareholder will be "not essentially equivalent to a dividend" will
depend upon the individual shareholder's facts and circumstances. The
IRS has indicated in published rulings that even a small reduction in
the proportionate interest of a small minority shareholder in a
publicly held corporation who exercises no control over corporate
affairs may constitute such a "meaningful reduction." Shareholders
expecting to rely upon the "not essentially equivalent to a dividend"
test should consult their own tax advisors as to its application in
their particular situation.
Corporate Shareholder Dividend Treatment.
If a sale of shares by a shareholder that is itself a corporation
is treated as a dividend, the corporate shareholder may be entitled to
claim a deduction equal to 70% of the dividend under Section 243 of the
Internal Revenue Code, subject to applicable limitations. Corporate
shareholders should, however, consider the effect of Section 246(c) of
the Internal Revenue Code, which disallows the 70% dividends-received
deduction with respect to stock that is held for 45 days or less. For
this purpose, the length of time a taxpayer is deemed to have held
stock may be reduced by periods during which the taxpayer's risk of
loss with respect to the stock is diminished by reason of the existence
of certain options or other transactions. Moreover, under Section 246A
of the Internal Revenue Code, if a corporate shareholder has incurred
indebtedness directly attributable to an investment in shares, the 70%
dividends-received deduction may be reduced.
In addition, amounts received by a corporate shareholder pursuant
to the offer that are treated as a dividend may constitute an
"extraordinary dividend" under Section 1059 of the Internal Revenue
Code. The "extraordinary dividend" rules of the Internal Revenue Code
are highly complicated. Accordingly, any corporate shareholder that
might have a dividend as a result of the sale of shares pursuant to the
offer should review the "extraordinary dividend" rules to determine the
applicability and impact of such rules to it.
Additional Tax Considerations.
The distinction between long-term capital gains and ordinary
income is relevant because, in general, individuals currently are
subject to taxation at a reduced rate on their "net capital gain,"
which is the excess of net long-term capital gains over net short-term
capital losses, for the year. Tax rates on long-term capital gain for
individual shareholders vary depending on the shareholders' income and
holding period for the shares. In particular, reduced tax rates apply
to gains recognized by an individual from the sale of capital assets
held for more than one year, currently 20 percent or less.
Shareholders are urged to consult their own tax advisors regarding
any possible impact on their obligation to make estimated tax payments
as a result of the recognition of any capital gain, or the receipt of
any ordinary income, caused by the surrender of any shares to the
Company pursuant to the offer.
Foreign Shareholders.
The Company will withhold United States federal income tax at a
rate of 30% from gross proceeds paid pursuant to the offer to a foreign
shareholder or his agent, unless we determine that a reduced rate of
withholding is applicable pursuant to a tax treaty or that an exemption
from withholding is applicable because the gross proceeds are
effectively connected with the conduct of a trade or business by the
foreign shareholder within the United States. For this purpose, a
foreign shareholder is any shareholder that is not (i) a citizen or
resident of the United States, (ii) a domestic corporation or domestic
partnership, (iii) an estate the income of which from sources without
the United States is effectively connected with the conduct of a trade
or business within the United States, or (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States persons
have the authority to control all substantial decisions of the trust.
Without definite knowledge to the contrary, we will determine whether a
shareholder is a foreign shareholder by reference to the shareholder's
address. A foreign shareholder may be eligible to file for a refund of
the tax or a portion of the tax if the shareholder (i) meets the
"complete redemption," "substantially disproportionate" or "not
essentially equivalent to a dividend" tests described above, (ii) is
entitled to a reduced rate of withholding pursuant to a treaty and the
Company withheld at a higher rate, or (iii) is otherwise able to
establish that no tax or a reduced amount of tax was due. In order to
claim an exemption from withholding on the ground that gross proceeds
paid pursuant to the offer are effectively connected with the conduct
of a trade or business by a foreign shareholder within the United
States or that the foreign shareholder is entitled to the benefits of a
tax treaty, the foreign shareholder must deliver to the depositary, or
other person who is otherwise required to withhold United States tax, a
properly executed statement claiming such exemption or benefits. These
statements may be obtained from the depositary. Foreign shareholders
are urged to consult their own tax advisors regarding the application
of United States federal income tax withholding, including eligibility
for a withholding tax reduction or exemption and the refund procedures.
Backup Withholding.
See Section 4 with respect to the application of the United States
federal income tax backup withholding.
The tax discussion set forth above is included for general
information only and may not apply to shares acquired in connection
with the exercise of stock options or pursuant to other compensation
arrangements with the Company. The tax consequences of a sale pursuant
to the offer may vary depending upon, among other things, the
particular circumstances of the tendering shareholder. No information
is provided herein as to the state, local or foreign tax consequences
of the transaction contemplated by the offer. Shareholders are urged
to consult their own tax advisors to determine the particular federal,
state, local and foreign tax consequences to them of tendering shares
pursuant to the offer and the effect of the stock ownership attribution
rules described above.
SECTION 15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
We expressly reserve the right, in our sole discretion and at any
time or from time to time, to extend the period of time during which
the offer is open by giving oral or written notice of the extension to
the depositary and making a public announcement thereof or by mailing
written notice to each shareholder. However, we have no current intent
to extend the offer. During any extension, all shares previously
tendered will remain subject to the offer, except to the extent that
shares may be withdrawn as set forth in Section 3. We also expressly
reserve the right, in our sole discretion, (i) to terminate the offer
and not accept for payment any shares not previously accepted for
payment or, subject to Rule 13e-4(f)(5) under the Exchange Act which
requires us either to pay the consideration offered or to return the
shares tendered promptly after the termination or withdrawal of the
offer, to postpone payment for shares upon the occurrence of any of the
conditions specified in Section 6 hereof, by giving oral or written
notice of such termination to the depositary and making a public
announcement thereof and (ii) at any time, or from time to time, to
amend the offer in any respect. Amendments to the offer may be
effected by public announcement or by a subsequent mailing to the
shareholders. The Company shall have no obligation, except as otherwise
required by applicable law, to publish, advertise or otherwise
communicate any extension, termination or amendment, other than by
making a public announcement or a subsequent mailing to all
shareholders. Material changes to information previously provided to
holders of the shares in this offer or in documents furnished
subsequent thereto will be disseminated to holders of shares in
compliance with Rule 13e-4(e)(3) promulgated by the SEC under the
Exchange Act.
If the Company materially changes the terms of the offer or the
information concerning the offer, or if we waive a material condition
of the offer, we will extend the offer to the extent required by Rule
13e-4 under the Exchange Act. The minimum period during which an offer
must remain open following material changes in the terms of the offer
or information concerning the offer, other than a change in price or
change in percentage of securities sought, depends on the facts and
circumstances, including the relative materiality of the change or
information. In a published release, the SEC has stated that in its
view, an offer should remain open for a minimum of five business days
from the date that notice of a material change is first published, sent
or given. Under Rule 13e-4(f)(1) of the Exchange Act, the offer will
continue or be extended for at least ten business days from the time
the Company publishes, sends or gives to holders of shares a notice
that we will (a) increase or decrease the price we will pay for shares
or (b) increase, except for an increase not exceeding 2% of the
outstanding shares, or decrease the number of shares we seek.
SECTION 16. SOLICITATION FEES AND EXPENSES
We have retained Computershare Trust Company, Inc. as depositary
in connection with the offer. The depositary will receive reasonable
and customary compensation for its services and will also be reimbursed
for certain out-of-pocket expenses. The Company has agreed to
indemnify the depositary against certain liabilities, including certain
liabilities under the federal securities laws, in connection with the
offer. The depositary has not been retained to make solicitations or
recommendations in connection with the offer.
We will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of shares pursuant to the offer,
other than the fee of the dealer manager. The Company will, upon
request, reimburse brokers, dealers, commercial banks and trust
companies for reasonable and customary handling and mailing expenses
incurred by them in forwarding materials relating to the offer to their
customers.
SECTION 17. WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
Additional copies of this offer, the letter of transmittal or
other tender offer materials may be obtained from the Company and will
be furnished at the Company's expense. Any questions concerning tender
procedures may be directed to the Company as set forth below.
Shareholders may also contact the depositary at the address and
telephone number set forth in the letter of transmittal or their local
broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the tender offer.
The Company will act as its own information agent in connection
with the offer. The Company may contact shareholders by mail,
telephone, facsimile, or other electronic means and may request
brokers, dealers, and other nominee shareholders to forward materials
and information concerning the offer to the beneficial owners.
The Company has also filed an Issuer Tender Offer Statement on
Schedule TO with the SEC, which includes certain additional information
relating to the offer. Such statement and other information may be
inspected and copied at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
information may also be accessed electronically by means of the SEC's
web page on the Internet (http://www.sec.gov).
SECTION 18. MISCELLANEOUS
The offer is being made to all holders of shares. The Company is
not aware of any state where the making of the offer is prohibited by
administrative or judicial action pursuant to a valid state statute.
If we become aware of any valid state statute prohibiting the making of
the offer, we will make a good faith effort to comply with the statute.
If, after such good faith effort, we cannot comply with the statute,
the offer will not be made to, nor will tenders be accepted from or on
behalf of, holders of shares in that state.
No person has been authorized to make any recommendation on
behalf of the Company as to whether shareholders should tender shares
pursuant to the offer. No person has been authorized to give any
information or to make any representations in connection with the offer
other than those contained herein or in the related letter of
transmittal. If given or made, the recommendation and the other
information and representations must not be relied upon as having been
authorized by HIA, Inc.
October 30, 2000 HIA, INC.
