Registration No. 333-4937
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KINARK CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 71-0268502
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
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7060 SOUTH YALE AVENUE
TULSA, OKLAHOMA 74136
(918) 494-0964
(Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
PAUL R. CHASTAIN
CHIEF FINANCIAL OFFICER
7060 SOUTH YALE AVENUE
TULSA, OKLAHOMA 74136
(918) 494-0964
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
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COPY TO:
Paul A. Quiros, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
1201 Peachtree Street, Suite 2200
Atlanta, Georgia 30361
(404) 817-6000
(404) 817-6050 (Fax)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
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If the only securities being registered in this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Price Per Share(1) Aggregate Offering Price(1) Registration Fee(2)
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 6,066,536 $4.47 $27,117,415.92 $
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a). The estimated maximum price per share is calculated
in accordance with subsections (c) and (g) of Rule 457 and represents the
average of the high and low trading prices of the Common Stock on May 29, 1996.
(2) The registration fee has been paid with the Company's initial filing made
on May 31, 1996, and the Company's amended filing made on June 7, 1996.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
<PAGE>
KINARK CORPORATION
Cross Reference Sheet Between Items in Part I of
Form S-3 and the Prospectus
<TABLE>
Item Number and Caption Prospectus Caption
<S> <C>
1. Front of Registration Statement and Outside
Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio Summary; Risk Factors; Summary Pro Forma
of Earnings to Fixed Charges and Selected Financial Data
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price The Rights Offering
6. Dilution *
7. Selling-Security Holders *
8. Plan of Distribution Outside Front Cover Page; Summary; The
Rights Offering
9. Description of Securities to Be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters; Experts
11. Material Changes Summary; Business Strategy; The Acquisition
or Merger
12. Incorporation of Certain Information by Inside Front Cover Page; Description of
Reference Capital Stock
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
</TABLE>
*Omitted because answer is negative or not applicable<PAGE>
SUBJECT TO COMPLETION, DATED JULY ___, 1996
PROSPECTUS
KINARK
CORPORATION
__________ COMMON SHARES
Kinark Corporation ("Kinark" or the "Company") is offering up to 6,066,536
shares, to holders of record as of the close of business on ________________,
1996 (the "Record Date"), of its common stock, $.10 par value per share (the
"Common Stock"). Each stockholder will receive one nontransferable right
(each, a "Right") for each one share of Common Stock held on the Record Date
(the "Rights Offering"), with each such Right entitling the holder thereof to
subscribe for and purchase one share of Common Stock (the "Subscription
Privilege") for a price of $____ per share (the "Subscription Price"). The
Rights will expire at 5:00 p.m. New York City time, on ____________, 1996,
unless extended as provided herein (the "Expiration Date"). Based on the
Company's 18,000,000 authorized shares of Common Stock and the 7,201,536 shares
currently issued and outstanding or reserved for issuance pursuant to the
Company's stock option plans (collectively, the "Plans"), if each of the
stockholders exercised its Rights in full, the number of shares of Common Stock
issued and outstanding and reserved for issuance pursuant to the Plans after
the Rights Offering would be 13,268,072 and the number of shares of Common
Stock authorized and available for future issuance after the Rights Offering
would be 4,731,928. The Rights are evidenced by nontransferable Subscription
Cards (the "Subscription Cards") distributed to holders of record on the Record
Date with this Prospectus. See "The Rights Offering." There are no assurances
of proceeds to the Company under this Rights Offering. The Rights Offering
will not close until the Company receives subscriptions for at least $1,500,000
(the "Minimum Proceeds"). Once a holder has exercised any Rights, such
exercise may not be revoked. Holders exercising Rights should complete and
return their Subscription Card(s) with payment of the Subscription Price
promptly to insure timely receipt and the collection of any funds prior to the
Expiration Date.
The proceeds of this Rights Offering, together with other sources of funds
available to the Company, if required, will be used by the Company to offer to
acquire the remaining 364 shares, representing approximately 31%, of the
capital stock (the "Acquisition") of Rogers Galvanizing Company ("Rogers") not
currently owned by the Company, at a cost of approximately $2,584,400 and to
pay related fees and expenses, for capital expenditures, for general corporate
purposes and, if available, for possible future acquisitions primarily in the
galvanizing industry and for repayment of the Company's bank loans. In the
event that some or all of the minority stockholders of Rogers decline to accept
the Company's offer to purchase the remaining Rogers stock, the Company intends
to complete the Acquisition through a merger pursuant to Delaware law (the
"Merger"). In the Merger, all of the minority stockholders of Rogers would
receive cash for their shares of Rogers stock. The closing of the Rights
Offering is contingent upon satisfaction or waiver of certain conditions,
including the receipt by the Company of the Minimum Proceeds from the exercise
of Rights in this Rights Offering. The Minimum Proceeds represent the funds
necessary to acquire shares of Rogers stock exceeding 11.1% of the issued and
outstanding Rogers stock, which will allow the Company to own over 80% of
Rogers and to consolidate Rogers with the Company for tax purposes and to pay
fees and expenses relating thereto and to this Rights Offering. If the Company
receives only the Minimum Proceeds, it will immediately offer to acquire up to
188 shares of Rogers stock and use other sources of funds to attempt to
complete the Acquisition or Merger as soon as practicable. There are no
assurances that the Company will receive the Minimum Proceeds in this Offering.
In the event the conditions to the Rights Offering, including receipt of the
Minimum Proceeds, have not been satisfied by _______________, 1996, or the
Rights Offering is otherwise terminated, all subscription payments will be
returned promptly, without interest or deduction. See "The Acquisition or
Merger" and "Use of Proceeds."
This document contains a Prospectus of the Company with respect to the
shares of Common Stock issuable upon the exercise of the Rights.
The Company's Common Stock is listed for trading on the American Stock
Exchange ("AMEX") under the symbol "KIN." The last reported sales price of the
Common Stock on July 26, 1996, was $3.56 per share. The Company anticipates
that the shares of Common Stock issued upon the exercise of the Rights will be
approved for trading on the AMEX.
PRIOR TO DECIDING TO EXERCISE RIGHTS AND PURCHASE SHARES OF THE COMMON
STOCK, POTENTIAL INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH IN
"RISK FACTORS" ON PAGE 12 IN ADDITION TO THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS. STOCKHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN FULL WILL
SUFFER SIGNIFICANT DILUTION IN THEIR PROPORTIONATE INTEREST IN THE EQUITY
OWNERSHIP AND VOTING POWER OF THE COMPANY. SEE "RISK FACTORS."
<TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<CAPTION>
Underwriting Discounts Proceeds to the
Price to Public and Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share $__________ N/A $__________
Total $__________ N/A $__________
</TABLE>
(1) See "The Rights Offering - Information Agent" for information with respect
to certain contingent fees which could be payable by the Company to Morrow
& Co., Inc., the Information Agent for the Rights Offering.
(2) Before deducting expenses of the Rights Offering payable by the Company,
estimated to be $300,350. See "Use of Proceeds."
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The date of this Prospectus is _______________, 1996.
<PAGE>
THE FOLLOWING INFORMATION APPEARS ALONG THE LEFT BORDER OF THE PRECEDING PAGE:
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; New York Regional Office, Public Reference Room, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Company's Common Stock is listed on the American Stock
Exchange, Inc., and reports, proxy statements and other information concerning
the Company may be inspected at the office of the American Stock Exchange,
Inc., 86 Trinity Place, New York, New York 10006. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and any amendments thereto, including
exhibits filed as a part thereof, are available for inspection and copying as
set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission under the Exchange Act are incorporated herein by reference: (a)
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
filed with the Commission on April 1, 1996, as amended by Form 10-K/A filed
with the Commission on April 4, 1996, and as further amended by Form 10-K/A
filed with the Commission on July 30, 1996, File No. 001-03920; (b) the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
filed with the Commission on May 15, 1996, as amended by Form 10-Q/A filed with
the Commission on July 30, 1996, File No. 001-03920; (c) the Company's Current
Report on Form 8-K dated February 5, 1996, filed with the Commission on
February 20, 1996, as amended by Form 8-K/A filed with the Commission on April
19, 1996, File No. 001-03920; (d) the Company's Current Report on Form 8-K
dated February 27, 1996, filed with the Commission on March 13, 1996, as
amended by Form 8-K/A filed with the Commission on March 21, 1996, and as
further amended by Form 8-K/A filed with the Commission on April 5, 1996, File
No. 001-03920; (e) the Company's Current Report on Form 8-K dated April 10,
1996, filed with the Commission on May 8, 1996, File No. 001-03920; and (f) the
Company's Current Report on Form 8-K dated May 14, 1996, filed with the
Commission on May 22, 1996, File No. 001-03920.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statements contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this Prospectus is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM MORROW & CO., INC., 909
THIRD AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022-4799 (TELEPHONE (800) 566-
9061).<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and consolidated financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. In February and
March 1996, the Company acquired 808 shares, representing 68.9%, of the
outstanding capital stock of Rogers Galvanizing Company with the proceeds of
two private placements. See "Private Placements and Acquisition of Rogers
Stock." The Company intends to offer to acquire the remaining 364 shares, or
188 shares if the Company receives the Minimum Proceeds, of outstanding Rogers
stock with the proceeds of this Rights Offering or funds from other sources if
only the Minimum Proceeds are received (the "Acquisition") at the same price
per share paid for the Trust Stock. The Company cannot determine how many
additional minority stockholders of Rogers will accept the Company's offer, but
for purposes of pro forma financial information appearing herein, all of the
remaining Minority Stock is assumed to have been purchased. In the event that
some or all of the minority stockholders of Rogers decline to accept the
Company's offer to purchase the remaining Minority Stock, the Company intends
to complete the Acquisition through a merger which would be effected under
Section 251 of the Delaware General Corporation Law (the "Merger"). If the
Company receives only the Minimum Proceeds it will offer to acquire 188 shares
of Minority Stock and will use other sources of funds to attempt to complete
the Acquisition or Merger as soon as practicable. See "The Acquisition or
Merger."
PRIVATE PLACEMENT AND ACQUISITION OF ROGERS STOCK
Pursuant to the Stock Purchase Agreement dated as of August 3, 1994, as
amended (the "Rogers Agreement"), by and among the Company and The C.L. Simpson
Inter Vivos Revocable Trust and The Alta Rogers Simpson Inter Vivos Revocable
Trust (together, the "Trusts"), the Company and the Trusts agreed for the
Company to acquire 600 shares, representing 51.2%, of the capital stock of
Rogers from the Trusts (the "Trust Stock") for $7,100 a share. In addition,
the Company agreed to offer to purchase the remaining shares of Rogers from its
minority stockholders (the "Minority Stock") at the same price per share paid
for the Trust Stock. The Company acquired the Trust Stock on February 5, 1996,
with a portion of the proceeds of a private placement of 2,319,038 shares of
the Company's Common Stock at a purchase price of $2.50 a share (the "Private
Placement"). Sales pursuant to the Private Placement closed in January and
March 1996, with gross proceeds of $5,797,595. In February and March 1996, the
Company acquired an additional 208 shares of the Minority Stock, representing
an additional 17.7% of the outstanding capital stock of Rogers, with a portion
of the proceeds of the Private Placement. Gross proceeds from the Private
Placement totalled $5,797,595. The purchase price for 68.9% of the Rogers
stock acquired by Kinark with these proceeds was $5,736,800. See "The Private
Placement and Acquisition of Rogers Stock."
<PAGE>
THE COMPANY
The Company is a diversified company conducting business in two market
segments: galvanizing and chemical storage and distribution. The Company
operates its galvanizing business through Boyles Galvanizing Company, a wholly-
owned subsidiary ("Boyles"), and Rogers, which is currently a majority owned
subsidiary. Boyles and Rogers engage principally in hot dip galvanizing, a
process in which iron and steel products are immersed in molten zinc to create
an alloyed metal surface which is highly resistant to oxidation or corrosion.
Through its wholly-owned subsidiary, Lake River Corporation ("Lake River"), the
Company engages in the bulk storage of chemicals. Lake River, located in
Chicago, has 233 tanks providing 44 million gallons of liquid storage capacity
and 600,000 square feet of warehouse capacity. Lake River also operates bag
and drum filling lines for integrated storage, formulating, packaging and
distribution of chemicals. The Company recently divested itself of its
specialty chemicals subsidiary, Kinpak, Inc. ("Kinpak"), which engaged in the
production and packaging of antifreeze, windshield washer fluid and household
cleaning products. Cash proceeds in the amount of $850,000 from the sale of
Kinpak's assets were received during February 1996 and the buyer assumed the
capital lease on Kinpak's plant facilities.
The Company was incorporated under the laws of the State of Delaware in
1955. The mailing address of the Company's executive offices is P.O. Box 1499,
Tulsa, Oklahoma 74101-1499. Its telephone number is (918) 494-0964.
BUSINESS STRATEGY
A key part of the Company's business strategy is to grow its galvanizing
business. The acquisition of a majority of the outstanding capital stock of
Rogers (the "Rogers Stock") with the proceeds of the Private Placement has
created the largest independent galvanizing operation in North America, and
management believes that, based on tonnage galvanized, the combined company
will have the largest share of the galvanizing market in the five-state region
comprised of Texas, Missouri, Kansas, Oklahoma and Arkansas. Rogers has had
net profits each year since 1987, with its sales increasing from approximately
$7 million in 1987 to $17.6 million for 1995. Acquisition of a portion of the
Minority Stock exceeding 11.1% of the outstanding Rogers stock will allow the
Company to consolidate the financial results of Rogers with the Company's
results for tax purposes. If Rogers earnings continue to increase as described
above and earnings for its other subsidiaries continue to increase, this tax
consolidation will allow the Company to utilize approximately $5,309,000 in net
operating loss carryforwards against future taxable income which will result in
tax savings to the Company. Acquisition of all of the remaining Minority Stock
would result in the Company owning 100% of Rogers and allow inclusion of 100%
of Rogers' future net earnings in the Company's financial statements. Based on
Rogers' past earnings and the current favorable market conditions in the
galvanizing industry resulting in higher sales, consolidation of Rogers'
financial results with the Company's should provide additional net earnings for
the Company which would strengthen its operating results. Currently, the
Company is able to present only 68.9% of the Rogers net earnings in its
operating results, with approximately $225,000 of Rogers net earnings for the
period February 1, 1996 through June 30, 1996 attributable to the Minority
Stock currently excluded from the Company's consolidated net earnings. As
discussed above, the acquisition of all of the remaining Minority Stock would
result in the Company owning 100% of Rogers and allow inclusion of 100% of
Rogers future net earnings in the Company's financial statements.
Additionally, based on the pro forma combined results of the Company for the
most recently completed fiscal year, management believes that the consolidation
of financial results will increase the revenues and earnings generated by the
Company's galvanizing operations.
The Company also believes that the acquisition of all or part of the
remaining Minority Stock will allow the Company to continue the assimilation of
Rogers as a Company subsidiary and allow the Company to realize some economies
by consolidating the corporate operations of Rogers into its operations.
Management has not determined any specific amount of savings that may result
from the integration of Rogers with its Boyles Galvanizing subsidiary, however,
the Company is exploring a number of opportunities to reduce expenses and
operating costs, including the elimination of duplicate functions, combining
administrative functions and redefining the optimum staffing level for each of
its eleven (11) galvanizing plants. Management believes that completion of the
Acquisition or the Merger and integration of Rogers with the Company will
provide additional opportunities to enhance profitability of its galvanizing
operations, in part, through the Company's planned standardization of
galvanizing processes and operating equipment to achieve more efficient plant
operations. These standards will reflect selection of the best production and
engineering practices from Rogers and the Company's Boyles Galvanizing
subsidiary. Improvement will be measured by reduced raw material costs,
increased tonnage output per manhour and reduced operating overhead. In terms
of new business development, an integrated sales function should be able to
compete more effectively by capitalizing on the strength of the Company's
expanded production capacity, faster turn-around service and diverse locations.
Centralized purchasing is expected to result in improved allocation and pricing
for zinc raw material, chemicals and natural gas supplies, key components
utilized in the galvanizing process.
In addition, completion of the Acquisition or Merger should provide the
Company with greater financial and managerial resources to enhance the
Company's ability to make future acquisitions of independent galvanizing
operations and its ability to make capital expenditures based on Rogers' strong
financial position, even if proceeds are not available from this Rights
Offering for such purposes. Rogers' total debt to net worth ratio is .65% and
debt maturities are staggered to facilitate future refinancing requirements.
Approximately 15% of Rogers' term debt bears interest at fixed rates below
current market rates. Bank revolving lines of credit totaling $3 million are
adequate for current working capital needs, and have unused capacity. In
addition, as business opportunities evolve, these revolving lines could be
increased by approximately one-third based on Rogers' current asset base. As a
measure of the financial strength to be added by the completion of the
Acquisition or Merger, Rogers' pre-tax earnings provide better than a 10 times
coverage of debt interest expense. The management team is drawn from the
experienced management pool available within Rogers and Boyles. Each of these
companies will contribute unique functional expertise to complement a new
organizational structure with the management depth and capacity to support
continued growth in galvanizing, internally and through acquisitions. See
"Business Strategy."
THE ACQUISITION OR MERGER
Pursuant to the Rogers Agreement, the Company acquired the Trust Stock
from the Trusts for $7,100 per share for an aggregate purchase price of
$4,260,000 in cash with a portion of the proceeds of the Private Placement. As
part of the Rogers Agreement, the Company agreed to offer to purchase the
Minority Stock from the minority stockholders for cash at a price of $7,100 per
share, the same price per share paid for the Trust Stock. The Company also
acquired an additional 208 shares of the Minority Stock for $1,476,800 in cash
with a portion of the proceeds of the Private Placement. If all of the
remaining Minority Stock is purchased at the same price per share, the
Acquisition price will be $2,584,400. Giving effect to the payment of fees and
expenses related to the Rights Offering and the Acquisition of approximately
$300,350, the total cost associated with the Rights Offering and the
Acquisition or Merger, if necessary, is estimated to be approximately
$3,000,000. See "Use of Proceeds." In the event that some or all of the
minority stockholders of Rogers decline to accept the Company's offer to
purchase the remaining Minority Stock, the Company intends to effect the
Merger. The Company would effect the Merger with a wholly-owned subsidiary of
the Company pursuant to Delaware law, and all of the Rogers stockholders,
including the minority stockholders, would be paid cash consideration for their
Rogers common stock in the amount of $7,100 a share. The minority stockholders
of Rogers would have the right to exercise dissenters' rights pursuant to
Delaware law, which would allow them to challenge the amount of the
consideration paid to them for their Minority Stock in the Merger. The
stockholders of the Company would have no such rights. The exercise of
dissenters' rights by the minority stockholders of Rogers could not prevent the
consummation of the Merger, but the exercise of such rights could increase the
cost of the Merger and the Acquisition by increasing the amount the Company has
to pay for each share of Minority Stock if it were determined that the shares
should be valued at an amount greater than $7,100 a share and by increasing the
costs associated with the Merger due to the costs that would be incurred
resolving the issues raised by the dissenting stockholders if any. See "Risk
Factors - Dissenters' Rights." The cost of the Merger should be equivalent to
the cost of the Acquisition, unless stockholders perfect their dissenters'
rights as described above and it is determined that the shares should be valued
at an amount greater than $7,100 a share. However, based on the sales of the
Trust Stock and Minority Stock in February and March 1996 at $7,100 a share,
the Company believes that the $7,100 per share price represents the value of
remaining shares of Minority Stock. See "Risk Factors - Dissenters' Rights."
The completion of the Acquisition or the Merger will be funded from the
proceeds of the Rights Offering and, if only the Minimum Proceeds are raised,
from other sources. The Company will also use a portion of the proceeds of the
Rights Offering, if available, for capital expenditures, general corporate
purposes, future acquisitions primarily of galvanizing operations and repayment
of the Company's bank loans. See "Use of Proceeds" and "Loan Repayments."
There can be no assurance that the Company will be able to acquire any or all
of the remaining Minority Stock if the Rights Offering is successful without
having to effect the Merger as described above, or that the Company will
receive sufficient proceeds to fund capital expenditures, for general corporate
purposes, to finance additional acquisitions or to repay amounts outstanding
under the bank loans. If the Company does not raise the Minimum Proceeds
before the Expiration Date of this Rights Offering, all funds received will be
promptly returned to the subscribers without any interest thereon or deduction.
See "Summary Pro Forma and Selected Consolidated Financial Information" and
"The Acquisition or Merger."
THE RIGHTS OFFERING
Rights The Company is offering up to 6,066,536
shares of Common Stock to holders of record
on __________, 1996, (the "Record Date").
Each stockholder of the Company will receive
one nontransferable right (the "Rights") for
each one share of the Common Stock held by
such holder as of the close of business on
the Record Date. Based on the Company's
authorized 18,000,000 shares of Common Stock
and 7,201,536 shares issued and outstanding
or reserved for issuance pursuant to the
Company's stock option plans (collectively,
the "Plans") as of the Record Date, if all
of the Rights were exercised in full, the
number of shares of Common Stock issued and
outstanding and reserved for issuance
pursuant to the Plans after the Rights
Offering would be 13,268,072 and the number
of shares of Common Stock authorized and
available for future issuance after the
Rights Offering would be 4,731,928. The
Rights are evidenced by nontransferable
Subscription Cards (the "Subscription
Cards"). See "The Rights Offering - The
Rights" and "The Rights Offering -
Subscription Privileges."
Minimum Proceeds The Rights Offering will close if the
Company receives subscription payments for
at least $1,500,000 of Common Stock. If
these Minimum Proceeds are not received on
or before the Expiration Date, the Company
will promptly return such payments to
subscribers without any interest thereon or
deduction.
Subscription Price $____ in cash per share of Common Stock
subscribed for pursuant to the Subscription
Privilege (the "Subscription Price"). See
"The Rights Offering - The Rights."
Subscription Privilege Each Right entitles the holder thereof to
purchase one share of Common Stock upon
payment of the Subscription Price (the
"Subscription Privilege"). See "The Rights
Offering - Subscription Privilege."
Non-Transferability of Rights The Rights are nontransferable.
Record Date ________________, 1996, at 5:00 p.m. New
York City time.
Expiration Date ________________, 1996, at 5:00 p.m. New
York City time, unless extended (the
"Expiration Date"). The Expiration Date
will not be extended beyond ____________,
1996, and if the conditions to the Rights
Offering have not been satisfied by
____________, 1996, or the Rights Offering
is otherwise terminated, all subscription
payments will be returned promptly, without
interest or deduction. The Company will
notify stockholders of any extension of the
Expiration Date of the Rights Offering
through the issuance of a press release
indicating such extension. See "The Rights
Offering - Expiration Date."
Procedure for Exercising Rights Rights may be exercised by the holder by
properly completing and signing the
Subscription Card evidencing the Rights and
forwarding such Subscription Card (or
following the Guaranteed Delivery Procedures
described herein), with payment of the
Subscription Price for each share of Common
Stock subscribed for pursuant to the
Subscription Privilege to Chemical Mellon
Shareholder Services, L.L.C. (the
"Subscription Agent") on or prior to the
Expiration Date. If the mail is used to
forward Subscription Cards, it is
recommended that insured, registered mail be
used. No interest will be paid on funds
delivered in payment of the Subscription
Price. ONCE A HOLDER HAS EXERCISED ANY
RIGHTS, SUCH EXERCISE MAY NOT BE REVOKED.
See "The Rights Offering - Exercise of
Rights."
<PAGE>
Procedure for Exercising Rights by
Foreign and Certain Other
Stockholders Subscription Cards will not be mailed to
holders of Common Stock whose addresses are
outside the United States or who have an APO
or FPO address, but will be held by the
Subscription Agent for their account. To
exercise the Rights represented thereby,
such holders must contact the Subscription
Agent on or prior to 5:00 p.m. New York City
time, on ________________, 1996. See "The
Rights Offering - Foreign and Certain Other
Stockholders."
Persons Holding Common Stock and
Wishing to Exercise Rights
Through Others Holders who hold shares of the Common Stock
for the account of others, such as brokers,
trustees or depositories for securities,
should notify the respective beneficial
owners of such shares as soon as possible to
ascertain such beneficial owners' intentions
and to obtain instructions with respect to
the Rights. If the beneficial owner so
instructs, the holder of such Right shall
complete Subscription Cards and submit them
to the Subscription Agent with the proper
payment. See "The Rights Offering -
Exercise of Rights."
Issuance of Common Stock Certificates representing shares of the
Common Stock purchased pursuant to the valid
exercise of the Rights will be delivered to
subscribers as soon as practicable after the
Expiration Date and the conditions to the
Rights Offering have been satisfied. See
"The Rights Offering - Subscription
Privilege."
Subscription Agent ChaseMellon Shareholder Services, L.L.C.
Information Agent Morrow & Co., Inc. (Telephone number: (800)
566-9061).
Common Stock to be Outstanding
After the Rights Offering The exact number of shares outstanding after
completion of the Rights Offering depends
upon the number of shares sold herein. Two
scenarios are presented: (i) 12,133,072
shares assuming the issuance of all of the
shares offered hereby; and (ii) _________
shares assuming the issuance of _________
(or ___%) of the shares offered hereby,
representing the number of shares that would
be issued if subscriptions were received for
$3,000,000, which amount would allow the
Company to complete the Acquisition or the
Merger. See "The Rights Offering" and
"Capitalization." None of the officers or
directors of the Company have indicated to
the Company whether or not they intend to
exercise their Rights, and therefore, there
can be no assurance that the Company will
receive any proceeds from this Rights
Offering.
AMEX Symbol for the Common Stock KIN
Use of Proceeds The proceeds from the sale of the Common
Stock in the Rights Offering will be used by
the Company to acquire shares of Rogers
stock exceeding 11.1% of Rogers' issued and
outstanding stock if only the Minimum
Proceeds are received, and if available, to
complete the Acquisition or the Merger, to
pay related fees and expenses, to pay for
capital expenditures, if for future
acquisitions primarily of galvanizing
operations and for repayment of outstanding
amounts pursuant to the Company's loans.
See "Use Of Proceeds," and "The Acquisition
or Merger." There are no assurances of
proceeds to the Company under the Rights
Offering or that the Company will be able to
acquire all of the remaining Minority Stock,
without effecting the Merger.
Conditions to the Rights Offering The issuance of shares pursuant to the
Rights Offering is subject to the following
conditions: (i) the receipt of the Minimum
Proceeds; and (ii) the absence of any suit
or other action seeking to enjoin the Rights
Offering, the Acquisition or the Merger. In
the event that the foregoing conditions to
the Rights Offering have not been satisfied
by _________, 1996, or the Rights Offering
is otherwise terminated, all subscription
payments will be returned promptly, without
interest or deduction. See "The Rights
Offering - Conditions to the Rights
Offering."
Amendments and Termination The Company may extend the Rights Offering
or terminate the Rights Offering at any time
prior to the Expiration Date or thereafter
in the Board of Directors' discretion or if
the conditions to the Rights Offering have
not been satisfied. See "The Rights
Offering - Amendment and Termination." The
Company will issue a press release with
respect to any extension or termination of
the Rights Offering.
Risk Factors A purchase of the Common Stock involves a
substantial degree of risk. See "Risk
Factors" for certain factors that a
potential investor should carefully
consider.<PAGE>
SUMMARY PRO FORMA AND SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
The Company's pro forma combined financial data set forth below and on the
following page should be read in conjunction with the Unaudited Pro Forma
Combined Condensed Financial Statements included elsewhere herein. Such pro
forma data do not purport to present the financial position or results of
operations of the Company had the transactions assumed herein occurred on the
dates indicated, nor are they necessarily indicative of the results of
operations which may be expected in the future. The pro forma combined
financial data have been prepared showing the acquisition of all the remaining
Minority Stock, and are presented assuming the Acquisition or Merger is funded
either (i) by the proceeds of the sale of all of the shares offered hereby (the
"Maximum Case") or (ii) by the sale of 500,000 of the shares offered hereby
(the "Minimum Case"). The summary historical data presented below and on the
following pages have been derived from the Company's Consolidated Financial
Statements and notes thereto incorporated by reference herein and Rogers'
Consolidated Financial Statements and notes thereto included elsewhere herein,
and should be read in conjunction therewith.
<TABLE>
Pro Forma
<CAPTION>
For the Three Months Ended March 31, 1996
Maximum Case(2) Minimum Case(3)
Kinark Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Historical(1) Adjustments Combined Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Sales $10,417 $1,603 $- $12,020 $- $12,020
Costs and expenses 9,885 1,752 (40) 11,597 (43) 11,594
Other expenses 205 21 (136) 90 - 226
Income tax expense (benefit) 120 (65) 70 125 20 75
Minority Interest (83) - 83 - 39 44
Net earnings (Loss) 124 (105) 189 208 62 81
Net earnings (Loss) per
common shares .02 - - .02 - .01
Weighted average shares
outstanding(4) 5,318 - 6,815 12,133 1,248 6,566
<CAPTION>
For the Year Ended December 31, 1995
Maximum Case(2) Minimum Case(3)
Kinark Rogers Pro Forma Pro Forma Pro Forma Pro Forma
Historical(5) Historical(6) Adjustments Combined Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Sales $25,246 $17,614 $- $42,860 $- $42,860
Costs and expenses 25,761 16,014 (120) 41,655 (150) 41,625
Other expenses 634 26 (543) 117 660
Income tax expense (benefit) (446) 586 308 448 110 250
Minority Interest - - - - 164 164
Discontinued Operation (Loss) (1,176) - 1,176 - 1,176 -
Net earnings (loss) (1,879) 988 1,531 640 1,052 161
Net earnings (loss) per common share (.50) - - .05 - .02
Weighted average shares outstanding(4) 3,747 - 8,386 12,133 2,819 6,566
</TABLE>
(1) Rogers historical for the month of January 1996.
(2) Pro forma data reflecting (i) the issuance of all 6,066,536 shares of the
Common Stock offered in this Rights Offering, and (ii) the acquisition of
100% of the remaining capital stock of Rogers by the Company. See "The
Acquisition or Merger."
(3) Pro forma data reflecting (i) the issuance of 500,000 of the shares of the
Common Stock offered in this offering, and (ii) the acquisition of 11.1%
of the remaining capital stock of Rogers by the Company. See "The
Acquisition or Merger."
(4) Weighted average shares outstanding include the dilutive effect of stock
options, if applicable.
(5) During August 1995, the Company finalized a formal plan to discontinue the
operations of its Kinpak subsidiary, comprising the Company's chemical
packaging business. Substantially all of the assets of Kinpak were
subsequently sold on February 27, 1996 for $1,840,000 consisting of
$850,000 cash and the assumption by the buyer of the capital lease on its
plant facilities which was financed by a $3,000,000 industrial revenue
bond issue. Included in the Discontinued Operation Loss of $1,176,000 is
a loss of $307,000 from operations in addition to the $1,264,000 loss on
disposal (before income taxes of $395,000) which includes $460,000 of
operating losses incurred through February 27, 1996, the closing date, and
a $804,000 loss on the sale of assets. Revenues from Kinpak were
$6,346,236 (including revenues of $263,110 for the period through the
closing date) for the year ended December 31, 1995.
(6) Rogers historical for the fiscal year ended September 30, 1995.
<TABLE>
Kinark Historical
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31,
1996 1995 1995 (1) 1994 1993 1992 1991 (2)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $10,417 $6,074 $25,246 $26,223 $25,542 $26,338 $29,369
Costs and expenses 9,885 6,355 25,761 24,087 22,837 23,119 23,830
Other expense 205 144 634 598 1,510 850 477
Income tax expense (benefit) 120 (155) (446) 527 430 550 1,120
Minority Interest (83) - - - - - -
Discontinued Operations - (212) (1,176) (601) 15 (377) (256)
Change in Accounting Method - - - - 1,802 - -
Net earnings (loss)(3) 124 (482) (1,879) 410 2,582 1,442 3,686
Net earnings (loss) per common share(3) .02 (.13) (.50) (.11) .68 .38 1.00
Weighted average shares outstanding(4) 5,318 3,751 3,747 3,752 3,755 3,748 3,705
<CAPTION>
At and For the
Three Months
Ended At and For the Year Ended December 31,
March 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Working capital $2,857 $2,875 $2,761 $3,961 $4,028 $2,000
Total assets 31,328 18,375 20,954 20,931 18,402 16,841
Capital expenditures 365 1,055 1,410 2,459 3,186 2,311
Depreciation and Amortization 538 1,471 1,469 1,304 1,238 1,305
Long-term obligations 7,057 5,932 6,009 7,720 7,548 6,417
Stockholders' equity 13,913 8,165 10,044 9,634 7,052 5,119
Per share 2.29 2.18 2.68 2.57 1.88 1.41
Common shares outstanding 6,066 3,747 3,746 3,746 3,746 3,623
</TABLE>
<PAGE>
(1) During August 1995, the Company finalized a formal plan to discontinue the
operations of its Kinpak subsidiary, comprising all of the Company's
chemical packaging business. Substantially all of the assets of Kinpak
were subsequently sold on February 27, 1996 for $1,840,000 consisting of
$850,000 cash and the assumption by the buyer of the capital lease on its
plant facilities which was financed by a $3,000,000 industrial revenue
bond issue. Included in the Discontinued Operation Loss of $1,176,000 is
a loss of $307,000 from operations in addition to the $1,264,000 loss on
disposal (before income taxes of $395,000) which includes $460,000 of
operating losses incurred during the third and fourth quarter of 1995 and
the period through February 27, 1996, the closing date, and a $804,000
loss on the sale of assets. Revenues from Kinpak were $6,346,236
(including revenues of $263,110 for the period through the closing date)
for the year ended December 31, 1995.
(2) The Company changed its method of valuing certain inventory from the
first-in first-out (FIFO) method to the last-in first-out (LIFO) method in
1991. This change increased 1991 net earnings by $300,000 or $.08 per
share.
(3) Earnings from continuing operations before cumulative effect of change in
accounting method.
(4) Weighted average shares outstanding include the dilutive effect of stock
options, if applicable.
<TABLE>
Rogers Historical
<CAPTION>
For the Six Months
Ended March 31, For the Year Ended September 30,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $10,049 $8,607 $17,614 $12,625 $11,544 $10,907 $11,575
Costs and expenses 9,510 7,626 16,014 12,247 10,070 10,096 10,094
Other (income) expense 101 40 26 (50) (44) (8) (26)
Income tax expense 153 327 586 104 511 312 495
Earnings 285 614 988 324 1,007 507 960
Dividends paid 113 113 225 459 225 225 284
<CAPTION>
At and For the
Six Months
Ended At and For the Year Ended September 30,
March 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Working capital $ 982 $1,488 $1,119 $1,515 $1,160 $ 909
Total assets 10,150 8,472 6,852 5,548 4,298 4,157
Capital expenditures 1,125 1,276 973 923 596 828
Depreciation and Amortization 430 807 672 550 474 381
Long-term obligations 1,392 1,377 812 305 360 233
Stockholders' equity 4,624 4,451 3,688 3,824 3,042 2,760
</TABLE>
<PAGE>
RISK FACTORS
Prior to deciding to exercise the Rights and purchase the Common Stock in
the Rights Offering, potential investors should carefully consider the
following factors, together with other information contained in or incorporated
by reference into this Prospectus, in evaluating the Company and its
businesses.
CONCENTRATION OF OWNERSHIP IN MANAGEMENT - CERTAIN ANTI-TAKEOVER EFFECTS
The members of the Board of Directors and senior management currently own
approximately 2,790,087 shares of Common Stock, or 46% of the issued and
outstanding Common Stock. Assuming the sale of all 6,066,536 shares offered
hereby, the members of the Board of Directors and senior management of the
Company would beneficially own approximately _____ shares or 46% of the Common
Stock if all such persons exercised their subscription privileges to the
fullest extent. Assuming the sale of _________ shares which would result in
the receipt of $3,000,000, which is the amount necessary to complete the
Acquisition or Merger, the members of the Board of Directors and senior
management would beneficially own approximately ____% of the Common Stock if
all such persons exercised their subscription privileges to the fullest extent.
Although it is unlikely that the members of the Board of Directors and senior
management will exercise their Subscription Privileges to the fullest extent,
this Common Stock ownership, together with various provisions of the Company's
Restated Certificate of Incorporation may tend to deter non-negotiated tender
offers or other efforts to obtain control of the Company and thereby deprive
stockholders of opportunities to sell shares of Common Stock at prices higher
than those prevailing in the market. See "Description of Capital Stock -
Certain Certificate of Incorporation and Bylaw Provisions."
RECENT OPERATING LOSSES
During six of the last seven fiscal quarters, the Company experienced
operating losses due primarily to losses at Kinpak and diminished profitability
at Lake River, its chemical packaging and storage subsidiaries. The Company
divested itself of all of its chemical packaging operations through its sale of
the assets of Kinpak on February 27, 1996. While the Company reported positive
earnings for the first quarter of 1996, and management expects the Company's
earnings to continue to improve after the divestiture of Kinpak and if the
Acquisition or the Merger is consummated, there can be no assurance that the
Company will be profitable over any particular time frame. Continued losses
will impair the Company's liquidity and capital resources and reduce the value
of the Common Stock. See "Business Strategy."
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
The Company's recent losses have reduced its liquidity and capital
resources. Depending upon the number of shares of Common Stock issued in the
Rights Offering, substantially all of the net proceeds from the Rights Offering
could be utilized in the Acquisition or the Merger. In addition, the Company's
outstanding borrowings under its bank term loan and revolving credit facility
mature on April 30, 1997, and there can be no assurance that the maturity date
can be extended or the borrowings refinanced. See "Loan Repayments."
Rogers has outstanding borrowings under two revolving lines of credit and
three term loans provided under a bank credit agreement, and notes payable to
unrelated companies for the purchase of equipment. The two revolving lines of
credit were both scheduled to mature on July 31, 1996 and have been extended to
October 31, 1997. The three term loans mature at various dates in October
1996, July 1997 and October 2000. The notes payable to unrelated companies
have maturities at various dates ranging from 1997 through 2015. There can be
no assurance that any of these maturity dates can be extended or the borrowings
refinanced.
Unless the Company and Rogers are sufficiently profitable or the bank
borrowings are extended or refinanced, the Company and Rogers will likely have
to find additional sources of working capital to fund their operations. There
can be no assurance that these sources, if needed, will be found.
In addition, the Company's bank credit agreement provides that in the
event of certain defaults under the Rogers bank credit agreement, such defaults
would constitute a default under the Company's bank credit agreement and could
cause the maturity date of the Company's outstanding borrowings to be
accelerated. There can be no assurance that such a default by Rogers will not
occur.
OPERATIONS
Galvanizing is a business that is closely tied to the economic growth of
several industries such as highway and transportation, communications and
energy. During recessionary periods in these industries, the demand for
galvanizing can decline. Profitability in the galvanizing industry is also
dependent to a certain extent on zinc prices and pricing structures are
directly related to zinc prices. Increases in zinc prices lead to increased
costs and prices for galvanizing and decreases in zinc prices lead to
reductions in galvanizing costs and prices. Equipment at the Company's
galvanizing plants requires periodic replacement due to age or obsolescence.
These replacement costs may adversely affect the profitability of these
galvanizing operations.
The Company is committed to complying with all federal, state and local
environmental laws and regulations and using its best management practices to
anticipate and satisfy future requirements. As is typical in the galvanizing
and chemicals businesses, the Company's subsidiaries will have environmental
compliance costs associated with past, present and future operations. Although
management has committed resources to discovering and eliminating environmental
issues as they arise, the Company does not have sufficient information to
attempt to quantify these potential costs.
The Company's largest customer of its chemical storage business, which
accounted for 33% of its 1994 sales, failed to renew its contract during the
fourth quarter of 1994. Although this subsidiary has aggressively increased
its sales efforts and implemented cost cutting measures, there can be no
assurance that all of these efforts will successfully replace this lost
business. Additionally, this subsidiary has several leases that expire
beginning in 1999, and renewal at higher prices, or the inability to renew such
leases, could adversely affect its operations.
Rogers has recently formed two subsidiaries to provide specialty
galvanizing applications. Start-up costs have already been incurred and will
likely continue into 1996. One of these subsidiaries must purchase steel and
fabricate it before galvanizing the end product which is subject to
fluctuations in steel prices. Although the Company expects these combined
operations to be profitable in 1996, there can be no assurance that this time
frame will be met. Competition for the business provided by these subsidiaries
could also adversely affect profitability.
CONDITIONS TO THE ACQUISITION OR MERGER
The Company's ability to complete the Acquisition or the Merger and own
100% of Rogers is dependent upon the receipt of at least $3,000,000 in
subscriptions or its receipt of the Minimum Proceeds and its securing the
necessary additional financing, as soon as practicable, for such completion.
The Acquisition will require $2,584,400 for all of the remaining Minority Stock
and the Merger could require some additional funds if any holders of the
Minority Stock dissent and their shares are revalued at more than $7,100 a
share. The Company is not able to determine how much, if any, the shares might
be revalued. See "Dissenters' Rights." There can be no assurance that
sufficient funds from these sources will exist to complete the Acquisition or
the Merger. If the Company is not able to raise the Minimum Proceeds, no
shares will be sold in this Rights Offering and all subscription payments will
be returned promptly, without interest or deduction. See "The Rights
Offering - Conditions to The Rights Offering" and "The Acquisition or Merger."
IMPACT OF RIGHTS OFFERING ON HOLDERS OF COMMON STOCK
The Rights entitle the holders of the Common Stock to purchase shares of
the Common Stock at a price below the prevailing market price of the Common
Stock immediately prior to the commencement of the Rights Offering. Holders of
the Common Stock who exercise their Rights will preserve, and may increase,
their proportionate interest in the equity ownership and voting power of the
Company. Holders who do not exercise their Rights will experience a decrease
in their proportionate interest in the equity ownership and voting power of the
Company. The consummation of the sale of the shares offered hereby would
increase the number of shares of Common Stock outstanding (on a pro forma basis
as of March 31, 1996) (i) by 6,066,536 shares to 12,133,072 shares, assuming
all of the shares offered hereby are issued, or (ii) by _________ shares (or
_____%) to _____ shares, assuming shares offered hereby representing the
$3,000,000 necessary to complete the Merger or Acquisition are issued.
DISSENTERS' RIGHTS
In the event that some or all of the minority stockholders of Rogers
decline to accept the Company's offer to purchase the Minority Stock, the
Company intends to complete the Acquisition through the Merger. Upon
completion of the Merger, the minority stockholders of Rogers would receive
cash consideration for their Minority Stock in the amount of $7,100 a share.
The minority stockholders of Rogers would have the right to exercise
dissenters' rights under Delaware law, which would allow them to challenge the
amount of the cash consideration paid for their Minority Stock in the Merger.
The stockholders of the Company would have no such rights. The exercise of
dissenters' rights by any minority stockholders of Rogers would not prevent
consummation of the Merger, but the exercise of such rights could increase the
cost of the Merger and the Acquisition by increasing the amount the Company has
to pay for each share of Minority Stock if it were determined that the shares
should be valued at an amount greater than $7,100 a share and by increasing the
costs associated with the Merger due to the valuation costs related to the
issues raised by the dissenting stockholders. Based on the sales of the Trust
Stock and Minority Stock in February and March 1996 at $7,100 a share, the
Company believes that the $7,100 per share price represents the value of the
remaining shares of Minority Stock and that the $3,000,000 discussed above as
necessary to complete the Acquisition or Merger allows for reasonable amounts
that may be required to effect the Merger after the payment of approximately
$2,885,000 for all of the remaining Minority Stock and the payment of expenses
relating thereto and to this Rights Offering. In the event the Company
completes the Acquisition through the Merger, there can be no assurance that
some or all of the minority stockholders of Rogers will not successfully
exercise their dissenters' rights and require such increased amounts.
MARKET CONSIDERATIONS
There can be no assurance that the market price of the Common Stock will
not decline during the subscription period or that, following the issuance of
the Rights and the issuance of the underlying shares upon exercise of the
Rights, a subscribing Rights holder will be able to sell shares purchased in
the Rights Offering at a price equal to or greater than the Subscription Price.
The election of a Rights holder to exercise Rights in the Rights Offering is
irrevocable. Moreover, until certificates are delivered, subscribing Rights
holders may not be able to sell the Common Stock that they have purchased in
the Rights Offering. Certificates representing shares of the Common Stock
purchased pursuant to the Subscription Privilege will be delivered as soon as
practicable after the Expiration Date. No interest will be paid to Rights
holders on funds delivered to the Subscription Agent pursuant to the exercise
of Rights pending delivery of Common Stock acquired upon exercise of the Rights
or if the Rights Offering is terminated.
RIGHTS NOT TRANSFERABLE; NO MARKET FOR RIGHTS
The Rights are not transferable, and thus there will be no market or other
means for holders of the Rights to directly realize any value associated with
the Rights. Thus, holders of the Rights must exercise them and acquire
additional shares of the Common Stock in order to realize any such value. The
election of a Rights holder to exercise Rights in the Rights Offering is
irrevocable.
DEBT RESTRICTIONS
The terms of the Company's existing bank term loan and revolving credit
facility restrict certain aspects of the Company's operations. These
restrictions include specified minimum values for the net worth and working
capital and a maximum debt to net worth ratio for the Company, and limitations
on incurring additional debt or capital expenditures or engaging in
acquisitions and dispositions by the Company. There can be no assurance that
the Company will be able to comply with these restrictions without disrupting
its business.
The terms of Rogers' existing revolving lines of credit and term loans
restrict certain aspects of Rogers' operations. These restrictions include a
specified minimum value for the net worth of Rogers, limitations on the payment
of dividends and limitations on incurring additional debt or lease obligations.
There can be no assurance that Rogers will be able to comply with these
restrictions without disrupting its business.
COMPETITION
The independent hot dip galvanizing market is highly competitive. In
particular, during 1995, the Company's Boyles subsidiary was subject to
increasing price pressure from its competitors in certain of its geographic
markets, and a new independent galvanizer recently commenced operations in
Rogers' geographic market. Although prices have improved during 1996, the
current profitability of Boyles and Rogers, and hence the Company, will depend
in part on their ability to maintain current prices. There can be no assurance
that these prices can be maintained. See "Business Strategy."
GOVERNMENT REGULATION
The Company's operations are subject to various government regulations,
including those related to occupational safety and health (OSHA), workers'
compensation and environmental matters. Like their competitors in the
galvanizing and chemicals businesses, the Company and its subsidiaries,
including Rogers, will have regulatory compliance costs associated with past,
present and future operations, but the Company cannot presently quantify the
cost of complying with these regulations. While neither the Company, nor its
subsidiaries is presently the subject of any material claim or investigation
with respect to these regulations, there can be no assurance that the cost of
complying with these regulations in the future will not have a material adverse
effect on the Company or its subsidiaries.
BUSINESS STRATEGY
In May 1995, Michael T. Crimmins, currently the Chairman of the Board of
the Company, acquired 9.7% of the Company's Common Stock from Northbridge
Holdings, Inc. In connection with this acquisition, Mr. Crimmins assumed the
duties of Chairman of the Board of the Company and later became Chief Executive
Officer of the Company. Subsequently, in February 1996, Ronald J. Evans
assumed the duties of President of the Company.
Mr. Crimmins and the other members of the Board intend to lead the Company
toward a refocusing of its efforts on its galvanizing business. The Company
divested itself of its Kinpak specialty chemical subsidiary and has completed
the acquisition of a controlling interest in Rogers to expand its galvanizing
operations. Mr. Crimmins, Mr. Evans and Paul R. Chastain, all officers and
directors of the Company, now comprise the entire Board of Directors of Rogers
and control management of the Rogers business. The acquisition of a
controlling interest in Rogers has created the largest independent galvanizing
operation in North America, and management believes that the combined company,
based on tonnage galvanized, will have the largest share of the galvanizing
market in the five-state region comprised of Texas, Missouri, Kansas, Oklahoma
and Arkansas. Rogers' sales have increased steadily since 1987 due to a strong
geographic niche in the central Midwestern United States market and, based on
its operating income for the fiscal year ended September 30, 1995, Rogers would
have been a major contributor to the Company's profitability during this
period.
A key part of the Company's business strategy is to grow its galvanizing
business. As part of its efforts to refocus on galvanizing, the Company is
proceeding toward consummation of the Acquisition or Merger and the continued
integration and consolidation of Rogers into its operations. Rogers has had
net profits each year since 1987, with its sales increasing from approximately
$7 million in 1987 to $17.6 million for 1995. Acquisition of a portion of the
Minority Stock exceeding 11.1% of the outstanding Rogers stock will allow the
Company to consolidate the financial results of Rogers with the Company's
results for tax purposes. If Rogers earnings continue to increase as described
above and earnings for its other subsidiaries continue to increase, this tax
consolidation will allow the Company to utilize approximately $5,309,000 in net
operating loss carryforwards against future taxable income which will result in
tax savings to the Company. Acquisition of all of the remaining Minority Stock
would result in the Company owning 100% of Rogers and allow inclusion of 100%
of Rogers' future net earnings in the Company's financial statements. Based on
Rogers' past earnings and the current favorable market conditions in the
galvanizing industry resulting in higher sales, consolidation of Rogers'
financial results with the Company's should provide additional net earnings for
the Company which would strengthen its operating results. Currently, the
Company is able to include only 68.9% of Rogers net earnings in its operating
results. As a result, approximately $225,000 of Rogers net earnings for the
period February 1, 1996 through June 30, 1996 attributable to the Minority
Stock have been excluded from the Company's consolidated net earnings. As
discussed above, the acquisition of all of the remaining Minority Stock would
result in the Company owning 100% of Rogers and allowing inclusion of 100% of
Rogers future net earnings in the Company's financial statements.
Additionally, based on the pro forma combined results of the Company for the
most recently completed fiscal year, management believes that the consolidation
of financial results will increase the revenues and earnings generated by the
Company's galvanizing operations.
The Company also believes that the acquisition of all or part of the
remaining Minority Stock will allow the Company to continue the assimilation of
Rogers as a Company subsidiary and allow the Company to realize some economies
by consolidating the corporate operations of Rogers into its operations.
Management has not determined any specific amount of savings that may result
from the integration of Rogers with its Boyles Galvanizing subsidiary, however,
the Company is exploring a number of opportunities to reduce expenses and
operating costs, including the elimination of duplicate functions, combining
administrative functions and redefining the optimum staffing level for each of
its eleven (11) galvanizing plants. Management believes that completion of the
Acquisition or the Merger and integration of Rogers with the Company will
provide additional opportunities to enhance profitability of its galvanizing
operations, in part, through the Company's planned standardization of
galvanizing processes and operating equipment to achieve more efficient plant
operations. These standards will reflect selection of the best production and
engineering practices from Rogers and the Company's Boyles Galvanizing
subsidiary. Improvement will be measured by reduced raw material costs,
increased tonnage output per manhour and reduced operating overhead. In terms
of new business development, an integrated sales function should be able to
compete more effectively by capitalizing on the strength of the Company's
expanded production capacity, faster turn-around service and diverse locations.
Centralized purchasing is expected to result in improved allocation and pricing
for zinc raw material, chemicals and natural gas supplies, key components
utilized in the galvanizing process.
In addition, completion of the Acquisition or Merger should provide the
Company with greater financial and managerial resources which should enhance
the Company's ability to make future acquisitions of independent galvanizing
operations and its ability to make capital expenditures based on Rogers' strong
financial position, even if proceeds are not available from this Rights
Offering for such purposes. Rogers' total debt to net worth ratio is .65% and
debt maturities are staggered to facilitate future refinancing requirements.
Approximately 15% of Rogers' term debt bears interest at fixed rates below
current market rates. Bank revolving lines of credit totaling $3 million are
adequate for current working capital needs, and have unused capacity. In
addition, as business opportunities evolve, these revolving lines could be
increased by approximately one-third based on Rogers' current asset base. As a
measure of the financial strength to be added by the completion of the
Acquisition or Merger, Rogers' pre-tax earnings provide better than a 10 times
coverage of debt interest expense. The management team is drawn from the
experienced management pool available within Rogers and Boyles. Each of these
companies will contribute unique functional expertise to complement a new
organizational structure with the management depth and capacity to support
continued growth in galvanizing, internally and through acquisitions. See
"Business Strategy."
THE PRIVATE PLACEMENT AND ACQUISITION OF ROGERS STOCK
On August 3, 1994, the Company entered the Rogers Agreement with the
Trusts, which together owned the Trust Stock consisting of 600 shares or 51.2%
of the capital stock of Rogers, to acquire their stock in Rogers for
approximately $4.3 million in cash or $7,100 a share. As part of the Rogers
Agreement, the Company agreed to offer to purchase the remaining shares of
Minority Stock from Rogers' minority stockholders for cash at a price per share
equivalent to that paid to the Trusts for the Trust Stock.
In February 1996, the Company acquired the Trust Stock with a portion of
the proceeds of the Private Placement, of 2,319,038 shares of the Company's
Common Stock. The Private Placement represented the sale of unregistered
shares of the Company's Common Stock to certain accredited investors at a sales
price of $2.50 a share. The share price in the Private Placement was based on
an average of reported sales prices of the Common Stock in December 1995, when
the Company's Board of Directors agreed to pursue the Private Placement. Sales
pursuant to the Private Placement closed in January and March 1996, with gross
proceeds of $5,797,595.
In February and March 1996, the Company acquired shares of Rogers stock
exceeding 208 shares of Minority Stock representing an additional 17.7% of the
outstanding Rogers stock with a portion of the proceeds of the Private
Placement. The Company intends to offer to acquire shares of Rogers stock
exceeding at least 11.1% of the outstanding Rogers stock with the Minimum
Proceeds and to complete the acquisition of Rogers through the Acquisition or
Merger upon receipt of at least $3,000,000 from this Rights Offering, or from
other sources if only the Minimum Proceeds are raised.
THE ACQUISITION OR MERGER
The Company currently owns 68.9% of the Rogers stock and intends to offer
to acquire the remaining Minority Stock at the same price per share paid for
the Trust Stock. The Company cannot determine how many additional minority
stockholders of Rogers will accept the Company's offer. In the event that some
or all of the minority stockholders of Rogers decline to accept the Company's
offer to purchase the Minority Stock, the Company intends to accomplish the
Acquisition through a merger which would be effected under Section 251 of the
Delaware General Corporation Law (the "Merger"). The Company would effect the
Merger with a wholly-owned subsidiary of the Company under Delaware law and all
of the Rogers stockholders, including the minority stockholders, would be paid
cash consideration for their Rogers common stock in the amount of $7,100 a
share.
If all of the remaining Minority Stock is purchased at the proposed price
per share the acquisition price will be $2,584,400. Giving effect to the
payment of fees and expenses related to the Rights Offering and the
Acquisition, including certain expenses related to the acquisition of the Trust
Stock, the total cost associated with the Rights Offering and the Acquisition
or Merger is estimated to be approximately $3,000,000. See "Use of Proceeds."
The cost of the Merger should be equivalent to the cost of the Acquisition,
unless stockholders perfect their dissenters' rights and it is determined that
the shares should be valued at an amount greater than $7,100 a share. See
"Risk Factors - Dissenters' Rights." The cost of the Acquisition or the Merger
would be funded from the proceeds of the Rights Offering and other sources, if
required. The Company will also use a portion of the proceeds, if available,
for capital expenditures, general corporate purposes, future acquisitions
primarily of galvanizing operations and repayment of the Company's bank loans.
See "Use of Proceeds." There can be no assurance that the Company will be able
to acquire any or all of the remaining Minority Stock if the Rights Offering
results in at least $3,000,000 in proceeds without having to effect the Merger
as described above, or that the Company will receive sufficient proceeds to
fund capital expenditures, for corporate purposes, to finance additional
acquisitions or to repay amounts outstanding under the bank loans.
ROGERS' BUSINESS
Similar to the Company's Boyles subsidiary, Rogers provides corrosion
protection for metal components by means of hot dip galvanizing. Rogers was
incorporated in 1940 and competed with Boyles in the central midwestern United
States market. Although the two companies previously bid jobs for the same
customers, the primary markets of the two companies did not generally overlap
due to the diverse physical locations of the Boyles' and Rogers' plants.
Rogers galvanizes for more than 600 customers annually. Rogers' primary market
is in the Tulsa area, which generates approximately 65% of its annual tonnage.
Currently, 40% to 50% of Rogers' business is subject to a yearly contract or
blanket purchase order.
Rogers maintains and operates two galvanizing plants in Tulsa. On a
combined basis, Rogers operates three galvanizing kettles with 56,000 square
feet under roof. Combined capacity is 75,000 tons of galvanized steel per year
and, in the year ended December 31, 1995, Rogers galvanized approximately
54,000 tons of steel. Rogers employs approximately 235 full-time employees.
Rogers acquired a galvanizing company in Kansas City, Missouri in September
1995 which it operates as a wholly-owned subsidiary. This acquisition was
intended to expand Rogers' operations to better serve the geographic area of
the midwestern United States that it was already serving. A competitor of
Rogers recently built a new plant in the Tulsa area, and as a result the price
that Rogers can charge for galvanizing is expected to be subject to enhanced
competitive pressure.
In addition, Rogers conducts specialty galvanizing operations through two
subsidiaries, Spin-Galv, Inc. ("Spin-Galv") and Reinforcing Services, Inc.
("RSI"). Spin-Galv provides specialized centrifuge galvanizing for smaller
metal components by placing them in a basket-like container and "spinning" them
in a molten zinc solution. Markets targeted by Spin-Galv include fabricators,
original equipment manufacturers, and manufacturers of industrial fasteners and
connectors. RSI provides galvanized components primarily through a business
agreement with The Reinforced Earth Company ("RECO"). RSI purchases steel,
fabricates it to RECO's specifications and then galvanizes it using a highly
specialized and automated process that requires roughly one-third of the
personnel needed for more traditional galvanizing methods. This on-site
fabrication and galvanizing eliminates the in-bound transportation expense
normally incurred by RECO in shipping to the galvanizer. RSI's agreement with
RECO expires August 31, 1997. RSI plans to target other specialty
manufacturers, such as rebar manufacturers, to explore opportunities for adding
new galvanizing business.
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the sale of the maximum number of shares
of Common Stock to be issued with respect to the Rights are estimated to be
approximately $___________, after deducting the estimated offering expenses
payable by the Company. However, there is no assurance that the Company will
receive any proceeds from the Rights Offering. The Company will use the net
proceeds of the Rights Offering and financing from other sources, if required,
to finance the Acquisition or the Merger, pay related fees and expenses, and,
if available, for capital expenditures, general corporate purposes, possible
future acquisitions primarily in the galvanizing industry and repayment of the
Company's bank loans. The following table illustrates the estimated sources
and uses of funds, assuming that the Company (i) receives the maximum proceeds
through the issuance of all of the shares of Common Stock offered hereby (the
"Maximum Proceeds"), or (ii) receives the Minimum Proceeds through the issuance
of 500,000 of the shares of Common Stock offered hereby. There can be no
assurance that the Company will receive any proceeds from the Rights Offering.
<TABLE>
<CAPTION>
MAXIMUM PROCEEDS MINIMUM PROCEEDS
AMOUNT AMOUNT
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <S> <C>
SOURCES OF FUNDS: SOURCES OF FUNDS:
Common Stock offered hereby $ -- Common Stock offered hereby $1,500
Other Sources(1) 11 Other Sources(1) 11
Total Sources of Funds $ -- Total Sources of Funds $1,511
USES OF FUNDS: USES OF FUNDS:
Acquisition of portion of minority
Acquisition of Rogers $ 2,584 Rogers Stock(2) $1,335
Fees and expenses(3) 300 Fees and expenses(3) 176
Capital Expenditures(4) -- Capital Expenditures(4) 0
Acquisitions(5) --
Repayment of Bank Loan(6) -- Repayment of Bank Loan(6) 0
Other corporate purposes -- Other corporate purposes 0
Total Uses of Funds $ -- Total Uses of Funds $1,511
</TABLE>
(1) Cash from operating funds.
(2) These funds, along with other sources available to the Company will be
used to acquire 188 shares of Minority Stock which would result in the Company
owing more than 80% of the outstanding Rogers Stock. If the Company receives
at least $3,000,000 in gross proceeds from this Rights Offering, it will be
able to complete the Acquisition or the Merger for approximately $2,584,500 and
pay related fees and expenses of $300,350, resulting in the Company's ownership
of 100% of the outstanding Rogers stock. If the Company does not raise at
least $3,000,000 in the Rights Offering, it intends to complete the Acquisition
or Merger as soon as practicable with funds from other sources.
(3) This amount includes expenses comprised of the registration fee for this
Rights Offering, blue sky fees and expenses, AMEX application fees, printing
and engraving costs, expenses of subscription agents and information agents and
legal and accounting fees and expenses. If the Company receives only the
Minimum Proceeds, it will pay $176,000 of these expenses from the proceeds,
with the remaining funds coming from other sources.
(4) This amount would be used for capital improvements to upgrade or replace
existing galvanizing plants and operating equipment, to upgrade chemical
storage tanks and pipelines and for other projects to enhance the efficiencies
and profitability of the facilities operated by Boyles, Rogers and Lake River.
(5) This amount would be used to make strategic acquisitions primarily in the
galvanizing industry.
(6) This amount would be used to repay all or a portion of the outstanding
principal and interest relating to the Company's revolving line of credit and
term loan from the Bank of Oklahoma. See "Loan Repayments."
LOAN REPAYMENTS
If the Company receives the Maximum Proceeds, it intends to use a portion
of such proceeds to repay all or a portion of the outstanding principal and
interest relating to the Company's Term Loan (as defined below) and revolving
line of credit (as defined below). The Company operates under that certain
Revolving Line of Credit and Term Loan Agreement, dated as of March 24, 1992,
among The Bank of Oklahoma, the Company, Boyles Galvanizing Company and Lake
River Corporation, as amended (the "Loan Agreement"). The Loan Agreement
provides for a $4,250,000 maximum revolving line of credit (the "Line of
Credit") and a term loan in the original principal amount of $5,000,000 (the
"Term Loan"), both of which mature and become due and payable on April 30,
1997, unless extended. The approximate principal balances on the promissory
notes evidencing the Line of Credit and the Term Loan as of June 30, 1996 were
$2,921,000 and $2,839,000, respectively. Amounts borrowed on the Term Loan and
the Line of Credit bear interest at a rate of 1% over the prime rate, resulting
in an effective rate of 9.25% on both the Term Loan and the Line of Credit as
of June 30, 1996. The Term Loan and the Line of Credit can be repaid at any
time or from time to time without penalty or premium. The Loan Agreement was
most recently amended on April 1, 1996, which amendment extended the maturity
date of the Term Loan and the Line of Credit to April 30, 1997. The Line of
Credit is a working capital line of credit and the Term Loan is used to finance
capital expenditures.
<PAGE>
CAPITALIZATION
The following table sets forth, assuming the acquisition of all of the
remaining Minority Stock, the actual capitalization of the Company at March 31,
1996.
March 31, 1996
Historical
(In thousands)
Long-term obligations $ 7,057
Stockholders' equity
Common stock, $.10 par value,
Authorized: Actual - 18,000,000 shares;
Issued: 7,479,600 shares(1) 748
Additional paid-in capital 15,862
Retained earnings 3,214
Less: Treasury stock at cost: 1,413,064 shares (5,811)
Stock Subscription Receivable (100)
Total stockholders' equity 13,913
Total long-term obligations and stockholders' equity $20,970
- ------------
(1) Does not include shares issuable pursuant to currently exercisable options
to purchase Common Stock, which aggregate 77,125 shares or shares reserved
for issuance pursuant to the Plans.
<PAGE>
COMMON STOCK DIVIDENDS AND PRICE RANGE
The Company has a longstanding policy of not paying cash dividends on its
Common Stock in order to reinvest earnings to support its business operations.
The Company presently intends to continue that policy. The terms of the
Company's bank borrowings also restrict the payment of dividends on its Common
Stock. The Company's Common Stock is listed for trading on the American Stock
Exchange (the "AMEX") under the symbol "KIN" and appears in the market reports
in The Wall Street Journal as "KinarkCp." The following table sets forth, for
the periods indicated, the high and low sales prices of the Common Stock as
reported by the AMEX:
Quarterly Stock Prices
First Second Third Fourth
1996
High $3 1/4 4 3/4 3 5/8(1) N/A
Low 2 1/5 2 3/8 3 1/4(1) N/A
1995
High $4 $3 3 3 1/4
Low 3 2 7/8 2 7/8 2 1/4
1994
High $4 $4 7/8 $4 1/2 $4 1/4
Low 3 3/4 4 3 1/2 3
1993
High $5 1/2 $5 1/2 $5 3/8 $4 1/4
Low 4 3/8 4 1/4 4 3 3/8
------------
(1) Through July 26, 1996.
On July 26, 1996, the closing price of the Common Stock on the AMEX was
$3.56 per share. On that date, there were approximately 2,446 record holders
of the Common Stock.
THE RIGHTS OFFERING
THE RIGHTS
The Company is offering up to 6,066,536 shares of its Common Stock through
the distribution of nontransferable Rights, at no cost, to the record holders
("Holders") of outstanding shares of the Common Stock as of the Record Date
(5:00 p.m. New York City time, on ________________, 1996). The Company will
distribute one Right for each one share of the Common Stock held on the Record
Date. Each such Right entitles the holder thereof to subscribe for shares of
the Common Stock pursuant to a Subscription Privilege. See "Subscription
Privileges." The Rights are evidenced by nontransferable Subscription Cards
(the "Subscription Cards").
The Subscription Price of $____ per share of the Common Stock represents a
discount of ____% from the closing price of $_______ for the shares of the
Common Stock listed on the AMEX immediately prior to the commencement of the
Rights Offering. There can be no assurance that shares of the Common Stock
will trade at prices above the Subscription Price. See "Risk Factors - Market
Considerations."
EXPIRATION DATE
The Rights will expire at 5:00 p.m. New York City time, on ____________,
1996, unless extended by the Company (the "Expiration Date"), after which time
all unexercised Rights will be null and void. The Company will notify
stockholders of any extension of the Expiration Date of the Rights Offering
through the issuance of a press release indicating such extension. The Company
will not be obligated to honor any purported exercise of Rights received by the
Subscription Agent after 5:00 p.m. New York City time, on the Expiration Date,
regardless of when the documents relating to such exercise were transmitted,
except when timely transmitted pursuant to the Guaranteed Delivery Procedures
described below. The Expiration Date will not be extended beyond ____________,
1996, and if the conditions to the Rights Offering have not been satisfied by
such date, or the Rights Offering is otherwise terminated, all subscription
payments will be returned promptly, without interest or deduction. See
"Amendments and Termination."
SUBSCRIPTION PRIVILEGE
The Subscription Privilege entitles the holder of each Right to purchase
one share of the Common Stock upon payment of the Subscription Price.
Certificates representing shares of the Common Stock purchased pursuant to the
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Date. The Company is authorized to issue 18,000,000
shares of Common Stock, and 7,201,536 shares are currently issued and
outstanding or reserved for issuance pursuant to the Company's stock option
plans (collectively, the "Plans"). If each of the Company's stockholders were
to exercise its Subscription Privilege to the full extent of current ownership,
the number of shares of Common Stock issued and outstanding and reserved for
issuance pursuant to the Plans after the Rights Offering would be 13,268,072
and the number of shares of Common Stock authorized and available for future
issuance after the Rights Offering would be 4,731,928. The Company believes
that it is very unlikely that each stockholder will decide to participate in
the Rights Offering to the full extent of current ownership, and therefore, the
number of shares of Common Stock authorized and available for future issuance
will likely be greater than 4,731,928.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent, at or
prior to the Expiration Date (5:00 p.m. New York City time, on ____________,
1996, unless extended), the properly completed and executed Subscription Card
evidencing those Rights with any required signature guarantees, together with
payment in full of the Subscription Price for each share of the Common Stock
subscribed for pursuant to the Subscription Privilege. Such payment must be
made by (a) check or bank draft drawn upon a U.S. bank or postal, telegraphic,
or express money order payable to ChaseMellon Shareholder Services, L.L.C., as
Subscription Agent, or (b) wire transfer of same day funds to the account
maintained by the Subscription Agent for such purpose at Mellon Bank, N.A., ABA
No. 043000261, Account No. 100-2331 (marked: "Kinark Corporation
Subscription"). Payment of the Subscription Price will be deemed to have been
received by the Subscription Agent only upon (i) clearance of any uncertified
check, (ii) receipt by the Subscription Agent of any certified check or bank
draft drawn upon a U.S. bank or any postal, telegraphic or express money order
or (iii) receipt of good funds in the Subscription Agent's account designated
above. HOLDERS WISHING TO PAY BY UNCERTIFIED PERSONAL CHECK SHOULD NOTE THAT
SUCH A CHECK MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR AND SHOULD TRANSMIT
THE CHECK SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT IT IS
RECEIVED AND CLEARS BY SUCH DATE OR CONSIDER PAYMENT BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
The addresses to which the Subscription Cards and payment of the
Subscription Price should be delivered are:
By Mail: ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
P.O. Box 817
Midtown Station
New York, NY 10018
By Hand or
Overnight: ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway
13th Floor
New York, NY 10271
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Cards evidencing such Rights to reach the
Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following conditions (the "Guaranteed
Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each share of the Common Stock being subscribed for pursuant to the
Subscription Privilege to be received (in the manner set forth above) by
the Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guarantee notice (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions as to Use of
Kinark Corporation Subscription Cards (the "Instructions") distributed
with the Subscription Cards, from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. (the "NASD"), or from a commercial bank or trust company
having an office or correspondent in the United States (each, an "Eligible
Institution"), stating the name of the exercising Rights holder, the
number of Rights represented by the Subscription Cards held by such
exercising Rights holder, the number of shares of the Common Stock being
subscribed for pursuant to the Subscription Privilege, and guaranteeing
the delivery to the Subscription Agent of any Subscription Cards
evidencing such Rights within three AMEX trading days following the date
of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Card evidencing the Rights
being exercised, with any required signatures guaranteed, is received by
the Subscription Agent within three AMEX trading days following the date
of the Notice of Guaranteed Delivery relating thereto. The Notice of
Guaranteed Delivery may be delivered to the Subscription Agent in the same
manner as Subscription Cards at the addresses set forth above, or may be
transmitted to the Subscription Agent by telegram or facsimile
transmission (telecopier no. (201) 329-8936) confirmed by telephone
(telephone no. (201) 296-4983). Additional copies of the form of Notice
of Guaranteed Delivery are available upon request from the Information
Agent, whose address and telephone number are set forth below under
"Information Agent."
Funds received in payment of the Subscription Price for shares subscribed
for pursuant to the Rights will be held in a segregated account pending
issuance of such shares.
Unless a Subscription Card (i) provides that the shares of the Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription Card
must be guaranteed by a commercial bank, trust company, securities broker or
dealer, credit union, savings association or other eligible guarantor
institution which is a member of or a participant in a signature guarantee
program acceptable to the Subscription Agent.
Holders who hold shares of the Common Stock for the account of others,
such as brokers, trustees or depositaries for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Right should complete Subscription Cards and submit them to the Subscription
Agent with the proper payment.
The instructions accompanying the Subscription Cards should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CARDS TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CARDS AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
SUBSCRIPTION CARDS AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED
TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M. NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY
URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK,
MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Cards or incur
any liability for failure to give such notification.
The Company will pay the fees and expenses of the Subscription Agent, and
has also agreed to indemnify the Subscription Agent from any liability which it
may incur in connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed Morrow & Co., Inc. as Information Agent for the
Rights Offering. Any questions or requests for assistance concerning the
method of exercising Rights or additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery may be directed to the
Information Agent at the telephone number and address below.
Morrow & Co., Inc.
909 Third Avenue
20th Floor
New York, New York 10022-4799
or
CALL TOLL-FREE
(800) 566-9061
The Company will pay the fees and expenses of the Information Agent and
has also agreed to indemnify the Information Agent from certain liabilities
which it may incur in connection with the Rights Offering. Joseph J. Morrow, a
member of the Company's Board of Directors and the beneficial owner of
1,782,538 shares, or 29.4%, of the Common Stock as of the Record Date, is the
chief executive officer of the Information Agent. Mr. Morrow purchased
1,759,083 shares of Common Stock in the Company's Private Placement in January
1996.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE SUBSCRIPTION PRIVILEGE, SUCH
EXERCISE MAY NOT BE REVOKED.
CONDITIONS TO THE RIGHTS OFFERING
The issuance of shares pursuant to the exercise of the Rights is subject
to the following conditions: (i) receipt of the Minimum proceeds; and (ii) the
absence of any suit or other action seeking to enjoin the Rights Offering, the
Acquisition or the Merger. In the event that the foregoing conditions to the
Rights Offering have not been satisfied by _________, 1996, all subscription
payments will be returned promptly, without interest or deduction.
AMENDMENT AND TERMINATION
The Company may extend the Rights Offering and otherwise amend the terms
of the Rights Offering or terminate the Rights Offering at any time prior to
the Expiration Date or thereafter in the Board of Directors' discretion or if
the conditions to the Rights Offering have not been satisfied.
SHARES OF THE COMMON STOCK OUTSTANDING AFTER THE RIGHTS OFFERING
Assuming the issuance of all of the shares offered hereby, 6,066,536
shares of the Common Stock will be issued in connection with the Rights
Offering. Based on the 6,066,536 shares of the Common Stock outstanding as of
March 31, 1996, the issuance of such shares pursuant to the Rights Offering
would result (on a pro forma basis as of such date) in a 100% increase in the
number of outstanding shares of the Common Stock. Assuming the issuance of
500,000 of the shares offered hereby, the issuance of such shares would result
(on a pro forma basis as of March 31, 1996) in a ____% increase in the number
of outstanding shares of the Common Stock.
FOREIGN AND CERTAIN OTHER STOCKHOLDERS
Subscription Cards will not be mailed to holders whose addresses are
outside the United States or who have an APO or FPO address, but will be held
by the Subscription Agent for their account. To exercise such Rights, such
holders must notify the Subscription Agent on or prior to 5:00 p.m. New York
City time, on ________________, 1996.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Nelson Mullins Riley & Scarborough, L.L.P., the material
United States federal income tax consequences to holders of shares of the
Common Stock upon the issuance (the "Issuance") of the Rights, and to holders
of the Rights upon the exercise, lapse or disposition of the Rights, will be as
set forth below. The following summary is qualified in its entirety by
reference to, and is based upon, laws, regulations, rulings and decisions
currently in effect on the date of this Prospectus and as those laws,
regulations, rulings and decisions were interpreted on such date. The
following summary does not discuss all aspects of federal income taxation that
may be relevant to a particular investor or to certain types of investors
subject to special treatment under the federal income tax laws (for example,
and without limitation, banks, dealers in securities, life insurance companies,
tax exempt organizations and foreign taxpayers), and does not discuss any
aspect of state, local or foreign tax laws. The following discussion is
limited to holders who will hold the Rights and any shares of the Common Stock
received therefor upon exercise as capital assets.
Issuance of the Rights. Holders of shares of the Common Stock will not
recognize taxable income, for federal income tax purposes, in connection with
the receipt of the Rights.
Basis and Holding Period of the Rights. Except as provided in the
following sentence, the basis of the Rights received by a holder of Common
Stock as a distribution with respect of such holder's shares of Common Stock
will be zero. If either (i) the fair market value of the Rights on the date of
Issuance is 15% or more of the fair market value (on the date of Issuance) of
the shares of the Common Stock with respect to which they are received or
(ii) the holder of Common Stock elects, in his or her federal income tax return
for the taxable year in which the Rights are received, to allocate part of the
basis of such shares of the Common Stock to the Rights, then upon exercise or
sale of the Rights, the holder's basis in such shares of the Common Stock will
be allocated between the shares of the Common Stock and the Rights in
proportion to the fair market values of each on the date of Issuance. The
holding period of the Rights received by a holder as a distribution on such
holder's shares of the Common Stock will include the holder's holding period
(as of the date of Issuance) for the shares of the Common Stock with respect to
which the Rights were issued.
Lapse of the Rights. Holders of shares of the Common Stock who allow the
Rights received by them at the Issuance to lapse will not recognize any gain or
loss, and no adjustment will be made to the basis of the shares of the Common
Stock, if any, owned by such holders of the Rights.
Exercise of the Rights; Basis and Holding Period of Shares of the Common
Stock. Holders of the Rights will not recognize any gain or loss upon the
exercise of such Rights. The basis of the shares of the Common Stock acquired
through exercise of the Rights will generally be equal to the sum of the
Subscription Price therefor and the holder's basis in such Rights (if any).
The holding period for the shares of the Common Stock acquired through exercise
of the Rights will begin on the date such Rights are exercised.
THE FOREGOING IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH
HOLDER OF SHARES OF THE COMMON STOCK IS URGED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS
OR HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF
STATE AND LOCAL INCOME AND OTHER TAXES.
OTHER MATTERS
The Rights Offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor is the Company selling or accepting any
offers to purchase any shares of the Common Stock from Rights holders who are
residents of any such state or other jurisdiction. It is not anticipated that
there will be any changes in the terms of the Rights Offering. The Company, if
it so determines in its sole discretion, may decline to make modifications to
the terms of the Rights Offering requested by certain states or other
jurisdictions, in which event Rights holders resident in those states or
jurisdictions will not be eligible to participate in the Rights Offering.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company consists of 18,000,000 shares
of Common Stock, $.10 par value per share. As of March 31, 1996, the Company
had issued or reserved for issuance 7,201,536 shares of Common Stock, 6,066,536
of which were outstanding and 1,135,000 of which were reserved for issuance
pursuant to the Plans. Holders of Common Stock are entitled to one vote per
share on all matters on which the holders of Common Stock are entitled to vote
and do not have any cumulative voting rights. The holders of Common Stock are
entitled to receive such dividends as may be declared from time to time by the
Board of Directors. The Company has a longstanding policy of not paying cash
dividends on the Common Stock in order to reinvest earnings to support its
business operations. The terms of the Company's secured credit facilities also
restricts the payment of dividends on the Common Stock. See "Common Stock
Dividends and Price Range."
Holders of Common Stock have no preemptive, conversion, redemption or
sinking fund rights. In the event of a liquidation, dissolution or winding-up
of the Company, holders of Common Stock are entitled to share equally and
ratably in the assets of the Company, if any, remaining after the payment of
all debts and liabilities of the Company. The outstanding shares of Common
Stock are, and the shares of Common Stock issuable upon exercise of the Rights
when issued will be, fully paid and nonassessable.
For a description of the Rights to be distributed by the Company, see "The
Rights Offering."
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The provisions of the Company's Restated Certificate of Incorporation (the
"Certificate"), the Company's Amended and Restated Bylaws (the "Bylaws") and
the Delaware Corporation Law summarized in the following paragraphs may be
deemed to have anti-takeover effects and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider to be in such
stockholder's best interest, including those attempts that might result in a
premium over the market price for the shares held by stockholders, and may make
removal of management more difficult.
Authorized but Unissued Stock. After completion of the Rights Offering
the Company will have authorized but unissued shares of Common Stock available
for future issuance without stockholder approval. These additional shares may
be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued and unreserved Common
Stock may enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of the Company by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of the Company's
management.
The Board of Directors may also create and issue, without stockholder
approval, rights or options entitling the holders thereof to purchase from the
Company shares of the Company's Common Stock.
Number of Directors. The Certificate provides that the number of
directors of the Company shall be as provided in the Bylaws, but may not be
less than three and shall be seven if the Bylaws do not provide a number. The
Bylaws currently provide that the maximum number of directors which shall
constitute the entire Board of Directors shall be seven, with the exact number
of directors to be established by resolution of the Board from time to time.
The maximum number of directors may be increased or decreased from time to time
by amendment of the Bylaws, subject to the provisions of the Certificate.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of stockholder proposals
and stockholder nominations for the election of directors at any annual meeting
of stockholders must be in writing and be received at the principal executive
offices of the Company not less than 90 days in advance of the annual meeting.
The requirement to deliver notice to the Corporation a set number of days in
advance of an annual meeting shall mean that such notice must be delivered such
number of days in advance of the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed more than 60 days
from such anniversary, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which notice
of such meeting is first given to stockholders. For the purposes of this
Section, notice of an annual meeting shall be deemed to first be given to
stockholders when disclosure of such date is first made in a press release
reported by the Dow Jones News Services, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 and 15(d) of
the Securities Exchange Act of 1934, as amended. The Chairman of an annual
meeting shall, if the facts warrant, determine and declare to the annual
meeting that business was not properly brought before the meeting and if he
should so determine, he shall so declare to the annual meeting and any such
business not properly brought before the annual meeting shall not be
transacted. At any special meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
Approval of Business Combinations. The Certificate provides that subject
to certain exceptions summarized below and in addition to any affirmative vote
required by law or by the Certificate, approval of any Business Combination (as
hereinafter defined) requires the affirmative vote of at least two-thirds of
the outstanding Voting Shares (as hereinafter defined). For these purposes,
"Business Combination" shall mean:
(A) Any merger or consolidation of the Company or any subsidiary
with or into (i) any Interested Stockholder (as hereinafter defined) or
(ii) any other corporation which is, or after such merger or
consolidation, would be an Interested Stockholder or an affiliate of an
Interested Stockholder;
(B) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any Interested Stockholder or any affiliate of any
Interested Stockholder of any assets of the Company or any subsidiary
having an aggregate Fair Market Value of $1,000,000 or more in one
transaction or a series of related transactions;
(C) The issuance or transfer by the Company or any subsidiary of any
securities of the Company or any subsidiary to any Interested Stockholder
or any affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more in one transaction or a
series of related transactions; or
(D) The adoption of any plan for the liquidation or dissolution of
the Company proposed by or on behalf of an Interested Stockholder or any
affiliate of any Interested Stockholder.
"Voting Shares" shall mean all issued and outstanding shares of equity
securities and all rights to acquire any equity securities which are generally
entitled to vote in the election of directors.
The two-thirds voting requirement shall not apply to a particular Business
Combination if (i) any noncash consideration to be paid to holders of Common
Stock in such Business Combination is in the same form and bears the same
percentage to the total consideration as previously paid by the Interested
Stockholder in connection with its acquisition of beneficial ownership of
shares of Common Stock of the Company and (ii) the aggregate amount of cash and
the Fair Market Value of noncash consideration, determined as of the date of
the consummation of the Business Combination, to be received per share by the
holders of Common Stock in such Business Combination is at least equal to the
highest of the following:
(A) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder for any Voting Shares acquired by it (1) within the
two-year period immediately prior to the date of the first public
announcement of the proposed Business Combination or (2) in the
transaction in which it became an Interested Stockholder, whichever is
higher;
(B) The Fair Market Value per share of Common Stock on the date of
the first public announcement of the proposed Business Combination or on
the date on which the Interested Stockholder became an Interested
Stockholder, whichever is higher; and
(C) The per share book value of the Common Stock as reported at the
end of the fiscal quarter immediately preceding the date of the first
public announcement of the proposed Business Combination.
The two-thirds voting requirement shall also not apply to a particular Business
Combination if the Business Combination has been approved by two-thirds of the
directors of the Company.
"Fair Market Value" shall mean: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the whole Board of Directors in good
faith; and (ii) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined in good
faith by a majority of the whole Board of Directors.
"Interested Stockholder" shall mean any Person (other than the Company or
any corporation of which a majority of each class of equity securities is
owned, directly or indirectly, by the Company) which, as of the record date for
the determination of stockholders entitled to notice of and to vote on a
Business Combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares; or
(B) is an affiliate of the Company and at any time within two years
prior thereto was the beneficial owner, directly or indirectly, of not
less than 10% of the then outstanding Voting Shares; or
(C) is an assignee of or successor in interest to any shares of
capital stock of the Company which were at any time within two years prior
thereto beneficially owned by any Interested Stockholder, and such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
A majority of the whole Board of Directors shall have the power and duty
to determine on the basis of information known to them whether a person is an
Interested Stockholder, the number of Voting Shares beneficially owned by any
person, whether a person is an affiliate of another, whether a person has the
power to vote or dispose of Voting Shares or to direct the voting or
disposition of Voting Shares, whether the assets subject to any Business
Combination or the consideration received for the issuance or transfer of
securities by the corporation or any subsidiary or any Business Combination has
an aggregate Fair Market Value of $1,000,000 or more, or whether a person has
the right to acquire beneficial ownership of Voting Shares. The affirmative
vote of the holders of at least two-thirds of the Voting Shares shall also be
required to amend, repeal or adopt any provisions inconsistent with the two-
thirds votes required for Business Combinations.
Section 203 of the Delaware Corporation Law. Subject to certain
exclusions summarized below, Section 203 of the Delaware Corporation Law
("Section 203") prohibits any "Interested Stockholder" from engaging in a
"Business Combination" with a Delaware corporation for three years following
the date such person became an Interested Stockholder. For purposes of this
subsection, "Interested Stockholder" generally includes: (a)(i) any person who
is the beneficial owner of 15% or more of the outstanding voting stock of the
corporation or (ii) any person who is an affiliate or associate of the
corporation and who was the beneficial owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years before the date
on which such person's status as an Interested Stockholder is determined; and
(b) the affiliates and associates of such person. For purposes of this
subsection and subject to certain exceptions, a "Business Combination" includes
(i) any merger or consolidation of the corporation or a majority-owned
subsidiary of the corporation, (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets of the corporation or a
majority-owned subsidiary of the corporation having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (iii) any transaction that
results in the issuance or transfer by the corporation or a majority-owned
subsidiary of the corporation of any stock of the corporation or the subsidiary
to the Interested Stockholder, except pursuant to a transaction that effects a
pro rata distribution to all stockholders of the corporation, (iv) any
transaction involving the corporation or a majority-owned subsidiary of the
corporation that has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation or the subsidiary that is owned by the
Interested Stockholder, and (v) any receipt by the Interested Stockholder of
the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation or a majority-owned subsidiary of the corporation.
Section 203 does not apply to a Business Combination if (i) before a
person became an Interested Stockholder, the Board of Directors of the
corporation approved either the transaction in which the Interested Stockholder
became an Interested Stockholder or the Business Combination, (ii) upon
consummation of the transaction that resulted in the person becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (other than certain excluded shares), or (iii) following a
transaction in which the person became an Interested Stockholder, the Business
Combination is (a) approved by the Board of Directors of the corporation and
(b) authorized at a regular or special meeting of stockholders (and not by
written consent) by the affirmative vote of the holders of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Chemical Mellon Shareholder Services, L.L.C., Ridgefield Park, New Jersey.
LEGAL MATTERS
The legality of the Common Stock offered hereby has been passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
Certain tax matters relating to this offering has been passed upon for the
Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in this Prospectus by reference from Kinark Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995, as amended,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference (which report expresses
an unqualified opinion and includes explanatory paragraphs discussing the
Company's change in accounting for income taxes and the acquisition of Rogers
Galvanizing Company and the related private placement financing that occurred
subsequent to December 31, 1995). The consolidated financial statements of
Rogers Galvanizing Company as of and for the years ended September 30, 1995,
1994, and 1993, set forth in this Prospectus have been audited by Hogan &
Slovacek, PC, independent auditors, as indicated in their report set forth
herein. The financial statements and financial statement schedule referred to
above have been incorporated by reference or included in reliance upon the
reports of such firms given upon their authority as experts in accounting and
auditing.
With respect to the unaudited interim financial information of Kinark
Corporation for the periods ended March 31, 1996 and 1995 which is incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is
not a "report" or a "part" of the registration statement prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Act.<PAGE>
INDEX TO FINANCIAL STATEMENTS
______________
Page
KINARK CORPORATION
Pro Forma
Pro Forma Consolidated Financial Data (Unaudited) F-2
Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996 (Unaudited) F-3
Pro Forma Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1996 (Unaudited) F-5
Pro Forma Condensed Consolidated Statements of Operations for the Year
Ended December 31, 1995 (Unaudited) F-6
Notes to Pro Forma Condensed Consolidated Financial Statements for the
Three Months Ended March 31, 1996, Year Ended December 31, 1995
(Unaudited) F-7
ROGERS GALVANIZING COMPANY
Unaudited
Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 1996 F-10
Condensed Consolidated Statements of Income and Retained Earnings
(Unaudited) for the Three and Six Months Ended March 31, 1996 and
March 31, 1995 F-11
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three
and Six Months Ended March 31, 1996 and March 31, 1995 F-12
Notes to Condensed Consolidated Financial Statements (Unaudited) for the
Three and Six Months Ended March 31, 1996 F-13
Audited
Independent Auditors' Report F-14
Consolidated Balance Sheets as of September 30, 1995 and 1994 F-15
Consolidated Statements of Income and Retained Earnings for the Years Ended
September 30, 1995, 1994 and 1993 F-17
Consolidated Statements of Cash Flows for the Years Ended September 30,
1995, 1994, and 1993 F-18
Notes to Consolidated Financial Statements for the Years Ended September 30,
1995, 1994 and 1993 F-20<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following Pro Forma Consolidated Financial Data of Kinark Corporation (the
"Company") consists of a Pro Forma Condensed Consolidated Balance Sheet
(unaudited) as of March 31, 1996 (the "Pro Forma Balance Sheet"), and the Pro
Forma Condensed Consolidated Statements of Operations (unaudited) for the three
months ended March 31, 1996, and for the year ended December 31, 1995 (the
"1996 Pro Forma Statement of Operations" and "1995 Pro Forma Statement of
Operations," respectively).
The Pro Forma Balance Sheet reflects the combination of the balance sheets of
the Company and Rogers Galvanizing Company ("Rogers") as of March 31, 1996.
The Pro Forma Balance Sheet is presented as if the Rogers acquisition and the
Private Placement had been consummated on March 31, 1996.
The 1996 Pro Forma Statement of Operations reflects the combination of the
income statements of the Company and Rogers for the three months ended March
31, 1996, as if the transaction was consummated on January 1, 1996. The 1995
Pro Forma Statement of Operations reflects the combination of the income
statements of the Company for the year ended December 31, 1995, and of Rogers
for its fiscal year ended September 30, 1995, as if the transaction was
consummated on January 1, 1995.
The acquisition has been accounted for using the purchase method of accounting,
and, accordingly, the purchase price has been allocated to the assets purchased
and the liabilities assumed based upon the estimated fair values at the dates
of acquisition including an adjustment to eliminate the LIFO valuation reserve
on Rogers' zinc inventory. The excess of the purchase price over the fair
values of the net assets acquired was approximately $3 million and has been
recorded as goodwill, which is being amortized on a straight-line basis over 25
years. It is the Company's policy to account for costs in excess of fair value
of assets purchased and other intangible assets at the lower of amortized cost
or estimated fair value. On a periodic basis, management reviews the valuation
and amortization of such assets. As part of its ongoing review, management
estimates the fair value of the Company's intangible assets, taking into
consideration any events and circumstances which might have diminished fair
value. No valuation allowances have been recorded as a result of these
analyses. Management has not completed its determination of the fair value of
Rogers' assets and liabilities, but does not believe that the historical
amounts of such items differ materially from fair value. The net purchase
price was preliminarily allocated as follows:
<PAGE>
(Dollars in Thousands)
Estimated fair value of assets, not including cash $9,374
Goodwill 3,095
Liabilities (6,701)
Purchase Price, net of cash received $5,768
The Company is uncertain as to the level of stockholder participation in the
Rights Offering. The "minimum case" shown in the pro forma statements
represents the minimum amount of rights that must be exercised by stockholders
for the Rights Offering to close. If additional rights are exercised, the
Company will first use the proceeds to acquire the remaining minority interest
in Rogers (approximately $1.4 million). Proceeds received in excess of the
amount necessary to acquire the minority interest in Rogers and pay Rights
Offering fees and expenses of $300,350 will be used primarily to reduce the
Company's debt.
The Pro Forma Consolidated Financial Data should be read in conjunction with
the separate historical financial statements of the Company, the related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, as amended, as well as the historical consolidated
financial statements of Rogers appearing in this Form S-3. The Pro Forma
Consolidated Financial Data is based upon currently available information and
upon certain assumptions that the Company believes are reasonable under the
circumstances. The Pro Forma Consolidated Financial Data does not purport to
represent what the Company's financial position or results of operations would
actually have been if the aforementioned transactions in fact had occurred on
such date or at the beginning of the periods indicated or to project the
Company's financial position or results of operations at any future date or for
any future period.<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 1996 (Unaudited) (in thousands)
<TABLE>
<CAPTION>
Maximum Case Minimum Case
Kinark Pro-Forma Pro-Forma Pro-Forma Pro-Forma
HistoricalAdjustments Consolidated AdjustmentsConsolidated
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $380 $17,900(c) $9,828 $1,200(j) $373
(5,868)(g)
(2,584)(f) (1,207)(m)
Accounts receivable,
net 6,964 6,964 6,964
Net assets of
discontinued operation43 43 43
Inventories 4,081 4,081 4,081
Prepaid assets 425 (248)(c) 177 (248)(j) 177
Total current assets11,8939,200 21,093 (255) 11,638
Property, plant and
equipment 36,734 (1,094)(d) 35,640 (1,094)(k)35,640
Less accumulated
depreciation 23,066 1,094(d) 21,972 1,094(k) 21,972
Property, plant and
equipment, net 13,668 0 13,668 0 13,668
Other assets:
Deferred income taxes2,309 2,309 2,309
Other assets 383 383 383
Excess of cost over fair
value of net
assets acquired3,075 1,376(f) 4,451 630(m) 3,705
Total other assets5,767 1,376 7,143 630 6,397
Total $31,328 $10,576 $41,904 $375 $31,703
See notes to pro forma condensed consolidated financial statements. (Continued)
</TABLE>
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 (Unaudited) (in thousands)
<TABLE>
<CAPTION>
Maximum Case Minimum Case
Kinark Pro-Forma Pro-Forma Pro-Forma Pro-Forma
HistoricalAdjustments Consolidated AdjustmentsConsolidated
<S> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS'
EQUITY
LIABILITIES:
Current liabilities:
Long-term debt - current
portion $2,667 (488)(g) $2,179 $2,667
Accrued retirement
liabilities 26 114(f) 140 60(m) 86
Accounts payable 2,780 2,780 2,780
Accrued expenses - other3,443 3,443 3,443
Accrued income taxes120 120 120
Total current liabilities9,036(374) 8,662 60 9,096
Long-term debt 6,202 (5,380)(g) 822 6,202
Accrued retirement 77 77 77
Lease obligations 662 662 662
Deferred income taxes116 116 116
Total long-term
liabilities 7,057 (5,380) 1,677 7,057
Total liabilities16,093 (5,754) 10,339 60 16,153
MINORITY INTEREST 1,322 (1,322)(f) __ (637)(m) 685
SHAREHOLDERS' EQUITY:
Common Stock 748 465(c) 1,213 748
Additional paid-in capital15,86211,376(c) 27,238 (1,103)(j)14,759
Stock subscription receivable(100) (100) (100)
Treasury Stock (5,811) 5,811(c) -- 2,055(j) (3,756)
Retained earnings 3,214 -- 3,214 -- 3,214
Shareholders' equity13,913 17,652 31,565 952 14,865
Total $31,328 $10,576 $41,904 $375 $31,703
See notes to pro forma condensed consolidated financial statements. (Concluded)
/TABLE
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Maximum Case Minimum Case
Kinark Rogers(a) Pro-Forma Pro-Forma Pro-Forma Pro-Forma
AdjustmentsConsolidatAdjustmentsConsolidated
<S> <C> <C> <C> <C> <C> <C>
SALES $10,417 $1,603 $12,020 $12,020
COSTS AND EXPENSES:
Cost of sales 8,154 1,390 9,544 9,544
Selling, general and
administrative 1,193 289 $(55)(e) 1,427 $(55)(l) 1,427
Depreciation and
amortization 538 73 15(e) 626 12(l) 623
Operating earnings
(loss) 532 (149) 40 423 43 426
OTHER (INCOME) EXPENSE:
Interest expense, net205 25 (136)(g) 94 230
Other (income) expense,
net -- (4) -- (4) -- (4)
Other expenses, net205 21 (136) 90 226
Earnings (loss) before income
taxes and minority interest327(170) 176 333 43 200
Income Taxes 120 (65) 70(h) 125 20(n) 75
Income (loss) before
minority interest 207 (105) 106 208 23 125
Minority interest 83 -- (83)(f) -- (39)(m) 44
Net earnings (loss) $124 $(105) $189 $208 62 $81
Net earnings (loss) per
share $.02 N/M $.02 N/M $.01
Weighted average shares
outstanding 5,318 6,815 12,133(i) 1,248 6,566(o)
See notes to pro forma condensed consolidated financial statements.
/TABLE
<PAGE>
KINARK CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 (Unaudited) (in thousands, except per
share
data)
<TABLE>
<CAPTION>
Historical Maximum Case Minimum Case
Pro-Forma Pro-Forma Pro-Forma Pro-Forma
Kinark(b) Rogers(a) AdjustmentsConsolidatAdjustmentsConsolidated
<S> <C> <C> <C> <C> <C> <C>
SALES $25,246 $17,614 $42,860 $42,860
COSTS AND EXPENSES:
Cost of sales 20,524 12,764 33,288 33,288
Selling, general and
administrative 3,766 2,443 $(300)(e) 5,909 $(300)(l) 5,909
Depreciation and
amortization 1,471 807 180(e) 2,458 150(l) 2,428
Operating earnings
(loss) (515) 1,600 120 1,205 150 1,235
OTHER (INCOME) EXPENSE:
Interest expense,
net 634 133 (543)(g) 224 767
Other (income) expense,
net -- (107) (107) (107)
Other expenses,
net 634 26 (543) 117 660
Earnings (loss) from continuing
operations before income
taxes and minority
interest (1,149) 1,574 663 1,088 150 575
Income Taxes (446) 586 308(h) 448 110(n) 250
Income (loss) from continuing
operations before minority
interests (703) 988 355 640 40 325
Minority interest -- -- -- 164 164
Earnings (loss) from continuing
operations (703) 988 355 640 (124) 161
Earnings (loss) per share from
continuing operations
$(.19) N/M $.05 N/M $.02
Weighted average shares
outstanding 3,747 8,386 12,133(i) 2,819 6,566(o)
/TABLE
<PAGE>
KINARK CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996, YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(a)
The historical information for Rogers Galvanizing Company ("Rogers") in the
accompanying pro forma condensed consolidated statement of operations for the
three months ended March 31, 1996 reflects the month of January 1996 only, and
the year ended December 31, 1995 is based on that company's September 30, 1995
fiscal year.
(b)
During August 1995, the Company finalized a formal plan to discontinue the
operations of its Kinpak subsidiary, comprising the Company's chemical
packaging business. Substantially all of the assets of Kinpak were
subsequently sold on February 27, 1996 for $1,840,000 consisting of $850,000
cash and the assumption by the buyer of the capital lease on its plant
facilities which was financed by a $3,000,000 industrial revenue bond issue.
Included in the Discontinued Operation Loss of $1,176,000 is a loss of $307,000
from operations in addition to the $1,264,000 loss on disposal (before income
taxes of $395,000) which includes $460,000 of operating losses incurred during
the third and fourth quarter of 1995 and the period through February 27, 1996,
the closing date, and a $804,000 loss on the sale of assets. Revenues from
Kinpak were $6,346,236 (including revenues of $263,110 for the period through
the closing date) for the year ended December 31, 1995.
Pro Forma Adjustments - Maximum Case:
(c)
Reflects the issuance of 6,066,536 shares of the Company's common stock at
$3.00 per share through the Rights Offering resulting in aggregate net proceeds
of $17,900,000, an increase in common stock of $465,000 and additional paid in
capital of $11,376,000 (net of treasury stock or retired and stock issuance
costs of $548,000, of which $248,000 was prepaid).
(d)
To adjust property, plant and equipment to preliminary estimate of fair value.
(e)
Adjustments to reflect (i) the amortization of the excess of cost over fair
value of net assets acquired in the Rogers acquisition using a straight-line
method over 25 years and (ii) the elimination of salary and benefits relating
to Rogers' Chairman of the Board.
(f)
Adjustment to reflect the purchase of the remaining 31.1% of Rogers' common
stock. For purposes of these pro forma statements, the historical amounts of
Rogers' assets and liabilities have not been adjusted to fair value. Based
upon current estimates, fair values are not expected to differ materially from
such historical cost amounts. Adjustments based upon final determination of
the fair values of assets acquired and liabilities assumed will be made during
1996. The excess of costs over fair value of net assets acquired attributable
to the 31.1% interest acquired is as follows:
In
Thousands
Purchase Cost:
Purchase price for remaining
31.1% of Rogers' common stock $2,584
Liabilities assumed (minority interest in
funding of retirement trust) 114
Minority interest (1,322)
Excess of cost over fair value of
net assets acquired $1,376
(g)
Adjustment reflects reduction of the bank loans using excess proceeds of
$5,868,000 of Rights Offering and the resultant decrease in interest expense.
Interest on the bank loans is assumed to have an effective rate of 9.25% for
the year ended December 31, 1995 and for the three months ended March 31, 1996.
(h)
To reflect the tax effects of pro forma adjustments using a 36.5% effective tax
rate.
(i)
Reflects the historical weighted average shares outstanding adjusted for
issuance of 6,066,536 shares under the Rights Offering and for issuance of
2,319,038 shares under the Private Placement.
Pro Forma Adjustments - Minimum Case:
(j)
Reflects the issuance of 500,000 shares of the Company's common stock at $3.00
per share through the Rights Offering resulting in aggregate net proceeds of
$1,200,000, a decrease in treasury stock of $2,055,000 and additional paid in
capital of $1,103,000 (net of stock issuance costs of $548,000 of which
$248,000 was prepaid).
(k)
To adjust property, plant and equipment to preliminary estimate of fair value.
(l)
Adjustments to reflect (i) the amortization of the excess of cost over fair
value of net assets acquired in the Rogers acquisition using a straight-line
method over 25 years and (ii) the elimination of salary and benefits relating
to Roger's Chairman of the Board.
(m)
Adjustment to reflect the purchase of an additional 14.5% of Rogers' common
stock. For purposes of these pro forma statements, the historical cost amounts
of Rogers' assets and liabilities have not been adjusted to fair value. Based
upon current estimates, fair values are not expected to differ materially from
such historical amounts. Adjustments based upon final determination of the
fair values of assets acquired and liabilities assumed will be made during
1996. The excess costs over fair value of net assets acquired attributable to
the 14.5% interest acquired is as follows:
In Thousands
Purchase Cost:
Purchase price for additional
Rogers' common stock $1,207
Liabilities assumed (minority interest in
funding of retirement trust) 60
Minority interest (637)
Excess of cost over fair value of net
assets acquired $630
(n)
To reflect the tax effects of pro forma adjustments using a 36.5% effective tax
rate.
(o)
Reflects the historical weighted average shares outstanding adjusted for
issuance of 500,000 shares under the Rights Offering and for issuance of
2,319,038 shares under the Private Placement.
<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF MARCH 31, 1996 (in thousands)
ASSETS
CURRENT ASSETS:
Cash $265
Accounts receivable, net 3,370
Inventories 1,154
Deferred Income Taxes 202
Prepaid expenses 125
Total current assets 5,116
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175
Galvanizing plants and equipment 7,861
Other 489
Less accumulated depreciation 3,661
Total property, plant and
equipment 4,864
Intangible assets 170
$10,150
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $2,036
Accounts payable 1,169
Accrued liabilities 929
Total current liabilities 4,134
DEFERRED INCOME TAXES 116
LONG-TERM DEBT 1,276
COMMITMENTS AND CONTINGENCIES ---
SHAREHOLDERS' EQUITY:
Common shares, $100 par value,
1,967 shares authorized, 1,172
shares outstanding 117
Capital surplus 103
Retained earnings 4,404
Total shareholders' equity 4,624
$10,150
See notes to consolidated financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995 (in
thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
1996 1995 1996 1995
Sales $5,537 $4,512 $10,049 $8,607
Costs and expenses:
Costs of sales 4,402 3,200 7,878 6,127
Selling, general and
administrative 624 561 1,202 1,078
Depreciation and amortization 214 219 430 421
Operating earnings 297 532 539 981
Other (income) expense:
Interest expense, net 71 54 128 100
Other (income) expense (13) (46) (27) (60)
Earnings before income taxes 239 524 438 941
Income tax expense 78 185 153 327
Net earnings 161 339 285 614
Retained earnings, beginning of
period 4,299 3,686 4,231 3,467
Less: Dividends paid (56) (57) (112) (113)
Retained earnings, end of period $4,404 $3,968 $4,404 $3,968
See notes to consolidated financial statements.<PAGE>
ROGERS GALVANIZING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
1996 1995 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $161 $339 $285 $614
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 214 219 430 421
Changes in operating
assets and liabilities:
(Increase) decrease in
accounts receivable (617) 101 (955) (294)
(Increase) decrease in
inventories (82) (24) (175) (168)
(Increase) decrease in
prepaid expenses (19) 12 (41) (40)
Increase (decrease) in
accounts payable 22 (52) 362 9
Increase (decrease) in
accrued liabilities 150 117 33 131
Total adjustments (332) 373 (346) 59
Net cash provided
(used) by operating
expenses (171) 712 (61) 673
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant
and equipment (350) (297) (1,125) (457)
Net cash used in investing
activities (350) (297) (1,125) (457)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (57) (57) (113) (113)
Proceeds from (Payments on)
debt 578 (95) 1,117 47
Net cash provided
(used) by financing
activities 521 (152) 1,004 (66)
INCREASE (DECREASE) IN CASH 0 263 (182) 150
CASH, BEGINNING OF PERIOD 265 288 447 401
CASH, END OF PERIOD $265 $551 $265 $551
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $73 $58 $133 $108
Income taxes paid $85 $125 $147 $168
See notes to consolidated financial statements.<PAGE>
ROGERS GALVANIZING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1996
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
Rogers Galvanizing Company (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim
reporting and include all normal and recurring adjustments which are, in
the opinion of management, necessary for a fair presentation. These
financial statements have not been audited by an independent accountant.
The consolidated financial statements include the accounts of the Company
and its subsidiaries, Reinforcing Services, Inc., Spin-Galv, Inc. and
Rogers Galvanizing Company - Kansas City, Inc., which was acquired on
September 27, 1995. All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that
the disclosures are adequate to make the information presented not
misleading. However, these consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto for the years ended September 30, 1995, 1994, and 1993, included
elsewhere in this Form S-3. The financial data for the interim periods
presented may not necessarily reflect the results to be anticipated for
the complete year.
2. INVENTORIES
Inventories are composed primarily of raw zinc "pigs," molten zinc in
galvanizing kettles and other chemicals and materials used in the
galvanizing process. Molten zinc is stated at the lower of cost or
market, with cost determined by the last-in, first-out (LIFO) method. All
other inventories are stated at the lower of cost or market, with cost
determined by the first-in, first-out (FIFO) method.
3. ACQUISITION BY KINARK CORPORATION
On February 5, 1996, Kinark Corporation ("Kinark") acquired 51.2% of the
outstanding common stock of the Company for $4.3 million in cash from
Trusts that held such stock, and assumed control of the Board of
Directors. Additionally, in February and March 1996, Kinark acquired an
additional 16% and 1.7%, respectively, of the Company's outstanding common
stock at the same price per share paid for the common stock held by the
Trusts. The acquisition has been accounted for using the purchase method
of accounting.
Under the purchase agreement with the Trusts, Kinark has agreed to
purchase the Company's remaining outstanding shares of common stock from
its minority stockholders for cash at a price per share equivalent to that
paid in the transactions described above.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Rogers Galvanizing Company:
We have audited the accompanying consolidated balance sheets of Rogers
Galvanizing Company and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended September 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rogers Galvanizing
Company and subsidiaries as of September 30, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
/s/ Hogan & Slovacek, PC
HOGAN & SLOVACEK, PC
November 20, 1995<PAGE>
ROGERS GALVANIZING COMPANY
Consolidated Balance Sheets
September 30, 1995 and 1994
ASSETS
1995 1994
CURRENT ASSETS:
Cash $312,326 $327,202
Cash-workers' compensation reserve 84,667 23,904
Certificate of deposit 50,000 50,000
Accounts receivable, less reserve for
doubtful accounts of $58,181 in 1995
and $45,138 in 1994 2,414,986 2,156,576
Inventories 978,931 639,495
Income taxes receivable - 37,000
Deferred income taxes 202,000 178,500
Prepaid expenses 88,456 58,111
Total current assets 4,131,366 3,470,788
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 175,172 175,172
Buildings 951,234 795,858
Shop equipment 5,584,697 4,883,002
Office equipment 238,876 216,631
Plant yard 198,868 177,898
Automobiles and trucks 123,009 108,481
Construction in progress 163,554 32,618
7,435,410 6,389,660
Less-accumulated depreciation 3,227,538 3,008,592
Total property, plant and equipment 4,207,872 3,381,068
OTHER ASSETS 132,341 -
$8,471,579 $6,851,856
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $934,488 $877,464
Accounts payable 780,379 858,816
Accrued workers' compensation liability 334,504 310,680
Accrued employee health liability 110,718 79,953
Accrued retirement 27,347 25,252
Accrued payroll and payroll taxes 316,125 182,770
Other accrued liabilities 25,876 16,515
Income taxes payable 113,757 -
Total current liabilities 2,643,194 2,351,450
DEFERRED INCOME TAXES 115,800 61,500
ACCRUED RETIREMENT 68,625 95,973
LONG-TERM DEBT 1,192,462 654,800
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common shares, $100 par value, 1,967 shares
authorized, 1,172 shares outstanding 117,200 117,200
Capital surplus 103,451 103,451
Retained earnings, per accompanying
statements 4,230,847 3,467,482
Total shareholders' equity 4,451,498 3,688,133
$8,471,579 $6,851,856
The accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
Consolidated Statements of Income and Retained Earnings
For the Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
Sales $17,614,234 $12,624,796 $11,544,123
Costs and expenses:
Costs of sales 12,764,067 9,447,974 7,806,927
Selling, general &
administrative 2,443,072 2,127,505 1,713,037
Depreciation 807,278 671,681 550,108
Operating earnings 1,599,817 377,636 1,474,051
Other (income) expense:
Interest expense, net 133,497 19,290 22,466
Other (107,869) (69,427) (66,389)
Earnings before income taxes 1,574,189 427,773 1,517,974
Income tax expense 585,800 104,000 511,000
Net earnings 988,389 323,773 1,006,974
Retained earnings, beginning of
year 3,467,482 3,603,133 2,821,183
Dividends paid ($192 per share in
1995, $392 per share in 1994 and
$192 per share in 1993) (225,024) (459,424) (225,024)
Retained earnings, end of year $4,230,847 $3,467,482 $3,603,133
The accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $988, 389 $323,773 $1,006,974
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 807,278 671,681 550,108
Deferred income taxes 30,800 (29,000) (61,000)
Changes in operating assets
and liabilities:
(Increase) in accounts
receivable (258,410) (424,173) (470,087)
(Increase) in
inventories (339,436) (71,951) (62,672)
(Increase) decrease in
income taxes
receivable 37,000 (17,000) 27,598
(Increase) in prepaid
expenses (30,345) (20,365) (19,638)
Increase (decrease) in
accounts payable (78,437) 321,371 95,965
Increase in workers'
compensation liability 23,824 57,827 118,702
Increase (decrease) in
accrued employee health
liability 30,765 (17,325) 97,278
Increase (decrease) in
accrued payroll and
payroll taxes 133,355 (142,875) 130,255
Increase (decrease) in
other accrued liabilities 9,361 (10,836) 8,265
Increase (decrease) in
income taxes payable 113,757 (129,745) 129,745
(Decrease) in accrued
retirement (25,253) (23,317) (88,170)
Total adjustments 454,259 164,292 456,349
Net Cash provided by
operating
activities 1,442,648 488,065 1,463,323
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant and
equipment (1,144,082) (972,825) (922,582)
Purchase of other assets (132,341) - -
Net cash used in
investing activities (1,276,423) (972,825) (922,582 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (225,024) (459,424) (225,024)
Proceeds from debt 1,226,917 900,000 -
Payments on debt (1,122,231) (83,375) (24,554)
Net cash provided by (used in)
financing activities (120,338) 357,201 (249,578)
NET INCREASE (DECREASE) IN CASH 45,887 (127,559) 291,163
CASH, beginning of year 401,106 528,665 237,502
CASH, end of year $446,993 $401,106 $528,665
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $149,759 $34,255 $29,941
Income taxes paid $397,835 $214,742 $414,657
The Accompanying notes are an integral part of these financial statements.
<PAGE>
ROGERS GALVANIZING COMPANY
Notes to Consolidated Financial Statements
For the Years Ended September 30, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Rogers Galvanizing Company and its subsidiaries ("Rogers") is engaged in the
hot dip galvanizing of steel structures and components to customer
specifications. On September 27, 1995, Rogers acquired the business and
operating assets of another galvanizing company.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Rogers and its wholly-owned subsidiaries, Reinforcing Services, Inc., Spin-
Galv, Inc. and Rogers Galvanizing Company - Kansas City, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
Inventories
Inventories are composed, primarily, of raw zinc "pigs", molten zinc in
galvanizing kettles and other chemicals and materials used in the galvanizing
process. Molten zinc is stated at the lower of cost or market, with cost
determined by the last-in, first-out (LIFO) method. All other inventories are
stated at the lower of cost or market, with cost determined by the first-in,
first-out (FIFO) method.
The molten zinc valued on a LIFO basis in the September 30, 1995 and 1994
financial statements was $661,631 and $503,623, respectively. The
corresponding approximate replacement cost for this inventory was $1,258,970
and $952,300 at September 30, 1995 and 1994, respectively.
Property, Plant and Equipment
Depreciation is provided using accelerated and straight-line methods over the
estimated useful lives of the related property, ranging from three to 20 years.
During 1994, Rogers capitalized $15,619 of interest incurred after entering
into a capitalized equipment lease obligation until the equipment was placed in
service.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Profit Sharing Plan
Rogers has a qualified 401(k) profit sharing plan for eligible employees.
Eligible employees may defer a portion of their salary. At the discretion of
the Board of Directors, Rogers may make annual contributions to the plan, but
is not required to do so. Rogers made no contributions in 1994 or 1995.
Other Assets
Other assets represent goodwill, capitalized acquisition costs and a non-
compete agreement relating to the formation of a wholly-owned subsidiary and
the acquisition of the business and operating assets of another galvanizing
company. The capitalized acquisition costs and non-compete agreement are being
amortized over five years and the acquired goodwill is being amortized over
fifteen years.
2. INCOME TAXES
The provision for income taxes consists of the following for the years ended
September 30,
1995 1994 1993
Current:
Federal $542,700 $133,000 $572,000
State 12,300 - -
555,000 133,000 572,000
Deferred:
Federal 30,800 (29,000) (61,000)
State - - -
$585,800 $104,000 $511,000
The income tax rate for financial reporting purposes varies from the
federal statutory rate as follows:
1995 1994 1993
Percent of pretax income:
Federal statutory
income tax rate 34.0% 34.0% 34.0%
State income taxes,
net of federal benefit .8 - -
Non-deductible permanent
differences .4 1.7 .4
Adjustment of prior
year's estimated
liability - (9.7) -
Other items 2.0 (1.7) (.7)
Effective income tax
rate for the year 37.2% 24.3% 33.7%
Significant components of Rogers' deferred tax liabilities and assets at
September 30 are as follows:
1995 1994
Deferred tax liabilities:
Tax over book depreciation $142,400 $98,500
Deferred tax assets:
Accrued retirement 37,200 46,900
Self-insured insurance programs 168,800 151,100
Reserve for doubtful accounts 22,600 17,500
228,600 215,500
Net deferred tax assets $ 86,200 $117,000
Based on Rogers' history of operating earnings and its expectations for future
operations, management believes that operating income will be sufficient to
allow the full realization of deferred tax assets.
3. ACCRUED RETIREMENT
At September 30, 1992, Rogers was making monthly retirement payments to two
retired company executives. During the year ended September 30, 1993, one of
the retired executives died. The liability to the remaining executive was
adjusted to estimated remaining payments to be made as calculated by an
insurance company using standard mortality tables and recorded at net present
value using an 8 percent interest rate.
4. LINE OF CREDIT AND LONG-TERM DEBT
Rogers' line of credit and long-term debt consisted of the following at
September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Combined revolving bank line of credit, up
to $3,000,000 through July 31, 1996,
interest payable monthly at floating prime
plus .5%, (9.25% at September 30, 1995) secured
by certain of Rogers' machinery and equipment,
and its inventories and accounts receivable,
restricts payment of cash dividends to not more
than net income, line is limited to $2,425,000
by a $575,000 workers' compensation self-insurance
letter of credit required by Oklahoma's Workers'
Compensation Court as discussed in Note 5 $511,608 $650,000
Note payable to bank in monthly installments of
$3,097 including interest at 7.2%, final
payment due October, 1996, secured by specific
equipment 30,411 69,029
Note payable to bank in monthly installments of
$4,684 including interest at floating prime
plus .5% (9.25% at September 30, 1995), final
payment due June, 1997, secured by equipment,
receivables, and inventory 95,749 142,828
Note payable to an unrelated company, payable
in monthly installments of $3,331 including
interest at 3.5%, final payment due July, 1997,
unsecured 70,875 107,661
Unsecured note payable to a company, payable
in monthly installments of $3,000, including
interest at 8%, through March, 1998 80,957 109,324
Revolving bank line of credit, up to $750,000
through September, 2000, payable in monthly
installments of principal and interest of
$15,660 at floating prime plus .5% (9.25% at
September 30, 1995) secured by certain of
Rogers' machinery and equipment and its
inventories and accounts receivable, restricts
payment of cash dividends to not more than net
income. 448,489 -
Note payable to unrelated party in monthly
installments of $6,475 including interest at
10% through September, 2000, at which time
unpaid principal is due. 490,000 -
Note payable to Tulsa County Industrial
Authority in monthly installments of $237
including interest at 6.8% due September,
2015, joint and severally guaranteed by co-makers 30,764 -
Capitalized lease obligation for equipment 368,097 453,422
2,126,950 1,532,264
Less current maturities 934,488 877,464
</TABLE> $1,192,462 $654,800
The aggregate maturities of this debt are as follows:
1996 $ 934,488
1997 410,463
1998 288,777
1999 115,422
2000 350,501
Thereafter 27,299
$2,126,950
5. WORKERS' COMPENSATION INSURANCE
Rogers utilizes a self-insured program for workers' compensation. This program
is limited to losses of $300,000 per claim, and aggregate losses of $5,000,000
over a two-year period through the use of a stop-loss policy. As required by
Oklahoma's Workers' Compensation Court, Rogers has a $575,000 letter of credit
with a bank to ensure Rogers' ability to pay workers' compensation claims.
This letter of credit is included in the $3,000,000 revolving bank line of
credit described in Note 4. Claims are accrued based on third-party estimates
of the aggregate liability for claims made and for potential claims. Such
claims are not discounted. Rogers provided $658,340, $813,195, and $329,499
for workers' compensation claims for the years ended September 30, 1995, 1994,
and 1993, respectively. In addition, Rogers incurred $83,574, $67,546, and
$68,573 for reinsurance and administrative expenses for the years ended
September 30, 1995, 1994, and 1993, respectively.
6. EMPLOYEE HEALTH INSURANCE
Rogers adopted a self-insured program for employee health benefits on June 1,
1993. Under this program, responsibility for employee health care costs are
assumed by Rogers with incurred costs above a specified amount covered by a
stop-loss insurance policy. Accrued claims are based on unpaid amounts at year
end and an estimate of incurred but not reported claims ("IBNR"). IBNR is
based upon Rogers' historical experience and a review of claims received
subsequent to year end. For the years ended September 30, 1995, 1994, and
1993, respectively, Rogers provided $571,523, $475,615, and $155,228 for
employee health care costs and paid out $293,754, $334,669, and $1,404 in
employee health care claims and incurred $247,003, $158,241, and $56,725 in
administrative costs and stop-loss insurance premiums.
7. NON-CASH TRANSACTIONS
During 1994, Rogers entered into a capital lease obligation for equipment
totalling $466,519. In addition, Rogers purchased inventory of $113,673 by
issuing a note payable to an unrelated company. In 1995, Rogers purchased the
operating assets of another galvanizer for cash and the issuance of a note
payable to an unrelated party in the amount $490,000.
8. COMMITMENTS AND CONTINGENCIES
Rogers is involved in various claims and legal actions arising from time to
time in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect
on Rogers' financial position, liquidity or results of operations.
Rogers has long-term operating lease agreements for the use of facilities at
its subsidiaries which were entered into during 1994. Future related lease
obligations are as follows for the years ended September 30, 1996 - $156,000,
1997 - $68,000, 1998 - $27,000, 1999 - $27,000, 2000 - $27,000 and $134,775
thereafter. Rent expense for these facilities during 1995 and 1994 were
$134,227 and $29,210, respectively.
9. OBLIGATIONS UNDER CAPITAL LEASE
Rogers acquired certain equipment under provisions of a long-term lease. For
financial reporting purposes, minimum lease rentals for the assets have been
capitalized. The following is a schedule of leased equipment under the capital
lease:
Capitalized cost $466,519
Less accumulated depreciation 68,034
$398,485
The following is a schedule by years of future minimum lease payments,
including renewal options, together with the present value of the net minimum
lease payments as of September 30, 1995:
Year Ended September 30,
1996 $116,514
1997 116,514
1998 116,514
1999 75,838
Total minimum lease payments 425,380
Less amount representing interest 57,283
Present value of net minimum lease payments $368,097
Current portion $ 90,331
Long-term portion 277,766
$368,097
The present value of net minimum lease payments are combined with other long-
term debt in the accompanying financial statements and Note 4.<PAGE>
<TABLE>
<S> <C>
No dealer, salesman or any other person
has been authorized to give any
information or to make any representations
other than those contained in this
Prospectus, and any information or _____________ SHARES
representation not contained herein must
not be relied upon as having been
authorized by the Company. This Prospectus
does not constitute an offer to sell or
solicitation of an offer to buy any
securities other than the securities to
which it relates, or an offer to sell
or a solicitation of an offer to buy such
securities in any jurisdiction in which such
offer or solicitation may not be legally
made. Neither the delivery of this
Prospectus nor any sale made hereunder
shall under any circumstances create any
implication that the information herein
is correct as of any date subsequent to
the date hereof.
KINARK
_______________________________ CORPORATION
TABLE OF CONTENTS Page
Prospectus Summary 3
Summary Pro Forma and Selected
Consolidated Financial Information 8
Risk Factors 11
Business Strategy 13
The Acquisition or Merger 14 COMMON STOCK
Use of Proceeds 16
Capitalization 17
Common Stock Dividends and Price Range 18
The Rights Offering 18
Description of Capital Stock 23 -------
Legal Matters 27 PROSPECTUS
Experts 27 -------
Financial Statements F-1
_______________________________
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting commissions) of the sale of
the shares of Common Stock are as follows:
Registration Fee $ 9,350
AMEX Application Fee 17,500
Blue Sky Fees and Expenses 1,000
Printing and Engraving 45,000
Subscription Agent's Fees and Expenses 10,000
Information Agent's Fees and Expenses 25,000
Legal Fees and Expenses 175,000
Accounting Fees and Expenses 15,000
Miscellaneous Disbursements 2,500
TOTAL $300,350
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation (the "Certificate") of the Company
contains a provision which, subject to certain exceptions described below,
eliminates the liability of a director to the Company or its stockholders for
monetary damages for any breach of duty as a director. This provision does not
eliminate the liability of the director (i) for violations of his duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or involving intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (the
"Delaware Corporation Law") relating to unlawful dividends and distributions,
or (iv) for any transaction from which the director derived an improper
personal benefit.
The Certificate and the Bylaws (the "Bylaws") of the Company require the
Company to indemnify any person who was, is, or is threatened to be made a
named defendant or respondent in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
by reason of service by such person as a director, officer, employee or agent
of the Company or any other corporation for which he served as such at the
request of the Company. Such persons are entitled to be indemnified against
judgments, penalties, fines, settlements, and reasonable expenses actually
incurred by the director in connection with the proceeding, except that no
payments may be made with respect to liability which is not eliminated pursuant
to the provision of the Certificate described in the preceding paragraph. Such
persons are also entitled to have the Company advance any such expenses prior
to final disposition of the proceeding, upon delivery of a written undertaking
to repay the amounts advanced if it is ultimately determined that the standard
of conduct has not been met.
In addition to the Certificate and Bylaws of the Company, Section 145(c)
of the Delaware Corporation Law requires the Company to indemnify any director
who has been successful on the merits or otherwise in defending any proceeding
described above. The Delaware Corporation Law also provides that a court may
order indemnification of a director if it determines that the director is
fairly and reasonably entitled to such indemnification.
The Company has the power, under the Certificate and Bylaws, to
obtain insurance on behalf of any director, officer, employee, or agent of the
Company against any liability asserted against or incurred by such person in
any such capacity, whether or not the Company has the power to indemnify such
person against such liability at that time under the Certificate or Bylaws.
ITEM 16. EXHIBITS
The following documents are filed as exhibits to this Registration
Statement:
3.1 The Company's Restated Certificate of Incorporation, as amended
on June 6, 1996.
3.2 The Company's Bylaws (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q dated March 31,
1996).
4.1 Provisions in the Company's Restated Certificate of
Incorporation and Bylaws defining the rights of holders of the
Company's Common Stock.
4.2 Form of Letter to Stockholders.
4.3 Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and other Nominees.
4.4 Form of Instructions as to the Use of Kinark Corporation
Subscription Cards.
4.5 Form of Subscription Card.
4.6 Form of Letter to Clients from Securities Dealers, Commercial
Banks, Trust Companies and other Nominees.
4.7 Form of Notice of Guaranty Delivery.
4.8 Form of Nominee Holder Certification.
4.9 Form of Special Notice to Holders of Kinark Corporation Common
Stock whose Addresses are Outside the United States.
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to the
legality of the securities being registered.
8.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to the
federal tax consequences to shareholders.
15.1 Letter Regarding Unaudited Interim Financial Information.
23.1 Consent of Deloitte & Touche LLP, independent auditors of the
Company.
23.2 Consent of Hogan & Slovacek, P.C., independent auditors of
Rogers Galvanizing Company.
23.3 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (contained
in the opinions included at Exhibits 5.1 and 8.1).
24.1 Power of Attorney of certain officers and directors of the
Company (see page II-5).
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant as described in Item 14 or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
4. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Ponte Vedra Beach, State of Florida, on July
__, 1996.
KINARK CORPORATION
By: /s/ Ronald J. Evans
Ronald J. Evans, President and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald J. Evans and Paul R. Chastain, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, and each of them or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Michael T. Crimmins* Chief Executive Officer (principal July __, 1996
Michael T. Crimmins executive officer) and Chairman
of the Board
/s/ Ronald J. Evans President and Director July __, 1996
Ronald J. Evans
/s/ Paul R. Chastain* Vice President, Chief Financial July __, 1996
Paul R. Chastain Officer (principal financial
officer and principal accounting
officer) and Director
/s/ Richard C. Butler* Director July __, 1996
Richard C. Butler
/s/ Mark E. Walker* Director July __, 1996
Mark E. Walker
/s/ Joseph J. Morrow Director July __, 1996
Joseph J. Morrow
/s/ John H. Sununu Director July __, 1996
John H. Sununu
</TABLE>
* Ronald J. Evans, by signing his name hereto, does hereby sign this amendment
to this Registration Statement on behalf of each of the directors and officers
of the Company after whose typed names asterisks appear pursuant to a power of
attorney duly executed by such directors and officers and filed with the
Securities and Exchange Commission as part of the Registration Statement.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Ex. No. Description Page
<S> <C> <C>
3.1 The Company's Restated Certificate of Incorporation,
as amended on June 6, 1996. *
3.2 The Company's Bylaws (incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q dated March 31, 1996). *
4.1 Provisions in the Company's Restated Certificate of
Incorporation and Bylaws defining the rights of
holders of the Company's Common Stock. *
4.2 Form of Letter to Stockholders. *
4.3 Form of Letter to Securities Dealers, Commercial
Banks, Trust Companies and other Nominees. *
4.4 Form of Instructions as to the Use of Kinark
Corporation Subscription Cards. *
4.5 Form of Subscription Card. *
4.6 Form of Letter to Clients from Securities Dealers,
Commercial Banks, Trust Companies and other Nominees. *
4.7 Form of Notice of Guaranty Delivery. *
4.8 Form of Nominee Holder Certification. *
4.9 Form of Special Notice to Holders of Kinark
Corporation Common Stock whose Addresses are
Outside the United States. *
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
as to the legality of the securities being registered.
8.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
as to the federal tax consequences to shareholders.
15.1 Letter Regarding Unaudited Interim Financial Information.
23.1 Consent of Deloitte & Touch LLP, independent auditors
of the Company.
23.2 Consent of Hogan & Slovacek, P.C., independent auditors
of Rogers Galvanizing Company.
23.3 Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(contained in the opinions included at Exhibits 5.1
and 8.1).
24.1 Power of Attorney of certain officers and directors
of the Company (see page II-5).
* Exhibit previously filed.
</TABLE>
EXHIBIT A
TO NELSON, MULLINS, RILEY & SCARBOROUGH, L.L.P.
OPINION LETTER
INTERPRETIVE STANDARDS
APPLICABLE TO
LEGAL OPINIONS TO THIRD PARTIES
IN CORPORATE TRANSACTIONS
Purpose and Scope of Interpretive Standards.
The purpose of these Interpretive Standards is to explain the meaning of
Opinion Letters (which incorporates these interpretive standards by reference)
addressed to non-client third parties in connection with corporate acquisition
or financing transactions. Included in these Interpretive Standards are general
qualifications to legal opinions, common assumptions as to fact and law,
standards governing an opinion that an agreement is "enforceable," and
interpretations of certain recurring legal opinions and confirmations of fact.
Incorporation in an opinion letter of these Interpretive Standards is intended
to shorten the content of the letter while expanding the mutual understanding
of its meaning. Any of these Interpretive Standards, however, may be overridden
by a specific statement in an Opinion Letter which supersedes a contrary
Interpretive Standard.
Definitions of Terms Used in Interpretive Standards.
The following capitalized terms have the following meanings when used in
these Interpretive Standards:
"Agreement" means the primary legal document which evidences the
Transaction.
"Assets" means all of the tangible and intangible real and personal
property of Company.
"Company" means the entity which is the client of Opinion Giver and on
whose behalf the Opinions Letter is given.
"Documents" means the Agreement, together with other documents identified
in the Opinion Letter which contains one or more obligations of Company related
to the Transaction.
"GBCC" means the Georgia Business Corporation Code in effect on the date
of the Opinion Letter.
"Law(s)," whether or not a capitalized term, means the constitution,
statutes, judicial and administrative decisions, and rules and regulations of
governmental agencies of the Opining Jurisdiction and, unless otherwise
specified, federal law.
"Local Law" means the statutes, administrative decisions, and rules and
regulations of any county, municipality or subdivision, whether created at
federal, state or regional level.
"Opining Jurisdiction" means a jurisdiction, the law of which the Opinion
Giver addresses.
"Opinion" means a legal opinion contained in an Opinion Letter.
"Opinion Giver" means the law firm or lawyer giving an Opinion.
"Opinion Letter" means the letter containing one or more Opinions or
confirmations of fact by Opinion Giver.
"Opinion Recipient" means the person or persons to whom the Opinion Letter
is addressed.
"Other Agreements" mean documents (other than the Documents) to which
Company is a party or by which Company is bound.
"Other Counsel" means counsel (other than Opinion Giver) providing a legal
opinion or confirmation of fact on aspects of the Transaction directed to
Opinion Recipient or Opinion Giver or both.
"Other Jurisdiction" means any jurisdiction (other than the Opining
Jurisdiction) the law of which is stipulated to be the governing law.
"Personal Property" means all of the tangible and intangible personal
property of Company.
"Primary Lawyer Group" has the meaning discussed in Interpretative
Standard 7.
"Public Authority Documents" means certificates issued by a governmental
office or agency, such as the Secretary of State, or by a private organization
having access to and regularly reporting on government files and records, as to
a person's property or status.
"Remedies Opinion" means an Opinion dealing with the enforceability
against Company of one or more of the Documents.
"Transaction" means the transaction with respect to which the Opinion
Letter is given.
Qualifications To Each Opinion
1. Law Addressed by Opinion.
If an Opinion Letter is expressly limited to the Law of one or more
specified jurisdictions, or to one or more discrete laws within one or more
jurisdictions, an Opinion with respect to any other law, or the effect of any
other law, is disclaimed.
2. Scope of Opinion.
An Opinion covers only those matters both essential to the conclusion
stated by the Opinion and, based upon prevailing norms and expectations found
among experienced legal practitioners in the Opining Jurisdiction, reasonable
in the circumstances. Other matters are not included in an Opinion by
implication. The following matters, including their effects and the effects of
noncompliance, are not covered by implication or otherwise in any Opinion,
unless coverage is specifically addressed in the Opinion Letter as provided by
Interpretive Standard 11:
(1) Local Law.
(2) Law relating to permissible rates, computation or disclosure of
interest, e.g., usury.
(3) Antitrust and unfair competition law.
(4) Securities law.
(5) Fiduciary obligations.
(6) Pension and employee benefit law, e.g. ERISA.
(7) Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System.
(8) Fraudulent transfer law.
(9) Environmental law.
(10) Land use and subdivision law.
(11) Except with respect to the No Consent Opinion (Interpretative
Standard 28), Hart-Scott-Rodino, Exon-Florio and other laws
related to filing requirements, other than charter-related
filing requirements, such as the requirements for filing
articles of merger.
(12) Except with respect to a No Violation Opinion (Interpretive
Standard 27), law concerning creation, attachment, perfection or
priority of a security interest in any Assets.
(13) Bulk transfer law.
(14) Tax law.
(15) Patent, copyright, trademark and other intellectual property
law.
(16) Racketeering law, e.g., RICO.
(17) Criminal statutes of general application, e.g., mail fraud and
wire fraud.
(18) Health and safety law, e.g., OSHA.
(19) Labor law.
(20) Law concerning national or local emergency.
3. Unwarranted Reliance.
Opinion Giver may not rely for purposes of the Opinion Letter upon
information, whether or not in a Public Authority Document, or (except in the
case of arbitrary or hypothetical assumptions contained in an overriding
agreement referred to in Interpretive Standard 11 or as stated in Interpretive
Standard 22 with respect to choice of law), upon an assumption otherwise
appropriate, if Opinion Giver has knowledge that such information or assumption
is false, or recognizes factors that compel the conclusion that reliance on
such information or assumption would be unreasonable. "Knowledge" or
"recognizes" for purposes of the foregoing sentence and wherever used in these
Interpretive Standards means the current awareness of information by any lawyer
in the Primary Lawyer Group.
4. Reliance on Other Sources of Information.
Subject to Interpretive Standard 3, Opinion Giver may rely, without
investigation, upon facts established by a Public Authority Document, facts
provided by an agent of Company or others and, if disclosed in the Opinion
Letter, facts asserted by a party to the Transaction in a representation or
warranty embodied in the Documents, provided:
(a) if not established by a Public Authority Document, the facts do
not constitute a statement, directly or in practical effect, of the legal
conclusion in question;
(b) the person providing facts is, in Opinion Giver's professional
judgment, an appropriate source; and
(c) if the facts are set forth in a certificate, Opinion Giver has
used reasonable professional judgment as to its form and content.
5. Scope of Opinion Giver's Inquiry.
Opinion Giver is presumed to have given consideration to such matters of
law and fact as Opinion Giver deemed appropriate in order to give an Opinion or
confirmation of fact, unless Opinion Giver has expressly limited the scope of
inquiry in the Opinion Letter. A recital of specific documents reviewed or
specific procedures followed, without more, is not a limitation on the scope of
Opinion Giver's inquiry for purposes of the foregoing presumption.
6. Opinion or Confirmation Qualified by Knowledge of Opinion Giver.
Whenever an Opinion Letter qualifies an opinion or confirmation of facts
by the words "to our knowledge", "known to us" or words of similar meaning, the
quoted words mean the current awareness by lawyers in the Primary Lawyer Group
of information such lawyers recognize as being relevant to the Opinion or
confirmation so qualified. The quoted words do not include within what is
"known" information not within such current awareness that might be revealed if
a canvass of lawyers outside the Primary Lawyer Group were made, if the Opinion
Giver's files were searched or if any other investigation were made.
7. "Primary Lawyer Group."
"Primary Lawyer Group" means that lawyer in Opinion Giver's organization
who signs the Opinion Letter and, solely as to information relevant to an
Opinion or confirmation issue, any lawyer in Opinion Giver's organization who
is primarily responsible for providing the response concerning the particular
issue.
8. Who May Rely On Opinion.
Opinion Recipient and designated principals of Opinion Recipient, if
Opinion Recipient is identified in the Opinion Letter as an agent for
designated principals, are the only persons entitled to rely upon any Opinion
or confirmation of fact contained in the Opinion Letter, and then only for
purposes of the Transaction.
9. Other Counsel.
Opinion Giver's responsibility for the opinion of Other Counsel depends
upon what is stated in the Opinion Letter. A statement that Opinion Giver has
relied on an opinion of Other Counsel means only that Opinion Giver believes
that (i) based upon Other Counsel's professional reputation, it is competent to
render such opinion, and (ii) such opinion on its face appears to address the
matters upon which Opinion Giver places reliance. A statement that Opinion
Giver believes that Opinion Recipient is justified in relying on an opinion of
Other Counsel means only that Opinion Giver believes that, based upon Other
Counsel's professional reputation, it is competent to render such opinion. A
statement that Opinion Giver concurs in an opinion of Other Counsel means that
Opinion Giver has assumed the responsibility for verifying the accuracy of the
opinion of Other Counsel. If no concurrence by Opinion Giver is expressed, no
concurrence is implied. If Opinion Giver merely identifies or remains silent
with respect to the opinion of Other Counsel, Opinion Giver assumes no
responsibility for Other Counsel's opinion, and Opinion Recipient may not
assume that Opinion Giver has relied upon Other Counsel's opinion.
10. Updating.
An Opinion Letter speaks as of the date of its delivery, and Opinion Giver
has no obligation to advise Opinion Recipient or anyone else of any matter of
fact or law thereafter occurring, whether or not brought to the attention of
Opinion Giver, even though that matter affects any analysis or conclusion in
the Opinion Letter.
11. Overriding Agreement.
Opinion Giver and Opinion Recipient may agree upon arbitrary or
hypothetical assumptions that may not be true and upon qualifications,
standards or interpretations inconsistent with these Interpretive Standards.
Any such agreement with respect to such assumptions, qualifications, standards
or interpretations, when described with reasonable particularity in the Opinion
Letter, will supersede any contrary provision of these Interpretive Standards.
Assumptions.
12. Assumptions As To Parties Other Than Company.
Opinion Recipient in the Transaction has acted in good faith and without
notice of any defense against enforcement of rights created by, or adverse
claim to any security transferred as part of, the Transaction. Each party to
the Transaction other than Company has complied with all laws applicable to it
that affect the Transaction.
13. Assumptions As To Natural Persons And Documents.
Each natural person acting on behalf of any party to the Transaction has
sufficient legal competency to carry out such person's role in the Transaction.
Each document submitted to Opinion Giver for review is accurate and complete,
each document purporting to be original is authentic, each document purporting
to be a copy conforms to an authentic original, and each signature on a
document is genuine.
14. Assumption As To Transaction.
The Transaction complies with any test required by law of good faith or
fairness. Each party will act in accordance with the terms and conditions of
the Documents.
15. Assumption As To Accessibility to Laws.
Each law for which Opinion Giver is deemed to be responsible is published,
accessible and generally available to lawyers practicing in the Opining
Jurisdiction.
16. Assumptions As To Company.
No discretionary act of Company or on its behalf will be taken after the
date of the Transaction if such act might result in a violation of law or
breach or default under any agreement, decree, writ, judgment or court order.
Company will obtain all permits and governmental approvals and take all actions
which are both (i) relevant to performance of the Documents or consummation of
the Transaction, and (ii) required in the future under applicable law. Company
holds requisite title and rights to its Assets.
17. Assumption As To Other Agreement.
Any Other Agreement will be enforced as written.
18. Assumption As To Understandings.
There is no understanding or agreement not embodied in a Document among
parties to the Transaction that would modify any term of a Document or any
right or obligation of a party.
19. Assumption As To Absence of Mistake or Fraud.
With respect to the Transaction and the Documents, there has been no mutual
mistake of fact and there exists no fraud or duress.
20. Assumption as to Invalidity.
No issue of unconstitutionality or invalidity of a relevant Law exists
unless a reported case has so held.
Remedies Opinion Standards.
21. Meaning of Remedies Opinion.
A. General Meaning. The Remedies Opinion, with respect to any
referenced Document, and subject to the limitations contained in these
Interpretive Standards and in the Opinion Letter, means that:
(i) a contract has been formed under the law of contracts of the
jurisdiction applicable under Interpretive Standard 22; and
(ii) under laws normally applicable to contracts like the
Document, to parties like the Company and to transactions like the
Transaction, each obligation imposed on Company by the Document, each
agreement made by Company in the Document, and each right, benefit
and remedy conferred by Company in the Document, will be given effect
as stated in the Document.
B. Existence of Contract. The professional judgment reflected in
subparagraph A(i) above requires the Opinion Giver to conclude that:
(i) All legal requirements under contract law for the formation
of a contract of the type involved in the referenced Document
effective against Company (other than requirements that would be
covered by a Corporate Status Opinion, a Corporate Powers Opinion and
a Corporate Acts Opinions discussed at Interpretive Standards 24, 25
and 26) are met, such as necessary formalities (including compliance
with any applicable statute of frauds), consideration (where
necessary), definiteness, and the inclusion of essential terms.
(ii) The Document does not violate a law as to formation of
contracts that would prevent a court presented with the Document from
enforcing it.
(iii) Company does not presently have available any contractual
defense to the Document, such as the statute of limitations.
22. Choice of Law in Remedies Opinion.
If a Document covered by the Remedies Opinion contains no governing law
provision, or contains a governing law provision which names the Opining
Jurisdiction, the Remedies Opinion means that if Company is brought before a
proper court of the Opining Jurisdiction to enforce rights under the Document,
and if such court applies the substantive law of the Opining Jurisdiction, the
result will be as stated in the Opinion and these Interpretive Standards.
If the Document contains a governing law provision which names a
jurisdiction other than the Opining Jurisdiction, the Remedies Opinion does not
opine whether any court of any jurisdiction will give effect to the governing
law provision in the Agreement, but assumes that if Company is brought before a
proper court of the Opining Jurisdiction to enforce rights under the Document,
such court will apply the substantive law of the Opining Jurisdiction,
notwithstanding the governing law provision in the Document, and based upon
such assumption the result will be as stated in the Opinion and these
Interpretive Standards.
The Remedies Opinion does not extend to the content or effect of any law
other than the law of the Opining Jurisdiction and federal law.
23. Exceptions To The Remedies Opinion.
Any Remedies Opinion contained in an Opinion Letter which incorporates
these
Interpretive Standards by reference will be deemed not to address the matters
excluded in Interpretive Standard 2 and subject to the following exceptions:
(i) The effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights and remedies of creditors.
This includes the effect of the Federal Bankruptcy Code in its entirety,
including matters of contract rejection, fraudulent conveyance and
obligation, turn-over, preference, equitable subordination, automatic
stay, conversion of a non-recourse obligation into a recourse obligation,
and substantive consolidation. This also includes state laws regarding
fraudulent transfers, obligations, and conveyances, including O.C.G.A.
Section 18-2-20, et seq., and state receivership laws.
(ii) The effect of general principles of equity, whether applied by a
court of law or equity. This includes the following concepts: (a)
principles governing the availability of specific performance, injunctive
relief or other traditional equitable remedies; (b) principles affording
traditional equitable defenses (e.g., waiver, laches and estoppel); (c)
good faith and fair dealing; (d) reasonableness; (e) materiality of the
breach; (f) impracticability or impossibility of performance; (g) the
effect of obstruction, failure to perform or otherwise to act in
accordance with an agreement by any person other than Company; (h) the
effect of section 1-102(3) of the Uniform Commercial Code; and (i)
unconscionability.
(iii) The effect and possible unenforceability of contractual
provisions providing for choice of governing law.
(iv) The possible unenforceability of provisions purporting to waive
certain rights of guarantors.
(v) The possible unenforceability of provisions requiring
indemnification for, or providing exculpation, release or exemption from
liability for, action or inaction, to the extent such action or inaction
involves negligence or willful misconduct or to the extent otherwise
contrary to public policy.
(vi) The possible unenforceability of provisions purporting to
require arbitration of disputes.
(vii) The possible unenforceability of provisions prohibiting
competition, the solicitation or acceptance of customers, of business
relationships or of employees, the use or disclosure of information, or
other activities in restraint of trade.
(viii) The possible unenforceability of provisions imposing increased
interest rates or late payment charges upon delinquency in payment or
default or providing for liquidated damages, or for premiums on
prepayment, acceleration, redemption, cancellation, or termination, to the
extent any such provisions are deemed to be penalties or forfeitures.
(ix) The possible unenforceability of waivers or advance consents
that have the effect of waiving statutes of limitation, marshalling of
assets or similar requirements, or as to the jurisdiction of courts, the
venue of actions, the right to jury trial or, in certain cases, notice.
(x) The possible unenforceability of provisions that waivers or
consents by a party may not be given effect unless in writing or in
compliance with particular requirements or that a person's course of
dealing, course of performance, or the like or failure or delay in taking
action may not constitute a waiver of related rights or provisions or that
one or more waivers may not under certain circumstances constitute a
waiver of other matters of the same kind.
(xi) The effect of course of dealing, course of performance, or the
like, that would modify the terms of an agreement or the respective rights
or obligations of the parties under an agreement.
(xii) The possible unenforceability of provisions that enumerated
remedies are not exclusive or that a party has the right to pursue
multiple remedies without regard to other remedies elected or that all
remedies are cumulative.
(xiii) The effect of O.C.G.A. Section 13-1-11 on provisions relating
to
attorneys fees.
(xiv) The possible unenforceability of provisions that determinations
by a party or a party's designee are conclusive.
(xv) The possible unenforceability of provisions permitting
modifications of an agreement only in writing.
(xvi) The possible unenforceability of provisions that the provisions
of an agreement are severable.
(xvii) The effect of laws requiring mitigation of damages.
(xviii) The possible unenforceability of provisions permitting the
exercise, under certain circumstances, of rights without notice or without
providing opportunity to cure failures to perform.
(xix) The effect of agreements as to rights of set off otherwise than
in accordance with the applicable law.
Interpretations.
24. The Corporate Status Opinion.
An Opinion to the effect that Company was duly organized as a corporation
and is existing in good standing under the laws of the State of Georgia (the
"Corporate Status Opinion") is subject to the following understandings:
(1) "duly organized" means that Company (i) properly complied with the
Georgia statutory requirements for incorporation, and (ii) thereafter
properly complied with the Georgia statutory requirements for organization;
(2) "is existing" means that Company is a corporation which has not
ceased to exist under the GBCC;
(3) The Opinion refers to the status of Company only for purposes of
and under the GBCC; and
(4) "good standing" has no official meaning under the GBCC, and for
purposes of any Opinion with respect to a corporation subject to the GBCC
means:
(i) Company has filed no notice of intent to dissolve under
section 1403 of the GBCC;
(ii) the Secretary of State has signed no certificate of
dissolution with respect to Company;
(iii) the Superior Court of the county of Company's registered
office has entered no decree ordering Company dissolved; and
(iv) Company has satisfied its tax and annual registration
requirements under section 1420 of the GBCC.
An Opinion limited to the conclusion that the Company "is a corporation"
means that third parties may not challenge Company's corporate existence, the
State of Georgia recognizes such existence, and the state may challenge
Company's
incorporation only under the circumstances described in Section 203(d) of the
GBCC.
25. The Corporate Powers Opinion.
An Opinion that Company has the corporate power to execute and deliver a
Document, to perform its obligations under a Document, to own and use its Assets
and to conduct its business (the "Corporate Powers Opinion") is subject to the
following understandings:
(1) the Opinion refers only to the GBCC and Company's articles of
incorporation as sources of corporate power;
(2) "power" refers only to whether the acts referenced in the Opinion
are ultra vires;
(3) the Opinion is built upon an assumption that the Corporate Status
Opinion could also be given;
(4) "own and use" refers to every right company has in the Assets;
(5) the Opinion refers to Assets owned and used and business conducted
on the date of the Opinion, and not those contemplated for future
ownership, use or conduct except to the extent the acquisition of the Assets
or conduct
of the business is concurrent with, and recognized by Opinion Giver as
constituting part of, the consummation of the Transaction; and
(6) the Opinion does not affirm that Company is engaged in no unlawful
business and in business which Georgia law would not permit to be conducted
by a corporation incorporated under the GBCC.
26. The Corporate Acts Opinion.
An Opinion that Company has duly authorized the execution and delivery of,
and performance by Company under, the Documents and has duly executed and
delivered the Documents (the "Corporate Acts Opinion") is subject to the
following
understandings:
(1) the Opinion affirms compliance with all corporate action necessary
under the GBCC, Company's articles of incorporation and bylaws and, if
applicable, Company's duly adopted policies and practices for delegation of
authority in order to authorize the execution and delivery of, and
performance under, the Documents;
(2) the Opinion affirms that the execution and delivery of the
Documents was, and Company's performance of its obligations under the
Documents in accordance with the Documents as written will be, in
accordance
with the authorization;
(3) the Opinion is built upon an assumption that the Corporate Status
Opinion and the Corporate Powers Opinion could also be given;
(4) the Opinion addresses no law other than the GBCC and applicable
law
of agency.
27. The No Violation Opinion.
An Opinion to the effect that Company's execution and delivery of the
Documents do not, and if Company were now to perform its obligations under the
Documents such performance would not, result in (i) a violation of the Company's
articles of incorporation, bylaws or any law to which Company or its Assets are
subject, or (ii) a breach of or default under described agreements, or (iii) a
creation or imposition of contractual liens or security interests arising out of
described agreements, or (iv) a violation of any known judicial or
administrative
decree, writ, judgment or order to which the Company or its Assets are subject
(the "No Violation Opinion") is subject to the following understandings:
(1) a "violation" or "breach or default" means any act or omission
that, by itself or upon notice or the passage of time or both, would
constitute a violation, breach or default giving rise to a remedy under
the document or law in question;
(2) the Opinion addresses only the relevant facts and law as they
exist on the date of the Opinion Letter;
(3) "agreements" refers to agreements, indentures and instruments in
writing identified in the Opinion Letter creating risks and obligations;
(4) references to any law or to "decree, writ, judgement or order" or
the like include only those (i) which either prohibit performance by
Company under the Documents or subject Company to a fine, penalty or other
similar sanction, and (ii) which a lawyer, using customary professional
diligence, would reasonably recognize as applicable to Company and the
Transaction;
(5) the Opinion addresses only whether the specific terms of the
relevant Document violate laws or cause a breach of or default under the
specific terms of an obligation created by a described Other Agreement,
taking into account information provided in accordance with Interpretive
Standard 4 and other facts known to Opinion Giver;
(6) the Opinion does not address acts permitted or contemplated but
not required, or inferred but not set forth, by the relevant Document,
except to the extent such acts are concurrent with, and recognized by
Opinion Giver as constituting part of, the consummation of the
Transaction;
(7) to the extent the interpretation of words in described Agreements
requires resort to law, Opinion Giver will apply the law of the Opining
Jurisdiction;
(8) the Opinion does not address liens or security interests created
by or in favor of Opinion recipient, created under a Document or arising
by operation of law; and
28. The No Consent Opinion.
An Opinion to the effect that no consent, approval, authorization or other
action by, or filing with, any governmental authority is required for Company's
execution and delivery of the Documents and consummation of the Transaction
(the "No Consent Opinion") is subject to the understandings set forth in
Interpretive Standard 2 and 27(2) and (4). "Required" means that there is no
governmental consent, approval, authorization or filing, the absence of which
would either prohibit performance by company of its obligations under the
Documents or subject Company to a fine, forfeiture, penalty or similar
sanction.
29. The Capitalization Opinion.
An Opinion to the effect that described shares have been duly authorized
and are, or upon issuance will be, validly issued, fully paid and non-
assessable (the "Capitalization Opinion") is subject to the following
understandings:
(1) the Opinion affirms compliance with all corporate action
necessary to create and issue the shares under the Georgia corporate law
in effect at the time of such creation and issue ("Corporate Code") and
under Company's articles of incorporation and bylaws;
(2) "duly authorized" means Company had the corporate power to create
the shares, the shares so created have the rights and attributes required
by the Corporate Code, and the rights and attributes of the shares so
created were permitted by the Corporate Code and are permitted by the GBCC
and Company's articles of incorporation and bylaws;
(3) "validly issued" means that at the time of issuance Company had
sufficient authorized and unissued shares to permit the shares to be
issued, Company took the steps necessary to accord shareholder status to
the persons to whom the shares were issued and Company has taken no step
to deprive the shares of the "validly issued" status;
(4) "fully paid and nonassessable" means that the consideration
received upon issuance of the shares (i) was legally sufficient, (ii)
satisfied the requirements of the Corporate Code, Company's articles of
incorporation and bylaws, and relevant corporate resolutions, (iii) was
approved (e.g., as to value of property or services) by the directors or
shareholders, as required, and (iv) was in fact received, subject to
paragraph (1) above; and
(5) the Opinion is based on the assumption that the Corporate Status
Opinion could also be given.
30. The Share Transfer Opinion.
The only laws addressed in any Opinion as to the rights of a seller in
shares of Company acquired by any purchaser are the GBCC and Article 8 of the
UCC, and no Opinion is given regarding liens (other than UCC security
interests) that may be perfected without filing or possession of the share
certificate. The Opinion is based upon the assumption that the Capitalization
Opinion could also be given.
31. The Personal Property Transfer Opinion.
The Opinion as to Company's transfer of Personal Property expresses no
opinion as to Company's title. See Interpretive Standard 16.
32. The Foreign Qualification Confirmation.
A confirmation that Company is qualified to transact business as a foreign
corporation in any one or more named jurisdictions is not a legal opinion, but
a statement which may be based solely upon one or more certificates referenced
in the Opinion Letter and limited in meaning to the words of each certificate.
No implication arises from such confirmation that certificates have been
acquired from all jurisdictions in which Company is required to be qualified,
or that certificates obtained are from the appropriate public officials in the
jurisdictions referenced.
33. The Litigation Confirmation.
The confirmation regarding litigation pending or threatened in writing
against Company or any Assets derives from Opinion Giver's knowledge as defined
at Interpretive Standard 6 and certificate reliance discussed at Interpretive
Standard 4, but not from any reviews of public or court records or files of
Opinion Giver or others.
34. Incorporation by Reference Accord.
These Interpretive Standards may be incorporated by reference in the
Opinion Letter by a statement similar to the following:
This Opinion Letter is limited by, and is in accordance
with, the January 1, 1992 edition of the Interpretive
Standards Applicable to Legal Opinions to Third Parties in
Corporate Transactions adopted by the Legal Opinion
Committee of the Corporate and Banking Law Section of the
State Bar of Georgia, which Interpretive Standards are
incorporated in this Opinion Letter by this reference.
END OF EXHIBIT A
EXHIBIT 8.1
LAW OFFICES
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
OTHER OFFICES:
400 COLONY SQUARE Charleston, South Carolina
SUITE 2200 Charlotte, North Carolina
1201 PEACHTREE STREET, N.E. Columbia, South Carolina
ATLANTA, GEORGIA 30361 Florence, South Carolina
TELEPHONE (404) 817-6000 Greenville, South Carolina
FACSIMILE (404) 817-6050 Myrtle Beach, South Carolina
July 30, 1996
Kinark Corporation
7060 South Yale Ave.
Tulsa, OK 74136
Ladies and Gentlemen:
We have served as counsel to Kinark Corporation, a Delaware corporation (the
"Company"), in connection with the issuance of stock rights (the "Rights")
relating to the Company's common stock, $ .10 par value (the "Common Stock"),
as described in the Form S-3 Registration Statement under the Securities Act of
1933 filed by the Company with the Securities and Exchange Commission, as
amended by Pre-Effective Amendment No. 1 and Pre-Effective Amendment No. 2 (the
"Registration Statement"). In connection therewith, you have requested our
opinion as to certain federal income tax matters relating to the Rights, as set
forth below. The terms used herein which are defined in the Registration
Statement shall have the respective meaning set forth in the Registration
Statement, unless otherwise defined herein.
In giving the opinion set forth below, we have relied upon certifications and
letters provided to us by governmental officials. As to matters of fact set
forth below, and matters of fact which form the basis for any opinion set forth
below, we have relied, with your permission, solely upon one or more of (i)
certificates presented to us and statements of officers, employees, and
independent accountants of the Company, and (ii) the statements and matters set
forth in the Registration Statement. In giving the opinion set forth below, we
have not attempted, and undertake no responsibility, to independently verify
any factual matters in connection with the giving of the opinion set forth
below.
In giving the opinion set forth below, we have made the following assumptions
regarding facts that we do not know to be true:
1. The Company is a corporation, validly existing and in good standing under
the laws of the State of Delaware and all other applicable laws to which
it is subject. The Company has full power and authority to consummate the
transactions described in the Registration Statement. All transactions
described in the Registration Statement, and all acts required in
connection therewith, have been duly authorized by all necessary corporate
action on the part of the Company. All documents and instruments executed
by the Company in connection therewith have been duly executed and
delivered on behalf of, and are binding upon and enforceable against, the
Company.
2. The signatures of all persons signing any document or instrument delivered
in connection with the consummation of the transactions contemplated by
the Registration Statement are genuine, and all such persons executing
such documents have been duly authorized to execute and deliver such
documents and instruments.
3. All natural persons executing any document or instrument delivered in
connection with the consummation of the transactions contemplated by the
Registration Statement have legal competency to do so. All documents
submitted to us as originals are authentic and all documents submitted to
us as certified or photostatic copies conform to the original documents
which are themselves authentic.
4. No event will take place subsequent to the date hereof which would cause
any act taken in connection with the transactions contemplated by the
Registration Statement to fail to comply with any law, rule, regulation,
order, judgment, decree, or duty.
5. Any certificate, representation, telegram, or other document on which we
have relied that is given or dated on or prior to the date hereof
continues to remain accurate, insofar as relevant to such opinion, from
such earlier date through and including the date of this letter.
6. Upon exercise of, and otherwise in relation to, the Rights, the applicable
holder of Common Stock exercising the Rights shall be entitled to receive
only Common Stock issued by the Company, and no person shall be entitled
to receive any other property, rights or entitlements from the Company or
any other person (except that holders of Common Stock who exercise the
Rights may designate in writing that the Common Stock to be issued as a
result of such exercise shall be issued in the name of one or more other
persons). The issuance of Common Stock pursuant to the exercise of any of
the Rights will not result, and no circumstance or arrangement in respect
of the Rights will result, directly or indirectly, in the receipt of other
than Common Stock by holders of Common Stock. No circumstance or event
relating directly or indirectly to the Rights will result in the receipt
of other than Common Stock by holders of Common Stock. The issuance of
the Rights, and transactions and entitlements associated with the Rights
do not relate to other than Common Stock, and do not involve, directly or
indirectly, with respect to the exercise of the Rights, other than the
issuance of Common Stock.
7. The issuance of the Rights, and the rights and obligations of and the
limitations upon holders of the Rights in respect of the Rights, will be
solely as set forth in the Registration Statement.
8. At no time (past, present or future) has or will any circumstance, event
or arrangement in relation to the Rights give rise to any conversion
ratio, redemption rights or other features, or any other transaction or
arrangement (including, without limitation, a recapitalization) having an
effect similar to any or all of the foregoing in respect of the Common
Stock.
On the basis of such assumptions, and subject to the limitations and
qualifications set forth herein, we are of the opinion that it is more likely
than not that, under the federal income tax laws of the United States of
America:
1. Holders of Common Stock will not recognize gross income, for federal
income tax purposes, as a direct result of the receipt of the Rights.
2. Except as provided in the following sentence, the federal income tax basis
of the Rights received by a holder of Common Stock as a distribution with
respect to the Common Stock held by such holder will be zero. However, if
either (i) the fair market value of the Rights on the date of issuance
thereof is 15% or more of the fair market value (on the date of issuance)
of the Common Stock with respect to which they are received, or (ii) the
holder of the Common Stock elects, in his or her federal income tax return
for the taxable year in which the Rights are received, to allocate part of
the basis of such shares of the Common Stock to the Rights, upon exercise
or sale of the Rights, the holder's federal income tax basis in such
Common Stock will be allocated between the Common Stock and the Rights in
proportion to the fair market value of each on the date of issuance.
3. The holding period of the Rights received by each holder as a distribution
on such holder's Common Stock will include the holder's holding period (as
of the date of issuance) for the shares of the Common Stock with respect
to which the Rights were issued.
4. Holders of the Common Stock who allow the Rights received by them at the
issuance to lapse will not recognize any gain or loss for federal income
tax purposes, and no adjustment will be made to the federal income tax
basis of the shares of Common Stock, if any, owned by such holders of the
Rights.
5. Holders of the Rights will not recognize any gain or loss for federal
income tax purposes upon the exercise of such Rights. The federal income
tax basis of the Common Stock acquired through exercise of the Rights will
generally be equal to the sum of the subscription price therefor and the
holder's basis in such Rights (if any).
6. The holding period for the Common Stock acquired through the exercise of
the Rights will begin on the date such Rights are exercised.
The opinion set forth in this letter is expressly limited and qualified as
follows, in addition to the other limitations and qualifications set forth in
this letter:
a. The opinion expressed herein is limited to matters of the federal
income tax laws of the United States of America, with respect to the
issuance by the Company of the Rights. No opinion is expressed as to
any issue which is governed by any other laws.
b. Our opinion is limited to the matters expressly stated herein, and no
opinion may be inferred or implied beyond the matters expressly
stated.
c. Our opinion is being furnished to the Company, and is solely for the
Company's benefit. No other person shall be entitled to rely on such
opinion, and the Company is not entitled to rely on such opinion in
any context other than with respect to the Rights. No copy of this
letter or opinion herein may be given to any person, other than the
Company, without our prior written consent.
d. Our opinion is qualified in its entirety by reference to, and is
based upon, applicable laws, regulations, rulings and decisions
currently in effect on the date of this letter, as those laws,
regulations, rulings and decisions are interpreted on such date. We
undertake no responsibility to revise or supplement this letter to
reflect any changes in the law, regulations, rulings or decisions, or
any interpretation of one or more of the foregoing, after the date of
this letter. Our opinion does not discuss all aspects of federal
income taxation that may be relevant to a particular investor or to
certain types of investors subject to special treatment under the
United States' federal income tax laws (for example, without
limitation, banks, dealers in securities, life insurance companies,
tax exempt organizations and foreign taxpayers), and does not address
any aspect of state, local or foreign tax laws. Our opinion does not
discuss any matters other than certain matters expressly discussed in
such opinion in relation to holders of Common Stock who will receive
the Rights and any Common Stock received therefor upon exercise as
capital assets.
e. We have acted as counsel to the Company pursuant to the Rights, and
this letter is given solely in our capacity as counsel to the
Company. We have not acted as counsel to any other person in
connection with the Rights.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ NELSON MULLINS RILEY
& SCARBOROUGH, L.L.P.
EXHIBIT 15.1
<PAGE>
May 30, 1996
Kinark Corporation
7060 South Yale
Tulsa, Oklahoma
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Kinark Corporation and subsidiaries for the periods ended March
31, 1996 and 1995, as indicated in our report dated May 10, 1996 which includes
an explanatory paragraph discussing the Company's adoption of Statements of
Financial Accounting Standards No. 121 and 123; because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, is being
incorporated by reference in this Registration Statement.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Tulsa, Oklahoma
EXHIBIT 23.1<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 2 to the Registration Statement No 333-4937 of Kinark Corporation on Form
S-3 of our report dated February 27, 1996, except as to the second paragraph of
the Long-Term Debt footnote, for which the date is April 1, 1996, (which
expresses an unqualified opinion and includes explanatory paragraphs discussing
Kinark Corporation's change in accounting for income taxes and the acquisition
of Rogers Galvanizing Company and the related private placement financing)
appearing in the Annual Report on Form 10-K of Kinark Corporation for the year
ended December 31, 1995, as amended, and to the reference to us under the
heading "Experts" in the Prospectus, which is a part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Tulsa, Oklahoma
July 30, 1996
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 2 to Registration
Statement of Kinark Corporation on Form S-3 of our report dated November 20,
1995, on the consolidated financial statements of Rogers Galvanizing Company
for the years ended September 30, 1995, 1994 and 1993, appearing in the
Prospectus which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Hogan & Slovacek, PC
Hogan & Slovacek, PC
Tulsa, Oklahoma
July 30, 1996
